“That Terrible Trillion Deficit”: Another Disingenuous Attempt To Scare And Bully The Body Politic Into Abandoning Social Programs
As you might imagine, I find myself in a lot of discussions about U.S. fiscal policy, and the budget deficit in particular. And there’s one thing I can count on in these discussions: At some point someone will announce, in dire tones, that we have a ONE TRILLION DOLLAR deficit.
No, I don’t think the people making this pronouncement realize that they sound just like Dr. Evil in the Austin Powers movies.
Anyway, we do indeed have a ONE TRILLION DOLLAR deficit, or at least we did; in fiscal 2012, which ended in September, the deficit was actually $1.089 trillion. (It will be lower this year.) The question is what lesson we should take from that figure.
What the Dr. Evil types think, and want you to think, is that the big current deficit is a sign that our fiscal position is completely unsustainable. Sometimes they argue that it means that a debt crisis is just around the corner, although they’ve been predicting that for years and it keeps not happening. (U.S. borrowing costs are near historic lows.) But more often they use the deficit to argue that we can’t afford to maintain programs like Social Security, Medicare and Medicaid. So it’s important to understand that this is completely wrong.
Now, America does have a long-run budget problem, thanks to our aging population and the rising cost of health care. However, the current deficit has nothing to do with that problem, and says nothing at all about the sustainability of our social insurance programs. Instead, it mainly reflects the depressed state of the economy — a depression that would be made even worse by attempts to shrink the deficit rapidly.
So, let’s talk about the numbers.
The first thing we need to ask is what a sustainable budget would look like. The answer is that in a growing economy, budgets don’t have to be balanced to be sustainable. Federal debt was higher at the end of the Clinton years than at the beginning — that is, the deficits of the Clinton administration’s early years outweighed the surpluses at the end. Yet because gross domestic product rose over those eight years, the best measure of our debt position, the ratio of debt to G.D.P., fell dramatically, from 49 to 33 percent.
Right now, given reasonable estimates of likely future growth and inflation, we would have a stable or declining ratio of debt to G.D.P. even if we had a $400 billion deficit. You can argue that we should do better; but if the question is whether current deficits are sustainable, you should take $400 billion off the table right away.
That still leaves $600 billion or so. What’s that about? It’s the depressed economy — full stop.
First of all, the weakness of the economy has led directly to lower revenues; when G.D.P. falls, the federal tax take falls too, and in fact always falls substantially more in percentage terms. On top of that, revenue is temporarily depressed by tax breaks, notably the payroll tax cut, that have been put in place to support the economy but will be withdrawn as soon as the economy is stronger (or, unfortunately, even before then). If you do the math, it seems likely that full economic recovery would raise revenue by at least $450 billion.
Meanwhile, the depressed economy has also temporarily raised spending, because more people qualify for unemployment insurance and means-tested programs like food stamps and Medicaid. A reasonable estimate is that economic recovery would reduce federal spending on such programs by at least $150 billion.
Putting all this together, it turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. Some of the deficit is in fact sustainable; just about all of the rest would go away if we had an economic recovery.
And the prospects for economic recovery are looking pretty good right now — or would be looking good if it weren’t for the political risks posed by Republican hostage-taking. Housing is reviving, consumer debt is down, employment has improved steadily among prime-age workers. Unfortunately, this recovery may well be derailed by the fiscal cliff and/or a confrontation over the debt ceiling; but this has nothing to do with the alleged unsustainability of the deficit.
Which brings us back to ONE TRILLION DOLLARS.
We do indeed have a big budget deficit, and other things equal it would be better if the deficit were a lot smaller. But other things aren’t equal; the deficit is a side-effect of an economic depression, and the first order of business should be to end that depression — which means, among other things, leaving the deficit alone for now.
And you should recognize all the hyped-up talk about the deficit for what it is: yet another disingenuous attempt to scare and bully the body politic into abandoning programs that shield both poor and middle-class Americans from harm.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 16, 2012
“Failing The Test Of Courage, Integrity And Loyalty”: Romney Messes Up And Tells The Truth About Austerity
Romney has periodic breakdowns when asked questions about the economy because he sometimes forgets the need to lie. He forgets that he is supposed to treat austerity as the epitome of economic wisdom. When he responds quickly to questions about austerity he slips into default mode and speaks the truth – adopting austerity during the recovery from a Great Recession would (as in Europe) throw the nation back into recession or depression. The latest example is his May 23, 2012 interview with Mark Halperin in Time magazine.
“Halperin: Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?
Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.”
Romney explains that austerity, during the recovery from a Great Recession, would cause catastrophic damage to our nation. The problem, of course, is that the Republican congressional leadership is committed to imposing austerity on the nation and Speaker Boehner has just threatened that Republicans will block the renewal of the debt ceiling in order to extort Democrats to agree to austerity – severe cuts to social programs. Romney knows this could “throw us into recession or depression” and says he would never follow such a policy.
Romney, however, has not opposed Boehner’s threat to use extortion to force austerity on the nation. Romney has the nomination sown up, but I predict that he will stand by and let Boehner try to throw us into a Great Depression rather than upset the Tea Party-wing of the Republican Party. Indeed, Romney will attack Democrats who have the political courage to defend our nation against his Party’s demands for austerity that would throw the nation into recession or depression. What does one call a politician who, solely to advance his personal political ambition, supports his Party’s efforts to coerce austerity even though he knows that the austerity would cause a national economic catastrophe and states that he, “of course,” would never adopt such self-destructive austerity if he were president? Romney is failing the tests of courage, integrity, and loyalty to our nation and people.
Later in the interview, Romney claims that federal budgetary deficits are “immoral.” But he has just explained that using austerity for the purported purpose of ending a deficit would cause a recession or depression. A recession or depression would make the deficit far larger. That means that Romney should be denouncing austerity as “immoral” (as well as suicidal) because it will not simply increase the deficit (which he claims to find “immoral” because of its impact on children) but also dramatically increase unemployment, poverty, child poverty and hunger, and harm their education by causing more teachers to lose their jobs and more school programs to be cut. Fewer children will be able to get college degrees. Austerity is the great enemy of children – it is the epitome of a self-destructive, immoral economic policy.
Listen for the sounds of silence from Romney in coming months. I predict that he will not act to protect our children or our economy from the suicidal and “immoral” austerity his Republican allies are trying to coerce the Democrats to inflict on our economy and our children.
By: William K. Black, New Economic Perspectives, May 25, 2012
“Mass Amnesia”: Mitt Romney Bets On Forgetfulness Of The American People
I’ve said this before, but in light of Mitt Romney’s economic speech today, it bears repeating: Virtually his entire case against Obama’s economic record rests on the assumption that the American people have developed a case of mass amnesia about the depth and severity of the economic crisis the President inherited.
A few months ago, Romney liked to claim that Obama made the economy “worse.” But the good economic news forced Romney to revise that argument, and he took to claiming that, yes, okay, the economy is getting better, but only in spite of Obama’s policies, which are slowing down the natural recovery.
Today Romney upped the ante yet again, offering still another explanation for why Obama should be denied a second term, even though the economy is recovering: It’s all about freedom! From the prepared remarks:
The Obama administration’s assault on our economic freedom is the principal reason why the recovery has been so tepid — why it couldn’t meet their projections, let alone our expectations. If we don’t change course now, this assault on freedom could damage our economy and the well-being of American families for decades to come…
The proof is in this weak recovery. This administration thinks our economy is struggling because the stimulus was too small. The truth is we’re struggling because our government is too big.
Relatedly, this morning, Romney said: “The economy always comes back after a recession, of course. There’s never been one that we didn’t recover from. The problem is this one has been deeper than it needed to be and a slower recovery than it should have been, by virtue of the policies of this president.”
The common thread here is obvious, and it’s important. The pace of this recovery, according to Romney, is sluggish compared to that of previous ones — proving that Obama’s policies, or his “assault on freedom,” are the reason why. Missing from this telling, of course, is the most important reason this recovery is different from previous ones: It came after the worst financial crisis since the Great Depression.
Romney’s argument that the recovery’s pace would otherwise have been normal if not for Obama’s polices rests on a bet that the American people will forget about this, or won’t factor it into their decision this fall. Perhaps some enterprising reporter will ask Romney the obvious follow-up questions: What would you have done as president in early 2009? Is it really your contention that the economy would have recovered at a typical pace from the worst financial crisis since the 1930s if government had done nothing at all?
By: Greg Sargent, The Plum Line, The Washington Post, March 19, 2012
“Food Stamps” Bigotry Feeds GOP Anti-Government Agenda
Newt Gingrich has rightly earned the derision he’s been getting for his performance last Monday night when he threw red meat wrapped in black skin to South Carolina Republicans who gave Gingrich a standing ovation for calling Barack Obama “the greatest food-stamp president in American history.”
When the master propagandist said President Obama “put” more people on food stamps than any president in American history he was deliberately confusing cause with effect.
Obama “put” no one on food stamps, as the New York Times rightly notes. People did that to themselves when they signed up for food assistance because they were poor, jobless or hungry. And the reason they were hungry was because America is suffering the worst recession since the Great Depression.
Indeed, as former George W. Bush speechwriter David Frum helpfully reminds us, in South Carolina where Newt Gingrich is now slyly insinuating his poison, residents may be hungrier than most since portions of the state suffer the highest poverty and unemployment rates in the nation and where 100,000 households now depend on food stamps for their daily diet.
By waving foods stamps around like the Confederate Battle Flag which flies aloft the South Carolina statehouse, Gingrich is clearly trying to “feed the prejudice of people who already believe that blacks and other poor people don’t really like to work,” argues the Times.
But the facts belie the bigotry since whites far outnumber blacks who receive foods stamps, notes the Times, and where 30% of those depend on food stamps to supplement the income they earn from working.
So, if you’re looking for the logic behind Gingrich’s raising of the food stamp non-issue forget about it, says the Times, because it just isn’t there.
Gingrich’s comments have been singled out for the scurrilous dog-whistle politics they are, and rightly so. But more important than the racially-charged implications of his coded messaging against minorities is the fact that Gingrich’s impugning of food stamps as a collective response to collective suffering is another manifestation of the larger Republican strategy to blame the current crisis entirely on government itself.
Newt Gingrich’ argument that the President of the United States would deliberately “put” millions of Americans on food stamps, like some drug pusher trying to get the public hooked on government the same way addicts get hooked on crack cocaine, is not all that different in its underlying assumptions and premises from the charges global warming deniers level against climatologists who deniers say exploit fears of the earth’s impending doom to grab power for themselves – or to make life miserable for oil magnets Charles and David Koch, whichever comes first.
It turns out the big banks weren’t the only ones whose failures the government bailed out in 2006 and 2008. Conservatives and Republicans, too, discovered that government can be a life-saver.
For, just as banks dubbed “Too Big To Fail” were able to press the government to cover their losing bets with taxpayer money, so too were true-believing conservatives able to target the government as a ready-made scapegoat for their own grievous blunders and so keep intact their blind faith in economic orthodoxies thought to be Too Veritable to Fail.
Be that as it may, never before had a worldview been more thoroughly repudiated than was the infallibility of unregulated markets by the economic calamity of 2008.
That left Republicans with an important choice to make. They could either man up and defend their record and supply-side principles against mounting evidence they had failed. Or, they could oppose everything the in-coming president did or stood for, and thereby take the emergency steps Barack Obama was forced to make to rescue the country from the disasters bequeathed to him by his retreating Republican predecessors and recast them as steps down some nightmarish path as America’s ancient liberties succumbed to a hostile government takeover.
The GOP left no doubt about which fork in the road it intended to take when right out of the gates House Republicans on a unanimous party line vote rejected Obama’s first $780 million stimulus bill at the height of the economic crisis in early 2009. This set the tone for all that has transpired in the preceding three years as Republicans execute their strategy of “blame the government first.”
While Republicans in Congress dig in with their rear-guard action to prevent President Obama from governing except on Republican terms, conservatives outside government are engaged in the task of feverishly rewriting history.
It’s what author Thomas Frank in his new book, Pity the Billionaire, calls “the classic switcheroo.” Republicans have been successful, says Frank, because they’ve been able to lay down a “thick smokescreen of deliberate bewilderment” that replaces real economic fears among middle class families facing job loss and foreclosure with false ones about the impending government takeover of society. It’s a bait and switch tactic being used so that a new villain (the government) can be pushed on stage as target for all those rotten eggs and tomatoes meant for the real villain (Wall Street).
A falsity this vast requires an all-consuming effort to round up and smash any incriminating evidence that might expose the nonsense behind the resurgent Right’s fairy tale for what it is, much like a criminal syndicate does when it ties up loose ends.
And so, says Frank, when the Right refused to accept that the infallibility of “free markets” was a myth, the only other road available to it in 2008 and 2009 was to “declare their true faith in the myth” and then to preserve the delusion by casting out as heretics all those unwelcome reminders conservatism and capitalism had failed — which meant in real life purging from Republican ranks most of the previous generation of people who also called themselves “conservative.”
That is why George W. Bush is a forgotten man and likely to remain a silent one all throughout the 2012 campaign. It is also why so many veteran Republican incumbents were consumed in the purifying fires of the Tea Party or beaten by Tea Party challengers whose single claim on political virtue was that they had virtually no political experience at all.
“Many Americans who had never been politically active, never walked a precinct, never interrupted their golf games, family gatherings or vacations to discuss politics, government or the Constitution were suddenly gripped with the sense that their government, nation and way of life were being stolen from them.”
Listening to that you might think the source of the writer’s worries was the growing concentration of wealth at the top, the theft of our government by Wall Street, the attacks on unions and the right to vote or a Supreme Court that had unleashed an unchecked flood of corporate cash with which to swallow our democracy.
But you’d be wrong. The words above are by right wing Red State blogger Erick Erickson, who gives voice to Tea Party paranoia that providing a lifeline to states to keep teachers in the classroom or cops on the beat or to extend unemployment insurance another few weeks to those who have lost jobs in the worst economic downturn in a century, wasn’t part of the rescue mission we’d expect from any decent government in a crisis like this but was instead a milestone that marked the way as President Obama and lead us down the perilous road to “European-style socialism.”
When Roger Ailes hired Glenn Beck shortly after conservatives were booted from all three branches of government in 2008, he told his new host: “I see this as the Alamo. If I just had somebody who was willing to sit on the other side of the camera until the last shot is fired, we’d be fine.”
Beck’s assignment was to take Barack Obama’s recovery challenge — that by logical implication exposed the Republican Party’s manifest failures with every problem President Obama managed to solve — and to turn that rescue effort into some vast left wing conspiracy to usher in a new “era of socialism.”
We were soon to learn what that assignment meant. Typical was a show aired in March 2010 when Beck said: “Most people will dread economic recessions and depressions. But some people don’t dread them. Some people are a little more opportunistic. They view this as their big chance, a window of opportunity to seize power to fundamentally transform things. They don’t see this as, ‘Oh my gosh, we’re struggling.’ They see this is as, ‘Now is our time.'”
You’ve got to hand it to Republicans. After their worldview collapsed in a pile of rubble around them they did not retreat or take time to rethink the fundamentals of their major premises. Instead, they responded like French Marshal Ferdinand Foch at the First Battle of the Marne when he declared: “Hard pressed on my right. My center is yielding. Impossible to maneuver. Situation excellent. I attack.”
Watching the way the Republican Party pursues power, I’m reminded of another quote, this one from the character Matt Hooper in the Spielberg classic, Jaws, when the marine biologist calls the Great White Shark a “machine” – a machine that does nothing all day but swim and eat and make little sharks. And that’s all.
Republicans today are just that single-minded — and also that ruthless and unsentimental — just like those Manifest Destiny expansionists that historian Robert W. Merry describes as rallying behind President James K. Polk and his war of conquest against Mexico to divest that often tragic country of its American possessions.
Unlike those Northern Whigs like Abraham Lincoln who opposed the Mexican war on moral grounds, or Southern Democrats like John C. Calhoun who opposed it for disturbing the delicate balance of power between slave state and free, Polk’s land-grabbing supporters understood that ethical considerations miss the fundamental truth about history, which Merry says is this: History does not turn on “normal suasion or concepts of political virtue” but instead moves forward “with a crushing force,” based on “differentials of power, will, organization and population.”
And so from the point of view of history, says Merry, the dismemberment of a “weak and dysfunctional” country like Mexico by a “vibrant, expanding and exuberant” democracy like America was not so much justified as inevitable.
These are the narratives and propensities that Newt Gingrich embodies with a vengeance with his dog-whistle references to food stamps that feed not only racist appetites but also the right wing/Fox News survival-of-the-fittest storyline that doing anything to repair the damage Republicans and free market capitalism have wrought — short of applying an even purer and more robust version of unregulated, untaxed capitalism – is nothing more than socialism and so contrary to the American Way of Life.
By: Ted Frier, Salon, Open Salon Blog, January 20, 2012
Quality Vs Quantity: Yes, We Need Jobs. But What Kind?
On Thursday, President Obama will deliver a major speech on America’s employment crisis. But too often, what is lost in the call for job creation is a clear idea of what jobs we want to create.
I recently led a research team to the Rio Grande Valley in Texas, where Gov. Rick Perry, a contender for the Republican presidential nomination, has advertised his track record of creating jobs. From January 2000 to January 2010, employment in the Valley grew by a remarkable 42 percent, compared with our nation’s anemic 1 percent job growth.
But the median wage for adults in the Valley between 2005 and 2008 was a stunningly low $8.14 an hour (in 2008 dollars). One in four employed adults earned less than $6.19 an hour. The Federal Reserve Bank of Dallas reported that the per capita income in the two metropolitan statistical areas spanning the Valley ranked lowest and second lowest in the nation.
These workers aren’t alone. Last year, one in five American adults worked in jobs that paid poverty-level wages. Worker displacement contributes to the problem. People who are laid off from previously stable employment, if they are lucky enough to find work, take a median wage hit of over 20 percent, which can persist for decades.
To understand the impact of low wages, in the Valley and elsewhere, we interviewed a wide range of people, including two directors of public health clinics, three priests, a school principal and four focus groups of residents. Everyone described a life of constantly trying to scrape by. One month they might pay for the phone, another, for utilities. Everyone knew how long each company would carry unpaid bills before cutting service. People spoke not only of their fear of an unexpected crisis — an illness, a broken car — but also of the challenge of paying for basic needs like school supplies. Many used the phrase “one paycheck away from homelessness.”
Because their parents cannot afford child care, children move among relatives and neighbors. They watch too much TV. They don’t finish their homework. Older children grow up too fast from parenting their younger siblings. As one person observed, “All you think about is which bill is more important.”
Economic stress strains marriages. Parents cannot afford quinceañeras for their daughters. In church youth groups, teenagers ask why they should stay in school if all they can get are low wages.
Many children are latchkey kids. Accidents are frequent; we heard of an elementary school student who badly burned himself in a science experiment, with his older brother watching. Their father couldn’t take time off from work to visit his son in the hospital. Children come to school sick. Parents miss teacher conferences because they can’t afford time off. Type 2 diabetes is a scourge in the Valley. Since Type 2 diabetics can be asymptomatic for years, many don’t buy medicine; as time passes, they become severely ill, often losing sight or a limb.
The director at one clinic, with nearly 70,000 visits a year, estimated that half of its patients had anxiety or depression. Often people can’t get to the clinic because they cannot afford to lose work time or because gas costs too much. When they go, they take their families, because they have no child care.
And yet the Valley is not hopeless. Teachers stay late to help with homework. They make home visits to meet parents. Health clinic employees work overtime. The community organization Valley Interfaith has pushed for training opportunities and living-wage jobs. There is no “culture of poverty,” but the low-wage economy has corrosive and tragic consequences.
Must we choose between job quality and quantity? We have solid evidence that when employees are paid better and given more opportunities within a company, the gains outweigh the costs. For example, after a living wage ordinance took effect for employees at the San Francisco International Airport, in 1999, turnover fell and productivity rose.
Contrary to the antigovernment rhetoric, there is much that the public sector can do to improve the quality of jobs.
A recent analysis by the Economic Policy Institute reported that 20 percent of federal contract employees earned less than the poverty level for a family of four, as opposed to 8 percent of traditional federal workers. Many low-wage jobs in the private sector (notably, the health care industry) are financed by taxpayers. The government can set an example by setting and enforcing wage standards for contractors.
When states and localities use their zoning powers to approve commercial projects, or offer tax incentives to attract new employers, they can require that workers be paid living wages; research shows this will not hurt job growth.
Labor standards have to be upgraded and enforced, particularly for those employers, typically in low-wage industries, who engage in “wage theft,” by failing to pay required overtime wages or misclassifying workers as independent contractors so that they do not receive the benefits to which they are entitled.
Americans have long believed that there should be a floor below which job quality does not fall. Today, polls show widespread support for upgrading employment standards, including raising the minimum wage — which is lower, in inflation-adjusted terms, than it was in 1968. It’s time for the federal government to take the lead in creating not just more jobs, but more good jobs. The job-growth mirage of the Rio Grande Valley cannot be our model.
By: Paul Osterman, Op-Ed Contributor, The New York Times, September 5, 2011
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