“Focusing On The Wrong Things”: Why We Should Stop Obsessing About The Federal Budget Deficit
I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.
Deficit reduction leads us in the opposite direction—away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know—it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy.
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected—bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.
The best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low—or become even lower—on the middle class.
(Higher taxes on the rich won’t slow the economy because the rich will keep spending anyway. After all, being rich means spending whatever you want to spend. By the same token, higher taxes won’t reduce their incentive to save and invest because they’re already doing as much saving and investing as they want. Remember: they’re taking home a near record share of the nation’s total income and have a record share of total wealth.)
Why don’t our politicians and media get this? Because an entire deficit-cutting political industry has grown up in recent years—starting with Ross Perot’s third party in the 1992 election, extending through Peter Petersen’s Institute and other think-tanks funded by Wall Street and big business, embracing the eat-your-spinach deficit hawk crowd in the Democratic Party, and culminating in the Simpson-Bowles Commission that President Obama created in order to appease the hawks but which only legitimized them further.
Most of the media have bought into the narrative that our economic problems stem from an out-of-control budget deficit. They’re repeating this hokum even now, when we’re staring at a fiscal cliff that illustrates just how dangerous deficit reduction can be.
Deficit hawks routinely warn unless the deficit is trimmed we’ll fall prey to inflation and rising interest rates. But there’s no sign of inflation anywhere. The world is awash in underutilized capacity As for interest rates, the yield on the ten-year Treasury bill is now around 1.26 percent—lower than it’s been in living memory.
In fact, if there was ever a time for America to borrow more in order to put our people back to work repairing our crumbling infrastructure and rebuilding our schools, it’s now.
Public investments that spur future job-growth and productivity shouldn’t even be included in measures of government spending to begin with. They’re justifiable as long as the return on those investments – a more educated and productive workforce, and a more efficient infrastructure, both generating more and better goods and services with fewer scarce resources – is higher than the cost of those investments.
In fact, we’d be nuts not to make these investments under these circumstances. No sane family equates spending on vacations with investing in their kids’ education. Yet that’s what we do in our federal budget.
Finally, the biggest driver of future deficits is overstated—rising health-care costs that underlie projections for Medicare and Medicaid spending. The rate of growth of health-care costs is slowing because of the Affordable Care Act and increasing pressures on health providers to hold down costs. Yet projections of future budget deficits haven’t yet factored in this slowdown.
So can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about—jobs and growth.
BY: Robert Reich, The American Prospect, November 21, 2012
“A Very Sketchy Deal”: Mitt Romney’s Grab Bag Of Right-Wing Disasterous Bush Policies
Mitt Romney’s entire presidential campaign is premised on the idea that—as a former businessman—he is best qualified to fix the economy. It went unnoticed, but while talking tax reform, President Obama pushed against that with an effective attack on the shaky numbers behind Romney’s tax plan:
Now, Governor Romney was a very successful investor. If somebody came to you, Governor, with a plan that said, here, I want to spend $7 or $8 trillion, and then we’re going to pay for it, but we can’t tell you until maybe after the election how we’re going to do it, you wouldn’t take such a sketchy deal and neither should you, the American people, because the math doesn’t add up.
Since then, “sketchy deal” has become something of a catchphrase for the president; to wit, in an Iowa speech yesterday, he used it to contrast Romney’s plan with “deals” of the past:
Romney still benefits from a presumption of competence, and Obama would be well-served by hammering on the essential vapidness of Romney’s economic plan. It’s not just that his tax promises don’t add up—even with a $25,000 limit on deductions, there’s not enough revenue raised to pay for an across-the-board cut and cuts to taxes on capital gains and investment income—but that his five point plan to create 12 million jobs does nothing of the sort.
The definitive debunking was done by The Washington Post’s Glenn Kessler, who found that Romney’s numbers just don’t add up. On his website, Romney’s economic advisors say that “History shows that a recovery rooted in policies contained in the Romney plan will create about 12 million jobs in the first term of a Romney presidency.” Team Romney even goes as far as to cite exact job-creation numbers for each plank of the plan: 3 million from Romney’s energy policies, 7 million from his tax policies, and 2 million from cracking down on China.
But as Kessler shows, the Romney campaign has little evidence for any of its claims. There’s no study showing that the Romney energy plan would create 3 million jobs—at most, there’s a Citigroup report that predicts that rate of job growth over the next eight years as a result of policies already adopted (and opposed by Romney). The 7 million jobs number? It comes from a ten-year estimate of what might happen with Romney’s policies. And the 2 million jobs claim comes from a 2011 International Trade Commission report which estimates gains if China stopped infringing on American intellectual property. The problem is that the study was highly contingent on last year’s job market, which was far worse than the current one.
Perhaps the most damning indictment of Romney’s claim is the simple fact that “12 million jobs” is the current projection for job growth over the next four years under the current policies. In essence, Romney’s promise is to take credit for the results of Obama’s policies if he’s elected president.
“Sketchy deal” is the right way to describe Romney’s offer to the American public. Rather than put forth a plan to deal with our short-term economic problems, he’s offered a grab bag of right-wing proposals that are indistinguishable from the disasterous policies of the Bush administration. He’s betting that better packaging is all it takes to sell the public the same bill of goods. And judging from the close polls, he might be right.
By: Jamelle Bouie, The American Prospect,October 18, 2012
“A Sensible Plan, An Obstructionist GOP”: The American Jobs Act One Year Later
On September 8, 2011 — exactly one year ago tomorrow — President Obama delivered an important speech to a joint session of Congress. In it, the president unveiled a proposal he called the American Jobs Act.
You may recall the economic circumstances at the time, and how similar they are to 2012 — though job growth looked strong in the early months of the year, the summer proved disappointing. Obama sought to shift the national conversation away from austerity and towards job creation, and presented a sensible plan, filled with ideas that have traditionally enjoyed bipartisan support.
Independent analysis projected the American Jobs Act, which was fully paid for, could create as many as 2 million jobs in 2012.
I mention this now because what happened a year ago is incredibly relevant to what’s happening now. This morning’s jobs report was disappointing, and we know exactly how the political world will digest the news — if the job market is underperforming, it’s Obama who’ll get the blame.
There’s not much I can do to change the course of that conversation, but if we’re going to play the blame game, we should at least try to keep some semblance of reality in mind.
The American electorate was clamoring for action on jobs; the Obama White House crafted a credible plan that would be helping enormously right now; and congressional Republicans reflexively killed the Americans Jobs Act for partisan and ideological reasons.
With this recent history in mind, how are we to assign responsibility for high unemployment? Should we condemn the person who threw the job market a life preserver, or those who pushed it away? Or put another way, are we better off now as a result of Republican obstructionism and intransigence, or would we have been better off if the popular and effective job-creation measures had been approved?
By any reasonable measure, the GOP argument, which will be trumpeted loudly today, is completely incoherent — they were wrong a year ago and now we’re paying the price.
As we talked about in June, for Republicans, when there’s discouraging economic news, Obama deserves all the blame. When there’s good economic news, Obama deserves none of the credit. Job losses in 2010 were Obama’s fault; job gains in early 2011 and 2012 have nothing do to with Obama; and tepid growth in the spring of 2012 are back to being Obama’s fault again.
Remember learning the “heads I win, tails you lose” game as a kid? It’s the GOP’s argument in a nutshell — whether the president deserves credit or blame for a monthly jobs report is due entirely to whether the report is encouraging or not.
But even this doesn’t go far enough in explaining the absurdity on display. If we’re going to assign blame to Washington policymakers for the state of the nation’s job market, how is it, exactly, that Congress bears no responsibility at all? This is, after all, a Republican-led Congress that has plenty of time to fight a culture war — I’ve lost count of the anti-abortion bills that have reached the House floor — but has shown passive disinterest to the jobs crisis.
Follow this pattern of events:
1. With the job market struggling, Obama unveils the American Jobs Act, a State of the Union agenda filled with economic measures, and an economic “to-do list.”
2. Republican lawmakers ignore the proposals, and the job market deteriorates.
3. The GOP then blames Obama for the failure his policies, which Congress didn’t pass.
The accepted truth this morning is that weak job numbers are absolute, concrete, incontrovertible proof that the president’s jobs agenda isn’t working. News flash: we aren’t trying Obama’s jobs agenda.
By: Steve Benen, The Maddow Blog, September 7, 2012
Memo To Rep Eric Cantor: Blame Is A Tricky Thing
In April, House Democrats “celebrated” the 100th day of the new Republican rule in the chamber. Most notably, Dems emphasized the fact that the GOP, despite a year of campaign promises, haven’t even considered any jobs bills, with Republicans instead preferring to waste time on pointless gamesmanship and culture war crusades.
As if to say, “Oh yeah?” House Majority Leader Eric Cantor (R-Va.) turned to Twitter to respond to the Democratic argument:
And here we are six weeks later.
Cantor said that “everything seems to be going in the wrong direction,” but denied that Republicans deserve a share of the blame for the stagnant economic recovery.
Well, Eric, blame is a tricky thing, isn’t it?
Even in April, Cantor’s argument was foolish. Indeed, by Cantor’s reasoning, job growth should be impossible. How can all of these jobs be created in the midst of Obama-induced uncertainty? And with crushing tax rates so high? And a massive debt? And with pesky regulations stifling the engines of ingenuity?
We were apparently supposed to believe that Republicans’ mere presence in the House of Representatives is enough to overcome these burdensome hurdles.
That is, until the jobs picture deteriorates, at which point, Republicans bear no responsibility whatsoever.
Heads Cantor wins; tails Dems lose.
By: Steve Benen, Contributing Writer, Washington Monthly-Political Animal, June 6, 2011
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