by Bill Kavanagh: The Republican focus on the federal deficit as a primary issue in this year's Congressional election cycle makes little sense in the context of our real economic problems. Economist Brad DeLong uses a good metaphor in a response to Henry Blodget's questions about long-term federal debt:
Think of it this way: our natural gas pipes are corroding, and there is a good chance that
tomorrowten years from now we will have a gas leak and if we do not fix it the house will explode. And Henry Blodget is using that danger to argue that we shouldn't turn on the heat tonight even though it is snowing outside...
Here's the false warning that's being promulgated: "There's a crisis coming in federal spending and if we don't start dealing with the pain now by cutting programs and spending by the government to alleviate unemployment, we'll be overwhelmed later by the mountain of debt we're accumulating."
Here's why it's a false warning: The long-term debt service on government spending to stimulate the economy pales in comparison to another problem. That looming issue is the long-term (and societally draining) economic damage done to the country if we let a decade be lost to high unemployment and lost productive labor, thereby creating additional drains on both the public and private sectors. In the current employment crisis environment, job one should be getting the country back to work— in order to create the conditions in which we dig ourselves out of this critical situation limiting the economy's stability and resilience.
It's myopic to look at debt due to federal domestic spending only, rather than the total situation the US economy is currently facing. Yet this single-minded approach seems to be crowding out discussion about solving the growing long-term unemployment crisis and its drain on the housing market, the demand for goods and services, and on the country's sense of hope that the future is something to invest in, rather than horde against.
I hope we can keep talking sense about dealing with the real problems in front of us, rather than being distracted by fears that a stronger America won't ever make sacrifices or hard choices to deal with paying our bills. Right now, the sacrifices being made are focused incredibly unevenly on those least equipped to cope with the losses: namely the poor and those becoming poorer daily.
Dean Baker responds to those voices crying out about an American "debt crisis" in the following way:
We can point to a debt crisis in Greece, and arguably Portugal and Spain, but it is not clear what that has to do with the argument for stimulus in the United States. There were debt crises in Latin America in the 80s, no one ever raised these in the context of the Reagan era budget deficits.
There needs to be more coverage of reasonable plans to revisit the unemployment issue during this election year, not less of it.
(Kavanagh cross posts at Bill's Big Diamond Blog.)