Tuesday, April 28, 2020

The Return of Deficit Mania

OK, now that we've actually spent some real money to solve a real problem (even though that problem has not yet been solved), it must mean that.....it's time for the return of deficit mania! With the cornonavirus still stalking the land and the economy in free fall, the murmurings are starting to get louder about the alleged problems being created by (oh, the horror!) the rising deficit and national debt. Robbing our children, fiscally unsustainable, undermining long-term economic growth, blah, blah, blah.
We've heard it all before, most recently in 2011 when deficit mania took over the Beltway dialogue while we were still recovering from the Great Recession. Resulting cuts in government spending undercut the recovery for no good reason whatsoever, other than placating the deficit maniacs (the same sad story played out in Europe where the hounds of austerity crippled the European recovery). Let's not make that mistake again, when we're in an even more perilous situation.
Fortunately, Paul Krugman is on the case, sending out early warning flares on this rising--and completely unjustifiable--deficit mania. This time 'round, we need a united front against this nonsense, unlike in 2011 where all too many "responsible" people on the center-left capitulated to deficit mania pressure.
"Almost a decade has passed since I published a column, “Myths of Austerity,” warning that deficit alarmism would delay recovery from the Great Recession — which it did. Unfortunately, that kind of alarmism seems to be making a comeback.
You can see that comeback in the gradually increasing number of news analyses emphasizing how much debt we’ll run up dealing with the Covid-19 crisis. You can also see it in the rhetoric of politicians like Mitch McConnell, the Senate majority leader, who is blocking aid to beleaguered state and local governments because, he says, it would cost too much.
So this seems like a good time to emphasize two key facts. One is economic: While we will run very big budget deficits over the next couple of years, they will do little if any harm. The other is that whatever they may say, very few prominent figures in politics or the media are genuine deficit hawks, who are actually worried about the consequences of rising government debt. What we mainly have, instead, are deficit peacocks and deficit vultures.
The term “deficit peacocks” was coined by the Center for American Progress for people who preen and posture about fighting deficits without offering realistic policy proposals. I’d broaden the term to include what I used to call Very Serious People — those who inveigh against the evils of debt not because they’ve done a careful analysis but because they imagine that it makes them sound earnest and tough-minded....
What about deficit vultures? That’s the term I’ve been using for politicians who exploit real or imagined fiscal distress to feed a reactionary policy agenda.
After the last crisis, conservatives used deficits as an excuse to cut social programs — for example, a number of states made it much harder to collect unemployment benefits. This time around, McConnell and Trump are trying to exploit deficit fears to force state governments to downsize, undermine (and possibly privatize) the post office and more....
The bottom line is that right now, the only thing we have to fear from deficits is deficit fear itself. Pay no attention to the peacocks and vultures: In this time of pandemic, we can and should spend whatever it takes to limit the damage."
The only fiscal thing to fear is deficit fear itself.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.