In the wake of the financial crisis, the GOP stood firm in their opposition to government spending on stimulus because increasing government spending naturally increases the deficit. In the GOP counter-empirical worldview, an increase in the deficit is assumed to be prima facie bad, no matter the reason.
Here’s one handy way to break down the real-world costs of deficit hawkery. The cries for fiscal prudence that come from folks like Timothy Geithner and Paul Ryan, which are echoed in the media by the Washington Post and other major outlets, are costing us almost $2 trillion a year in annual output. This amount comes to more than $6,000 per person per year or $24,000 for an average family of four. These deficit hawks are ensuring that our children and grandchildren will live in poverty.
Buy hey, as long as the rich get richer, no problem. Never mind that a core American value, expressed in the the Declaration of Independence, is that one function of government is to enact policies that promote the “general welfare.” One of the blessings of democracy is supposed to be the promise of widely distributed prosperity. However, GOP policies can be relied upon to work against the goal of widely distributed prosperity.
The constant fear-mongering of the deficit hawks prevented the government from spending the money required to push the economy back to full employment. There was nothing to replace the construction and consumption spending that had been driven by the bubble.
As a result, the economy has operated well below its potential level of output since the recession began almost ten years ago. Not only has this meant needless unemployment, causing hardships for families with one or more unemployed worker; it has also produced long-term damage to the economy. Millions of workers have dropped out of the labor force. Some will never work again. In addition, when companies see weak demand, they invest less than they would have otherwise. The drop in investment slows the rate of productivity growth.
Fewer workers and lower productivity, unsurprisingly cut the potential increase in GDP almost in half.
In 2008, before the true extent of the recession was known, the Congressional Budget Office (CBO) projected that by 2017 the economy’s potential would be 29 percent larger than it had been in 2007. In its most recent report, the CBO puts the economy’s potential for 2017 at just 16 percent more than its 2007 level. This difference of 13 percentage points translates into more than $2 trillion a year in today’s economy.
Who suffers?
It’s also well worth noting that this lost output is income that disproportionately would have gone to those at the middle and bottom of the income ladder. The people who don’t get employed in a weak economy are overwhelmingly African Americans, Hispanics, and workers with less education. Furthermore, in a weak labor market, workers at the middle and bottom of the wage ladder aren’t well positioned to get wage increases.
Who to blame?
Is it fair to blame the severity of the recession and the weakness of the recovery on the deficit hawks? Yes.
The deficit hawks Republicans failed to take advantage of cheap money and available labor to repair and upgrade America’s infrastructure. Infrastructure investment is never going to be cheaper in the future than it is right this minute. Inexplicably, Republicans STILL oppose infrastructure investment.
The situation is even worse.
The $1 trillion in lost annual output is considerably larger than the amount raised each year through Social Security taxes. Even cutting the loss in potential GDP in half, the cost to the population is equivalent to an increase in the Social Security payroll tax of 14 percentage points.
Keep this 14 percentage point hike in the payroll tax in mind. The deficit hawks would scream bloody murder over a proposal to phase in a Social Security tax increase of 2 percentage points over two decades. The deficit hawks are not much concerned about consistency.
Republicans are not a bit concerned about clarity and understanding among the American people.
But the deficit hawks seem to believe their greatest civic obligation is to scare people. We continually hear, from political demagogues and their policy enablers alike, about the $20 trillion national debt that we are passing on to our children. As House Speaker Paul Ryan recently put it, the need to “tackle the nearly $20 trillion national debt” is at the top of the country’s priority list.
This line surely scores big in focus groups, where politicians test the best ways to alarm their audiences.
A favorite way to scare the electorate is to throw big numerators around with no denominators to give those giant numerators any context.
This sort of game-playing happens with budget numbers all the time. If I wanted to convince readers that we were spending a huge amount trying to help the poor, I could say that we are spending more than $17 billion a year on Temporary Assistance for Needy Families (TANF), the program created by the 1996 welfare reform law. I might convince readers of our generosity to the world’s poor by noting that we spend $31 billion a year on foreign aid. But people would probably be far less impressed if they were told that TANF spending was just over 0.4 percent of the total budget and foreign aid was equal to 0.8 percent of federal spending.
The practice of expressing budget numbers in dollar terms that virtually no one understands is inexcusable.
In a display of fake long-term thinking, Republicans whine about the interest payments our grandchildren will have to pay on the deficit, while neglecting to consider the more likely long-term effects of eliminating the deficit as if the deficit is occurring in a vacuum.
We should remember that we will pass down a whole society to our kids—including the natural environment that underwrites the quality of life of future generations. If the cost of ensuring that large numbers of children do not grow up in poverty and that the planet is not destroyed by global warming is a somewhat higher current or future tax burden, that hardly seems like a bad deal—especially if the burden is apportioned fairly. Now suppose, by contrast, that we hand our kids a country in which large segments of the population are unhealthy and uneducated and the environment has been devastated by global warming, but we have managed to pay off the national debt.
Please read the entire article. thebaffler.com/...
None of the foregoing is news to the Republican leadership. Since they are allergic to accepting the blame for the effects of their policies, naturally they must find a scapegoat. Heaven forbid they should blame the white policymakers. Instead they blame the most vulnerable policy victims.