A story yesterday incorrectly claimed the US Economy was “deteriorating,” and was on the Trending List most of the day. Not only is it inaccurate, it is politically damaging: Imagine right wing media: “Even the liberal Daily Kos says economy deteriorating.” That conclusion is based on cherry-picked data, and is belied by this Treasury Department Report, showing the US is doing better than other developed nations post-Pandemic.
The economy is not “deteriorating.” Unemployment is at 3.5%, matching its lowest in 50 years. And as commenter kck pointed out:
Factory Jobs Are Booming Like It’s the 1970s
Chip production is being repatriated.
RE prices have stopped shooting for the moon.
The author lists three factors in purported support for the “deteriorating” claim:
(i) the USA now has the deepest budget deficit of all OECD countries relative to GDP,
(ii) the USA has had the worst blow-out in federal debt in the OECD, and
(iii) the USA is the only developed country currently in technical recession.
It is incorrect and dangerous to use the deficit as a measure of economic health, as discussed below. But even in the context of these facts, the author’s conclusion is misleading and inaccurate. The United States has done better than other developed nations in dealing with the Pandemic economy, as shown in the Treasury Report, The U.S. Economic Recovery in International Context, which demonstrates:
The U.S. Economic Recovery is the Fastest Among the G7 Nations
The U.S. Employment Recovery has Been Exceptionally Strong
Despite Higher Growth, U.S. Inflation is Now Comparable to most other major Advanced Economies
Rapid Economic Growth has led to Especially Rapid Improvement in the U.S. Fiscal Position
The author engages in extreme cherry picking, while ignoring much more significant data:
Any actual recession risk comes from the Fed’s raising interest rates to supposedly fight inflation by putting people out of work.
The relative size of the debt and and deficit are dangerous parameters for evaluating the health of the economy at any time. It’s not the size of the deficit; it’s what created the deficit. The story notes that the 2017 $2T tax cuts for the wealthy increased the debt and deficit. But the deficit was also increased even more by over $5T in Pandemic spending, most of which provided desperately needed relief to the non-wealthy and avoided a disastrous recession. It also (temporarily) increased the deficit) and prevented a recession.
More broadly, using the deficit to determine either the state of the economy or economic policy is lethal for progressive goals. In 2018 I wrote Democratic Deficit Obsession: A Surrender to the GOP's Asymmetrical Debt Warfare, in which I demonstrated historically how adopting deficit-focused policy has severely damaged Democratic success at the polls and policy implementation. See Appendix chronology below. We have deprived ourselves of “nice things,” (like universal healthcare, climate measures) in large part because of poisonous “pay for” and “deficit neutral” policies, supported unfortunately by too many Democrats.
In addition to the above missteps, the author of the story does advocate worthwhile policies like rising inequality and the need for higher taxes on the wealthy. But a few points don’t diminish the overall misleading and dangerous title and content.
The “Trending” Section should not include misleading and politically damaging stories.
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Appendix
Chronology of Deficit Focus and Political/Policy Failure
1980: Reagan elected;
1981-92: Reagan and HW Bush increase deficit from $73 billion to nearly $300 billion.
1988-90: HW Bush pledges “no new taxes;” then agrees to raise taxes
1992: HW Bush loses to Clinton.
1993: Clinton increases taxes to cut deficit, including not just high end tax increases, but a gas tax increase.
1994: Gingrich and Co. sweep to power. Tax increases play a big part in the victory.
2000: W Bush “elected” despite Clinton surplus.
2001: Recession hits after tech bubble bursts with insufficient funds because spending was cut in the late ‘90s to create the surplus.
2001: W Bush tax cuts pass: “unpaid for.”
2003: Iraq War begins: “unpaid for.”
2004: Bush re-elected despite $400-450 billion deficit, compared with surplus four years earlier.
2005: Medicare D passes: “unpaid for.”
2008: Obama wins, greatest factor is Great Recession, not deficit.
2009-10: ACA passes: “paid for” by high end tax increases, other taxes and cuts to Medicare Advantage.
2010: Republicans sweep to power again, based on anger at ACA — focused not just on bogus “death panels,” but higher taxes and “$700B cuts to Medicare,” which had enough factual basis to make it a decisive issue.
2016: Trump “elected,” promising “cheaper medical care for all.” Clinton was the “responsible” candidate — everything was “paid for” in her programs. Voters don’t care. (She lost for a lot of reasons, but her plans being “paid for” got her few votes, if any.)
2017: Republicans pass tax cuts. Democrats howl about “blowing a hole in the deficit” of possibly $1.5 trillion. Republicans shrug and just say growth will take care of it.
2018: Main campaign issue is Healthcare, not deficit.