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Not Everyone Agrees Deficit Is Major Problem
If we can all agree on one thing, it's that the federal budget deficit is a big problem, right?
"Bringing about a rapid end to unemployment, caring properly for an aging population, cleaning up the Gulf of Mexico, coping with our energy insecurity and with climate change are all far more important objectives than reducing a projection of future budget deficits, " Galbraith said. (AP/ Haraz N. Ghanbari) After all, that's the basic position of both parties, and when the chairs of President Obama's debt commission unveiled their draft proposal last week, it was the talk of Washington, with every pundit worth his salt offering praise or criticism (mostly criticism). The issue is, indeed, so pressing that the New York Times created its own interactive tool to let readers balance the budget themselves. There's even an imaginary presidential candidate, Hugh Jidette (get it?) to help draw attention to deficit crisis. Of course, the ratio of tax increases to spending cuts that you favor will likely depend on your political views. But to judge from most of the coverage, that the $1.4 trillion debt is a problem that needs to be solved sooner rather than later isn't up for debate.
Except that it is. Ever since concerns over the deficit took center-stage in Washington earlier this year, several prominent economists -- all progressives --- have been pushing back, claiming not simply that proposed spending cuts are too deep, or that the rich should be asked to sacrifice more. Rather, they've challenged the entire premise of the debate: that a budget shortfall caused by over-spending and under-taxation stands to put an undue burden on future generations, and that cuts to government programs, including Social Security, can help fix the problem. That view, they say, is based on a fundamental misunderstanding of what's driving the deficit and how government spending works. In fact, they argue, as one recently put it, that "the current deficit is a positive."
To be sure, as progressives, these thinkers--call them the deficit contrarians--already tend to take a skeptical view of efforts to cut government spending aimed at helping struggling Americans, as many deficit-cutting plans would likely do. But their credentials and prominence are such that their view deserves a much wider hearing than it's been getting -- especially given its enormous implications for the debate that's currently consuming Washington.
The starting point of the deficit contrarians' argument is that the deficit was caused not by over-spending and under-taxation, as the current debate would have it, but by the collapse in tax revenues that resulted from the 2008 financial crisis and the subsequent economic slump.
In prepared testimony before the presidential debt commission this summer, James Galbraith, a professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas, argued that this means the only way to reduce the deficit is to reduce unemployment, not to cut spending or raise taxes. Galbraith (pictured above) argued that the only way to reduce unemployment without adding to the deficit through more government spending is to get banks lending again, by fixing the root problems in the financial sector that caused the financial crisis in the first place.
Galbraith -- a former director of Congress's Joint Economic Committee, and the son of the renowned liberal economist John Kenneth Galbraith -- went on to address the idea that cutting Social Security benefits can help close the deficit. That's been a mainstay of the debate, and it's a notion that the commission's co-chairs appear to subscribe to, judging from their recent proposal, which recommends significant cuts to the program. But Social Security, Galbraith noted, isn't a spending program at all. It simply transfers wealth from today's taxpayers to low-income elderly people in the future. "One can favor or oppose [cutting benefits] on its own merits as social policy," Galbraith said. "But one cannot argue that it would save real resources that are otherwise being 'consumed' by the government sector."
Next, Galbraith took on the argument that deficits will produce higher long-term interest rates, making it prohibitively expensive for the government to borrow in the future. That's not true, he countered, because the government doesn't spend in the same way that private individuals or companies do. "So long as U.S. banks are required to accept U.S. government checks - which is to say so long as the Republic exists - then the government can and does spend without borrowing, if it chooses to do so," he declared.
All in all, Galbraith said, the current mania for deficit reduction is disastrously misplaced. "The right economic objectives are to meet real problems, not those conjured from thin air by economists," he concluded. "Bringing about a rapid end to unemployment, caring properly for an aging population, cleaning up the Gulf of Mexico, coping with our energy insecurity and with climate change are all far more important objectives than reducing a projection of future budget deficits."
Galbraith's testimony may have been the most detailed and extensive presentation of the deficit contrarians' position. But its basic thrust has received support from other prominent and respected figures. Paul Krugman of the New York Times, Dean Baker, the co-director of the Center for Economic and Policy Research, a progressive economic think tank, and Robert Reich, who served as Labor Secretary in the Clinton administration, all have contended, like Galbraith, that the deficit was caused by a loss of demand triggered by the bursting of the housing bubble.
Krugman and Baker also agree that concern over creating an interest burden for future generations is misplaced. Writing recently in the Boston Review, Baker noted that the Fed can simply buy the debt and hold it indefinitely, as it's now doing. "This means that the country really has no near-term or even mid-term deficit problem," he concluded. "The current deficit is a positive. In fact, if it were larger we would have more jobs and growth."
Krugman has used very similar language. "If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs," he wrote in February.
Reich hasn't gone quite that far, but he shares the view that the focus on the deficit as opposed to the economic slump is not only misplaced, it's counter-productive. "Our biggest problem isn't the size of pending federal budget deficits or debt but an anemic recovery that may drag on for years," Reich wrote recently. "And unless we're careful, budget-deficit mania may further slow economic growth -- thereby making future debts even less manageable."
As you can see from these examples, it's not as if these prominent economists -- and others who agree with them -- have been shy about expressing their view. And yet the mainstream debate in Washington offers surprisingly little evidence that their position even exists. That means the debate is skewed from the outset.
Of course, there's at least one other high-profile figure who has downplayed the importance of a balanced budget: That would be Dick Cheney, who's famously said to have declared, while arguing for a tax cut despite a looming shortfall, that "deficits don't matter." The former veep may now be surprised to see his position endorsed by a group of economists with very different priorities.
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70 Comments so far
Show AllAnd we are wasting $Billions every month in Iraq and Afghanistan.
The crippling cost of these illegal wars is almost never mentioned when discussing the Federal budget.
End these occupations and put the super rich in a 60% no deduction tax bracket like the progressive income tax system mandated when it first became law.
Corporate loopholes (deductions and offshore tax dodges) must be closed.
These simple steps would bring hundreds of $Billions of dollars back into the Federal budget each year and then back into our ailing domestic economy.
The main problem with the American economy today is most of the money stuck at the top and not circulating throughout the economy.
The irony is that during the current hourly media dramas forecasting deficit armageddon, nobody is replaying Dick Cheney's weekly proclamations that "DEFICITS DON'T MATTER". Cheney was flooding the airwaves and print media with this mantra during Dubya's first term.
Contrast that with our current WH resident: (paraphrasing) "We're all guilty of over-indulging and living beyond our means."
And we now know for sure that these Bozo's are as stupid and dishonest as he was. A first year economics student can prove the false mantra of deficit's don't matter in one minute.
The increasing debt service by itself is proof enough.
So true,
The wealthy and large US corporations are aiming to transfer more of their tax burden onto the working class, eliminate al government/public oversight or any hint of "regulation", in short "welcome to the jungle". I don't know what drives these people and how they think the nation will prosper under their missleadership. These thugs truly belong in those private prisons they have build to hold their opponents in.
"They" don't care if the US or any nation "prospers" because they are loyal to no nation, "they" are loyal only to ever growing profits and wealth for themselves.
"They" view governments solely as entities to be purchased for the purpose of transferring as much of the respective government's treasury into "their" coffers.
"They" are in most cases protected by laws that give corporations a license to steal.
The attitudes you list are real, but they exist because the companies are working in a capitalist system, and within a legal system that requires them to look out for their shareholders first.
The projected growth in the debt over the next several decades is almost entirely the result of, you guessed it, out of control, sky-rocketing medical expenses. The only real solution is what already works in Canada and other SOLVENT industrial societies-single payer health care!
Of course, Free Market religion and Congressional/Judicial prostitution to corporate lobbyists prevent the obvious cure.
James Kenneth Galbraith has it exactly right. The deficit isn't the problem at all. Actually it's a positive. Finally a progressive is talking like one who understands basic economics instead of ignoring the lessons of the 1930s.
AD
The current deficit reduction fever is nothing more than a ploy to kick 98% of Americans while they are economically down by gutting "domestic" programs, in other words...gutting anything that isn't a corporate welfare program.
Perhaps because he has it right, the economics profession does not take him seriously.
Keynes lives!
Eat well, exercise, avoid doctors and "health care" at all costs. Health care in this country is prescribing, procedures, tests, and finally care-giving after you've been health cared into incapacity. Not only is the health care industry ruinous to the financial health of society, it is ruinous to the physical health of it's citizens. What McDonalds is to food, mainstream allopathic care is to health.
I agree with "gonzonews". Our middle eastern wars are the big problem. I would only add that our enormous system of overseas military bases is also a problem.
One part of the solution has to be to go back to a truly progressive income tax like we had back during the Eisenhower Presidency.
Jim Shea
What if Obama had set up an unemployment commission instead of a debt commission? But if he had done that, he wouldn't have magnified the bankers' and republicans' chief talking point.
Primary challenge anyone? I believe that that is the best course towards an independent progressive movement which could lead to a third party.
Since 1985 the Democratic National Committe (DNC)has kicked primary contenders who are not a corporate money magnets off to the sidelines in a New York minute.
Dick Cheney: "Deficits don't matter."
George Bush: "Our economy is a house of cards."
Maybe these illusionists knew something after all. The folks on Wall Street who can turn crap into gold, the 100 million a year oil speculators, the Fed Fraudsters and the hedge fund whizzes may have a method to their madness, after all. They can print money at the turn of a hat,they make deficits disappear by creating inflation, create bubble manias that keep people happy for years, ward off evil, make the global warming waters recede--Magic and illusion; the only way to live regally!
The full quote from Cheney, you might as well include it: "Reagan taught us that deficits don't matter" - and btw: it is, of course, rank hypocrisy that those who carried that banner are the same ones now claiming they DO matter - get it?
Sure deficits matter. A lot. But when you're back's to the wall, as we are, we need to create jobs and spend like we should have been doing 30 yrs ago. And raise taxes on corps and the wealthy.
who owns deficit?
can a free society own deficit to anyone?
edweg
End George Bush's, Dick Cheney's and Donny Rusmfeld's wars of choice in Afghanistan and Iraq. Cancel the contracts, bring the troops home and close the bases. That's three trillion dollars right there. End Ronald Reagan's and George W. Bush's tax cuts for the wealthiest Americans and re-institute trade barriers and tariffs. That's another three trillion dollars. There's your balanced budget. Have a nice day neo-cons.
What's the difference between an economist and a bookie?
Cicero: "Freedom is participation in power."
Bookies pay winning bet makers of all economic classes. Establishment economists get paid by ruling class bet makers for turning everyone who can't afford to lose big into suckers.
An "economist" can only guess at the future results of a given project or event. A "bookie" knows in advance what the out come is going to be. The former "votes" based on stupendous ignorance while the latter votes on sure knowledge.
Galbraith and others are right. The deficit was caused by the politicians who deregulated the financial sector and by the banksters who robbed us blind back in 2008. (And, then added to by the illegal occupations in the ME.)
The thing is, Mr. Galbraith seems to think that the elitist scumbags who own this country want to help the citizenry recover. No. They want to continue the class war until every dime is sucked up into the top 2% and the 'middle class' is turned back into the serf class. This is the Real War.
Again I point to the Second World War.
All countries involved ran up enormous deficits. None of them claimed "we must balance the budget and should cut back on Military spending to do so"
They ALL printed up money and debt with no expense spared to WIN the war, whether they were on the side of the Axis or the Allies.
The same economists that claim "Governments can not create jobs " and "Stimulus spending does not work" will all say "It was the second World War that got us out of the depression"
The logic of these people is beyond me. How can government spending on a massive scale end a depression and cause economies to boom at the same time Government spending on a massive scale can never create jobs or provide a stimulus?
How is it that dropping bombs on Leningrad or on Berlin or on Tokyo STIMULATES an economy and Building Highways or providing health care or improving sanitation systems or paying decent pensions can not?
How can building 3 million tanks.aircrafts and ships and then BLOWING them up and building them again be rational and sane but building 2 million homes for the homeless that wcan house peoples for 100 years and more be "bad economics" ?
Why is no expense spared and no debt too great when it comes to winning WARS. ?
There "not enough money" is a CROCK.
How? Simple. It's called 'doublethink' see: Orwell re: 1984...
Cicero: "Freedom is participation in power."
New Deal government job programs got tens of millions of Americans THROUGH the Great Depression that lasted 13 years from 1929 to late 1942. What got the American economy OUT of the Great Depression was a combination of fully domestic war material manufacturing followed on immediately by post-war domestic civilian product manufacturing that was ramped up to supply global demand because most of the rest of the industrialized world's manufacturing capacity had been destroyed or severely damaged. The first GI bill catalyzed that domestic economic growth into a sustained expansion by multiplying the number of engineers five-fold and the number of people with business degrees seven-fold (leading to an explosion of small and medium-sized business creation), and taking the U.S. from a nation where one out of three adults owned their own home to a nation where two out of three adults owned their own home by the late 1960s. Two bedroom homes in the late 1940s & early '50s sold for around $25,000.
So the New Deal government job programs served as a sort of economic pilot light to keep the working-class home fires burning during the depths of the Great Depression, but it was war manufacturing, post war civilian product manufacturing and the GI Bill that turned the gas up and got the economy really cooking again. All those policies worked together in order to allow a recovery that was as fast and robust and sustained as it was.
It was a combination of the economic aftermath of Southeast Asian war expenditures, Cold War expenditures, the first Arab oil embargo's effects on oil and gasoline prices, and the transition from Keynesian economics on the gold standard to neo-liberal economics on the oil exchange rate financialized/T-bill standard (relying on the U.S. dollar as the world's key global reserve currency) that has so completely dismantled the large middle-class created by Keynesianism between 1933 and 1970.
One reason is the way and what the money was spent for and the returns it generated.
Ask Great Britain the cost of war.
But the really horrifying thing is full employment- driving to work, buying a big, new house, going to the bowl games- all the 'Murkan middle class lifestyle just pumps more carbon dioxide into the atmosphere and burns up the last of the oil. That's the real debt we're leaving to the future.
Wishing I was drunker--MD
Cicero: "Freedom is participation in power."
That's why we need a thoroughly Green New Deal as opposed to a half-assed militarized New Deal or an old school carbon intensive New Deal.
A quote from James Galbraith's dad:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
--John Kenneth Galbraith
nice one, thanks.. let me return the favor:
Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.
- John Maynard Keynes
It would improve the world if we cut spending on military, prisons, sick care, and other forms of corporate welfare, but I'm not holding my breath for either major party to ever grow the gonads to make this simple suggestion. Those systems will only fall apart when we, the people, refuse to work for them or pay into them.
Since 1972 nothing has backed the US dollar but faith in the power of the US government. The government that prints the dominant global reserve currency needs neither to borrow nor to tax, only to maintain our faith. But they can't even get that right. People would have faith in a USA that used its power to meet human needs everywhere. Imagine the potential!
But it doesn't seem to be on the agenda. Until it is, I will make every effort to withdraw all my support from exploitative corporations and the governments they own. I will focus locally with my friends to build the support we need to sustain each other independent of that system.
Vernon
The 2% of "have's and have more's" can't support what needs to be done, they are blind to anything other than 100% self-interest. I've finally come to realize that focusing locally is the only sane solution. However, 'independent of that system' really isn't possible for me.
In terms of technology we are terribly wealthy compared to our grandparents. For every CPU cycle the earth saw 60 years ago, the earth sees on the order of one quadrillion CPU cycles today.
In terms of political technology, we are ignorant savages unwilling to invent anything new. The world is good, why change it? Look across the landscape, why, the Great Spirit has given us everything we really need. There's a Kentucky Fried Chicken over there! Right next to the Manpower office full of chairs! Pep Boys! Yes, we would rather die than see a tiny bit of change to what the Invisible Hand has wrought. (actually, I should apologize to anyone who practices the real thing, not my mocking of modern idiots. The real practitioners are quite sane and carry a wealth of knowledge with them).
Oh yeah, the deficit? Balance the whole thing on the backs of the hungry, and leave the rich sailing in their $50m motor yacht homes. The rich have bought Congress to be a majority of froth-mouth culties who despise science when ordered to, and whoever has more froth in the mouth gets the most donations and wins the election.
On some other planet, nations don't fight foreign wars at the behest of international companies who only want minerals, or agricultural products, or near-slave labor.
On some other planet, nations don't lock up 2.5 million men in prisons, where they all grow old so that we spend $50k/year to keep a million 70 year old guys in wheelchairs from climbing over the prison walls.
On some other planet, health care, like free education for all kids, is taken as a fundamental function of government, not a purse-draining marathon.
If just those three things were fixed, and if our government was designed a bit better, there would be no reason for a deficit. Only our national cult members can create a deficit that big.
If President Obama wants to be a conservative, please run someone against him in the 2012 Democratic Primary. It worked against LBJ (except a group of CIA agents immediately shot Bobby Kennedy hours after they lost all hope of politically defeating him).
"except a group of CIA agents immediately shot Bobby Kennedy hours after they lost all hope of politically defeating him"
Few people point out the timing there. Indeed the CA primary did vault Kennedy into the spot of presumed nominee, and just as quickly, he was shot. No coincidence, that ...
Generally speaking I don't support the death penalty, but Alan Simpson should be marched out and shot at sunrise as my mother used to say.
'Not everyone' - that has been true for a long time, since 2008 when many economists like Galbraith and many others who saw the real estate bubble coming. Of course you wouldn't know jack about this from the msm - oh, and americans rejected liberal policies last election too - right?
I agree that the deficit is a red herring, however I really think everyone is consuming way too much of the earth's resources and it would not be a bad idea if everyone made a concerted effort to downsize and consciously and willingly made their footprint smaller. There would be lots of jobs in retro fitting to boot. Conscious and willing is the sticking point. In the town I live in there are two to three vehicles, a huge boat, and a huge RV beside a huge house. Not bad for hewers of wood and drawers of water. They are not going to give up all their toys easily.
The other option, throwing millions of people out on the street stripped of all their assets is one way to do it,but makes rebuilding to even modest and ecologically sound comfort almost impossible. Does not create jobs either.
This article correctly states:
"The starting point of the deficit contrarians' argument is that the deficit was caused not by over-spending and under-taxation, as the current debate would have it, but by the collapse in tax revenues that resulted from the 2008 financial crisis and the subsequent economic slump."
Yes, the deficit was caused by the "2008 financial crisis and the subsequent economic slump" --- but THAT was caused by massive looting by the corporatist EMPIRE in the specific form of looting via the vehicle of "negative externality cost dumping" onto the federal government!
In other words, the ruling-elite corporatist EMPIRE intentionally precipitated the crisis (a la "Shock Doctrine") by building a negative externality Ponzi scheme, which depended on fraudulent products (CDOs, CDSs, and other ethereal derivatives --- creating so-called 'Toxic Assets', which were and are really 'Fraudulent Assets'), the Negative Externality Costs of which had to be absorbed (under threat) by the US government, and should be rightly called a hidden Negative Externality Tax imposed by this ruling-elite EMPIRE on the American people.
Beyond Galbraith, Krugman, Simon Johnson, Stiglitz, and other critically thinking economists' accurate and alternative analysis described in this article, no media coverage has been focused on ANY critical economist who has addressed the tax perversion whereby the largest tax in our country (a hidden 'negative externality tax' by corporate/financial thieves) has been routed through the government, merely to be handed to precisely that looting Empire.
What do you think can be done to expose this fraudulent, but unseen, "Negative Externality Tax"?
Negative Externality Taxes are, by far, the greatest tax on the American people --- and only pass through our 'Vichy' government on the way to a guileful and disguised corporatist EMPIRE.
Modern Tea Partiers need to learn about history, specifically the history of EMPIRE and corporate economic exploitation through the guise of a political conduit --- which is what the original Tea Party was all about.
How many tax haters today in America know that by far the greatest tax on Americans --- far greater than income taxes, property taxes, or Social Security taxes --- is the over $10 Trillion "Negative Externality Tax" which the people, through their government have merely passed through to the hidden ruling-elite corporate/financial/militarist EMPIRE during this well planned financial crisis of the last two years?
And what can't be paid out of current government taxes on the people to this corporatist EMPIRE is forwarded as deficit and DEBT on the people and their children.
If various frustrated and angry sectors of the US populace, including so-called Tea-Partiers, were to become aware of both the level of economic oppression forced upon them by the the ruling-elite Empire, and the FACT that their own pauperization and the elites' untold wealth elevation were only being effected through the illusion of government by foisting massive negative externality cost dumping Ponzi schemes, such as Wall Street CDOs, CDSs, and other derivatives, oily global warming fratricide, and contrived wars for weapons sales, then even the clueless tea-partiers will turn their wrath toward the corporatist EMPIRE in addition to the "Vichy" government which the EMPIRE controls.
Exposure of the massive, and greatest hidden \"Negative Externality Tax\" scam which is being foisted on people and our country by this disguised EMPIRE is going to be the catalyst that both opens peoples' eyes to the real source of their tyranny, and ignites a focused explosion at the EMPIRE when the system and the people reach the critical mass and there is "no room for denial" of being "Against EMPIRE".
Alan MacDonald
Sanford, Maine
“There's class warfare all right but it's my class, the rich class, that's making war, and we're winning.”
-- Warren Buffet (NY Times, Nov 26, 2006)
"If various frustrated and angry sectors of the US populace, including so-called Tea-Partiers, were to become aware of both the level of economic oppression forced upon them by the the ruling-elite Empire, and the FACT that their own pauperization..."
This is a mischaracterizing of the Tea Partiers I've seen repeated several times on this site by various posters. A CBS/NY Times poll of Tea Party supporters taken in April of this year found that, over all, their members are more likely than the general public to say their personal financial situation is fairly good or very good. Most of them are white, male, over 50 years of age, "born again" Christians and fairly affluent. Many of them FEAR impoverishment as the result of the Housing Bubble implosion, the subsequent TARP handouts to the big banks and the ongoing cost of poverty welfare programs and unemployment benefit extensions, but they ignore corporate welfare, deficit offset spending cuts tied to extensions of the Bush tax cuts for the super-rich, and they are not a poor movement.
That said, while the progressive economists mentioned in the article are contextually framed by that article as focusing only on the collapse in tax revenue because the 2008 Housing Bubble implosion and the resulting sudden & steep economic decline, all those economists have also mentioned elsewhere several other aspects of neo-liberalism (besides its anti-regulatory stance towards Wall Street) that have contributed to the long-term structural decline of the underlying real economy, and which act as hurdles to any significant private sector job creation.
One that most of them don't mention (because it began and was successfully completed so long ago) was the corporate collectivization of small-to-medium size family farms and replacement of local agricultural workforces with seasonal, lower paid, illegal immigrant workforces (a process that went on uninterrupted from the late 1970s until the illegal immigrant deportation ramp-ups of recent years). But they do mention the legalization of usury from pay-day predatory lenders to soaring credit card interest rates, and the shifting of the tax burden away from High Finance, Big Insurance, and the Rentier Class and onto productive labor and domestic industry. And they do mention the millions upon millions of primary (big ticket heavy industry) and secondary (parts, equipment, chemicals) manufacturing jobs lost to the "free trade" regime over the last 16 years including the loss of all the local mom & pop businesses who depended on the local spending of well paid local factory workers around the country. And they do mention all the mom & pop businesses that, thusly, succumbed to the Walmart "big box'o'imports" distribution model--with the bulk of its workers so poorly paid that they qualify for food stamps and cannot support similar local economies of scale).
Forty years of this increasingly toxic neo-liberalism has exerted a cycle of economic attrition on the underlying real economy that exists beneath Wall Street's "financialized" economy. The "financialized" economy overwhelmingly serves to further enrich big banksters, AIG-like insurance firms, securities ratings agencies, hedge fund managers and major corporate share holders. It does little to nothing to sustain a healthy domestic working-class, let alone create enough good paying jobs to employ new workers trying to enter that working-class, or re-employ the growing numbers of long-term unemployed.
I think what has been left unstated by both progressive neo-Keynesian and neo-liberal economists is that, so long as the "free trade" regime acts as a barrier to rebuilding a domestic, private sector, middle-class manufacturing jobs base in this country (green or otherwise), the political class is afraid to implement large scale, New Deal type government job programs. I think they are afraid that all those millions of government created jobs would have to become permanent job entitlements because there will be insufficient private sector jobs to ever take their place in the foreseeable future.
Several progressive economists have calculated that, at present rates of private sector job growth, it will take 20 years or more to re-attain pre-2008 levels of employment and most of those trickle-down jobs will be low wage, low-or-no benefit jobs. The U.S. Chamber of Commerce and National Association of Manufacturers have made it abundantly clear that they have no interest in rebuilding our manufacturing base in this country when they can hire dirt cheap foreign labor to work in offshored factories, and ignore environmental regulatory costs and labor protection costs to increase their profit margins. The U.S. doesn't create enough low wage/service wage jobs anymore, let alone middle-class jobs, and hasn't for over a decade.
Moreover, while government job programs got tens of millions of Americans THROUGH the 13 years of the Great Depression, government spending on direct job creation did not get the U.S. OUT of the Great Depression. Franklin Delano Roosevelt faced no "free trade" regime as a barrier to ramp up domestic military manufacturing or post-war civilian product manufacturing (when most of the rest of the world's manufacturing capacity was destroyed or severely damaged and the U.S. had far fewer competitors for its exports). When our military personnel came back from the war in 1945, demand for domestic and export production was soaring, with a direct upward pressure on inventory accumulation and, therefore, private sector job creation. When our military folks come back from the oil/terror wars today, demand is flat, inventories are withered (except for temporary holiday blips) and imports exceed exports by record numbers.
Obama is now scuttling like a crab on crystal meth to extend the wars to Yemen, re-expand the war in Somalia, send "advisors" to Nigeria, preserve conflict in Iraq and the AfPak, and cut new military base construction and weapons deals all across the Middle East and Central Asia, but that still won't create enough jobs here at home. Most of the actual construction will be done by foreign "guest workers" from the Third World. Too many of our war material manufacturing and big military contractor firms (aside from heavy weapons makers) are now offshored. A lot of those American-in-their-names-only (AINTNO) logistics firms like Halliburton avoid contributing their fair share of tax revenue to the U.S. by relocating their corporate headquarters to pirate banking enclaves like Dubai, UAE. Even Lindsay Graham's fervent dream of going to war with Iran won't generate enough domestic jobs inside the U.S., although it might allow our all-volunteer armed forces to experience their 13th through 20th combat tours. These wars cost more in wasted tax revenue (that has failed to reduce overall numbers of terrorists, terrorist attacks or attempted terrorist attacks here and abroad for nine years and counting) than they generate in terms of domestic manufacturing production--especially relative to the cost of providing long-term medical care for the millions of veterans of these wars. We now spend two and a half times a year what we spent at the peak of the Cold War on the Shrublette/Obysmal oil/terror wars.
Excellent - keep it up, you are really on a role lately - when are you going to run for office?
Cicero: "Freedom is participation in power."
I get at least one person a week saying something to that effect to me lately, but the short answer is (1) I'm too broke, (2) the oligarchs or brainwashed Right in this country would to the same thing to me that I think some element of them did to Paul Wellstone, and (3) there's a book I'm working on that I want to then turn into a screenplay and get James Cameron to help me make it into a film.
Why am I not surprised?
You just can't get truth like this about the financial deceit of this EMPIRE posing as our former country anywhere in the MSM, and not too many places on the web.
Only sites like CD and Truthdig will even allow such truths from sources that are commonly slurred to be referenced in posters' comments.
This linked article compliments CD's fine job in publishing the article we are now viewing on the lies of the ruling-elite Empire regarding the true causation of our current economic tyranny:
"The plan [Bipartisan Policy Plan] is part of a larger agenda to stem the decline of US capitalism. Rivlin and Domenici, in an “open letter to the American people” that introduced the report, clearly linked up the attack on American workers with the aims of US imperialism abroad."
Full article:
http://www.wsws.org/articles/2010/nov2010/defi-n18.shtml
Alan MacDonald
Sanford, Maine
Dear Professor Galbraith:
I should say right away that although I agree with your premise that deficits don't matter to a fantastically rich sovereign country such as the US. But the manner in which you and the other progressive economists explain this to the general public leaves plenty of room for improvement. Because of this you are losing the hearts and minds of many independents who have been brainwashed by the dogmas of "balancing budgets" and "fiscal responsibility" repeated over decades like a mantra by their fathers and mothers and grandparents over decades, even though from a nuts and bolts accounting considerations to even sophisticated financial-economic-mathematical reasoning, we at top of the academic/research group of economics professionals know it is as much a no-truth slogan as the "world is flat".
This brings me to the fundamental truth about the American Polity. Its capacity for numerical reasoning is pathetic with IMO about 90% functionally innumerate. Its capacity for critical reasoning beyond slogans is also almost pathetic, even among college graduates because the attention span of close to 80% is that of a gnat. In this milieu, coming out bold faced against the religion of "deficit reduction" is like taking the podium at an evangelical church where "speaking in tongues" is daily ritual and saying Jesus never existed.
Let me come to specifics.
1. There is no problem with the NYTIMES interactive "deficit reduction" exercise. In fact I would say it is quite good and worth a visit by anybody serious in debating the deficit issue with facts more than emotion. It’s even fun to try and see whether one can actually reduce the deficit from among the choices offered (though limited and not very creative). I did that in a few minutes in quite a progressive manner but not completely one or another extreme, places which don't make any economic or real politik sense to me. I solved the said deficit both for 20105 and 2030 here at:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=4mx109rh
2. It is important to make a VERY STRONG and PROPERLY EXPLAINED, with colourful and eye-catching, idea illustrating diagrams of the money and size amounts, distinction between the YEARLY FEDERAL DEFICIT and the NATIONAL DEBT. Most people, even on CD and other progressive blogs, mix up the two. Second, it is important to state an EXACT FIGURE for the NATIONAL DEBT at say $14 TRILLION once and for all, and give the lie to many writers who inflate that with $50 trillion in UNFUNDED SS TRUST FUND liabilities. Third, some time and pages with small examples and large illustrations are necessary to make the hoi polloi UNDERSTAND the differences in size between $1million, $1billion and $1trillion. In point, I saw an interview by Chris Mathews on MSNBC a few days after the drubbing of the Dems on Nov. 7th with Governor Haley Balbour (Balfour?) who was the Republican Party Chief Election Strategist. He was saying that Obama and the Dems did not have any business sense because they had created the stimulus package of $800 TRILLION. Then a few seconds later he changed it to $800 billion. Then again to $800 trillion. And finally to "heck something like that, you understand" to Mathews. Besides being poster model of the fat white redneck, Balbour represents the barbarian innumerates now in control of our economy. So my point -- EXPLAIN the ABC's of the stuff well and don't presume the masses understand thoughts at your level.
3. The point you raised about US incurring debt without worrying about who will provide funds for the new debt by saying the Banks are legally obliged to cash Federal Government checks, though correct, is catastrophic if the innumerate masses and overseas depositors take it to heart. There would the mother of runs on all the banks. Instead of that, you should have explained that the US DEBT is almost ALWAYS issued in the form of TREASURY NOTES (short term-3months, 6months etc.) and TREASURY BONDS (2years to 30 years). The bonds are issued by the Treasury, and they are cashed out by the Federal Reserve and also sold directly to the public by the Treasury. FED uses surplus cash at hand or prints new cash (quantitative easing). The FED then places these securities in the secondary markets through its favourite underwriters. The US and world public buys them as they are considered to be the safest investments in terms of redemption at face value and interest payments in the world. Also, as the US $ is the world's reserve currency, there is no mathematical possibility that the US can default on securities in its own currency since it can print any amount necessary to meet obligations. Legally, the US is obliged to do nothing else since it issued the debt in US dollars and promised to pay back including interest in US dollars.
With these 3 major items clearly understood, the worry of the great mass of people who believe a country's budget and debt should be run like a household would ease and the deficit reduction religion would lose adherents. They also won't fret about their grandchildren and children bearing a large burden. Tell them the US, like any large company "too big to fall" is a "going concern" in accounting lingo, and it can simply ROLL OVER one TRANCHE of 30 year bonds when due by another tranche printed on brand new paper by the Treasury 30 years hence and cashed out by the Fed, without taking any repayment money from our kids and grandkids. Almost all running businesses do the same thing when they don't want to repay their debts because they may want to use the cash on hand for new investments etc. Since the Right Wingers want to run the country like a business, this is it.
RisR
Too many articles like this focus on the deficit with too little focus on the national debt. Doing so distorts the discussion. The conversation is equivalent to saying it is okay for a new college graduate making $40,000/yr to make a $1000 purchase on their credit card without considering anything else. It doesn't sound bad til you realize the graduate in already in debt for $50,000 ($25,000 college loans & $25,000 car loan) and is paying $1200 a month (hypothetical) in debt and interest payments. Keep spending and the student will be a slave to his own debt.
Very well said.