Skip to main content

Deficit Attention

Berkley MI

Tuesday

 

I am the last one who should be explaining economics to anyone, and my apologies to readers who know this stuff better than I. Which is not a high bar.

But as one of those rare Americans who actually received a basic, barely adequate education in the subject, I feel obliged to bring up two common misconceptions that simply will not go away. Or rather, they will not be allowed to go away, since they have historically dovetailed quite nicely with the long-term aims of the Republican party. Who never met a misconception they didn’t like.

The first is that a balanced budget is always a good thing. It’s not, though we’re brought up to think otherwise. It’s intuitive to us that we all need to balance our personal budgets, and that towns, counties, and states need to balance theirs as well. And Republicans are thrilled to have you think that way.

Because they never tell you that the federal government doesn’t need a balanced budget, and that it should not be forced into one. Most legitimate economists will agree, generally, that governments should spend more when times are bad and less when times are good. There’s plenty of room for argument about the nuances, but the basic idea is not in dispute.

Yes, this is counterintuitive to most people. If you lose your job, you tighten your belt. Same with your company if it gets in trouble. Same with your city and state. And yes, there’s a lot of belt-tightening going on right now.

But what’s correct for them is not so correct for the federal government. It has been demonstrated time and again, in downturn after downturn, that when you inject money into a distressed economy — like, say, this one — you create a stimulus effect that ripples through that economy and gets its people working and spending once again. The trade-off is that you incur a deficit. You spend more than you take in.

Trouble is, this only works when Republicans are not running things. Or obstructing things. They have deliberately undermined the whole idea of deficit spending for well over half a century. And they have encouraged and exacerbated the natural confusion surrounding it.

And it’s worked well. For them, not us. Because the second misconception, widely held, is that deficits are always a bad thing. They’re not. They are a necessary part of any stimulus effort. But when deficit spending collides with rigid ideology and bad faith agendas, we too often get duped.

So whenever a Democratic administration spends more money than it takes in, and the government indeed incurs a deficit, Republicans, without fail, scream bloody murder.

When a Republican administration (2000-04) delivers two massive tax cuts to the wealthy, ballooning the deficit to levels never before seen, well, suddenly deficits are a beautiful thing.

But when a Democratic administration raises spending to stimulate an economy devastated by a recession largely caused by Republican mismanagement, thereby incurring a much larger deficit, well, Republicans are back to screaming, but louder, like you shot their dog. (This happened in 2009. Obama saved their ass. They compared him to Hitler).

But here’s the fun part:

When a Republican administration gives a massive tax windfall to corporations, (as they did in 2017), resulting in the biggest, multi-trillion-dollar deficit in living memory, well, guess what. No screams. Not a peep about the evils of deficits, which just four years ago had been the harbinger of the end of civilization. Do we see a trend here?

More than just a trend, it’s a basic principle of real-world economics in the age of the pandemic: 

Deficits are only bad when Democrats are in charge.

Remember that next time Democrats are in charge, hopefully soon. Think of me when you hear the screams.

Why is this important? Because now that we’re running up an unimaginably massive deficit that might just be the most important, life-and-death, save-the-country action we have ever been forced to take in our entire history, a curious thing is happening. Republicans are running for cover. They’ve been caught with their pants down.

Their voters are finally starting to catch on that their criminally incompetent stewardship of the country — the decades-long starving of the federal government that long pre-dates Trump — has real-world consequences. That it’s actually killing people in unconscionable numbers. That the country was in no way prepared for this pandemic. And that even life-long Republican voters can see that.

But with citizens dying, the economy tanking, and a lunatic driving the bus, we will soon be looking at an almost inconceivably steep deficit. Managing that will be a massive and complex problem, one for which these felons have neither the aptitude nor the appetite. Their instincts are to obstruct and grift, though some of them (not all) seem at least mildly embarrassed that their constituents are dying.

Even so, we desperately need to be spending at unprecedented, dizzying levels. And it’s not even about stimulus. Not yet. It’s still about rescue, about dealing with the pandemic itself, about saving lives and livelihoods. The government is  already more than $4 trillion in the hole, and very little of it is about stimulating the economy. That comes later. I’ve read we could need as much as $8 trillion just to get through the next six months.

As far as I know, no country has ever seen a deficit of this scale. Nobody knows how it plays out. And it’s easier to imagine bad scenarios than good ones.

Meanwhile, economists from the sublime to the ridiculous, from Nobel-prize winners to Fox News charlatans, will soon be weighing in on this subject (Hint: listen to Paul Krugman, ignore Larry Kudlow). But don’t expect any of them to really know anything, because we’re truly in uncharted territory. The good ones will admit that right up front.

But the deficit will loom large in the national conversation for a long, long time.

Comments

Popular posts from this blog

Warning: Red States may be Hazardous to your Health

In late September, a Nebraska woman was sentenced to two years in prison for helping her daughter obtain abortion pills. The case was less about abortion than about some bizarre behavior regarding the burial of the fetal remains, but this is still appalling on any number of levels. Even so, that’s not what piqued my interest. Rather, I was drawn to one curious footnote to the story, and I’ve heard nothing about it since. Apparently, the judge in the case had ordered the woman to undergo a psychological evaluation prior to sentencing. Presumably, the results might have helped to mitigate her sentence. Which sounds reasonable, perhaps even routine. But that evaluation never happened. It was, strangely, “cancelled due to lack of funding.” Huh? A person whose future may have hinged on that evaluation was denied it because the state couldn’t afford it? How underfunded are we talking? How many other people moving through the Nebraska judicial system haven’t rece

The Media Wakes Up and Smells the Fascism

  A funny thing happened on the way to the 2024 horserace. The mainstream media brought Hitler into the conversation. Trump gave them no choice. He kept amping up his rants in terms that were so explicitly Nazi, so lifted — practically verbatim — from Hitler’s speeches, that it was hard for them to keep ignoring what they’ve willfully ignored for so long. When Trump used the word ‘vermin’ in his Veteran’s Day speech , he was taking a whole chapter from the fascism playbook. Whether he knew it or not. Dehumanization — the art of equating human beings with insects — is a classic stochastic terrorism technique, beloved of dictators the world over. In Rwanda in the nineties, the Hutu tribe openly called its rival Tutsis “cockroaches” on the radio, inciting its members to exterminate them with machetes, which they did. We’ll probably never know who actually wrote the Vermin speech — Stephen Miller or Steve Bannon are likely suspects — but we can be sure it wasn’t T

Things Have Been Too Cheap for Too Long

  Once upon a time, gasoline cost roughly 35 cents a gallon. That halcyon era came to an abrupt halt during the Carter administration, when oil-rich Arab states severely constricted our petroleum supply, causing hours-long lines at the gas pump that are still fresh in the memory of anyone who was there. When the dust cleared, gas was four times more expensive, and now we count ourselves lucky if it’s only ten times that long-ago price. But we did get over it, more or less. We learned to live with it. Around that time, some pundit I can’t remember said something that has stuck with me ever since. To paraphrase, “This country was built on cheap energy and cheap labor, and we’re running out of both.” It stuck with me because it’s even truer now than it was then. This despite the best efforts of corporate interests — and their Republican flunkies in government — to do all they can to keep both energy and labor as cheap as possible. For several decades, they made