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Want to worry about the deficit?

Donald Marron rounds up some readings.

By Ezra Klein  |  January 19, 2010; 9:57 AM ET
 
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At Andrew Tobias today:
The second would quote Republicans:

Voice Over: Here's what Republicans had to say about the President's economic plan.

Republican Rep. Joel Hefley said: “It will raise your taxes, increase the deficit, and kill over one million jobs.”

Republican Rep. John Kasich said: “This plan will not work...your economic program is a job killer.”

Republican Newt Gingrich said: “I believe this will lead to a recession next year.”

Republican Dick Armey said: “Clearly this is a job killer in the short run. The impact on job creation is going to be devastating.”

Republican Phil Gramm said: “Hundreds of thousands of Americans will lose their jobs because of this bill, and the

President will be one of them.”

Republican Rep. Jim Ramstad said: The Democrats’ plan “will stifle economic growth, destroy jobs, reduce revenues, and increase the deficit.”

Republican Rep. Phil Crane said: It's “a recipe for economic and fiscal disaster.”

Voice Over: The only problem is, all these Republican quotes were from 1993 after President Bill Clinton passed his budget without a single Republican vote. That budget led to the greatest economic boom in world history. Weren't you better off with Bill Clinton and the Democrats running the economy in the 1990s? The Republicans predictions could not have been more wrong. Yet they make almost word for word the same predictions again today about President Obama's economic programs. President Clinton left us with a projected $5 trillion surplus . . .

Posted by: AZProgressive | January 19, 2010 10:09 AM | Report abuse

AZProgressive:Were we better off under Clinton? No. Not in the long run. His policies benefitted some segments but working people were hurt by many of his trade deals. You simply cannot call the substitution of well paying jobs in manufacturing for a service economy as progress.

I do commend you for using the word 'projected.' Most progressives always drop that important adjective. I would also suggest many economist noted in the piece would argue we never had anywhere near a $5 trillion surplus.

You would also do well to notice this article does not use quotes from politicians.

Posted by: bobsteph1234 | January 19, 2010 11:18 AM | Report abuse

The public sector's deficit is the private sector's surplus, $-4-$. This statement is an accounting identity; denying it is akin to believing the earth is flat. For evidence of this statement see Figure 2: "Historical Behavior of Private Sector Surplus and Government Sector Deficit as a percent of GDP" of this blog post:

http://neweconomicperspectives.blogspot.com/2009/07/sector-financial-balances-model-of_26.html

If you want the private sector to go further into debt by all means attempt to cut the deficit. All of the six major recessions/depressions in United States history were proceeded by a public sector surplus. Stop the madness.

Posted by: nklein1553 | January 19, 2010 11:23 AM | Report abuse

@AZProgressive- the Clinton/Gingrich era was great. It was the result of some great compromises where real cuts were made to pet programs on both sides of the aisle. Unfortunately, those sort of Democrats and Republicans no longer exist in large numbers. Obama and the current leaderless crop of clueless Republicans don't see any benefits to fiscal responsibility.

Saw this on ZeroHedge this morning:
"The budget should be balanced, the Treasury should be filled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome be bankrupt. People must again learn to work, instead of living on public assistance."
Cicero - 55 BC

We may cross the line this year where fewer than 50% of Americans pay income taxes. Maybe we need the filibuster to prevent the tyranny of the majority more than we think.

Posted by: staticvars | January 19, 2010 11:28 AM | Report abuse

In and of itself the size of the national deficit or debt has no meaning whatsoever. It is just numbers on a spreadsheet. As the monopoly provider of fiat currency there is no constraint on the federal government's ability to spend other than the possibility that nominal aggregate demand exceed real output capacity (in which case inflation would ensue). There is no need to cut spending or raise taxes to "fund," government spending. You may not like it, but that is the truth. At a time when nearly one in five Americans are either unemployed or underemployed worrying about the size of the deficit or national debt is simply insane.

Posted by: nklein1553 | January 19, 2010 11:36 AM | Report abuse

@nklein1553 By your tortured logic, we could have the government hire every unemployed person to go sit at a desk and all of our problems would be solved. We could just have the government buy us all our flat screen TVs and giant trucks. We could sell more treasury bills and bonds, even if we have to print the money used to buy them, and everything will be fine.

Aggregate demand solves nothing when it is deficit financed, it just pushes the problem down the road. Sounds like baby boomer logic to me- let's hope we die before we run out of everyone else's money.

Posted by: staticvars | January 19, 2010 2:46 PM | Report abuse

I would not recommend the government buy any actual goods or services for anyone because that would put the government in a position of competing with the private sector. I do not believe the government should be an active participant in the labor market, or any other market for that matter, only that it should set the rules by which markets must operate. When you write: "have the government hire every unemployed person to go sit at a desk and all of our problems would be solved," what you are describing (albeit somewhat crudely) is called a job guarantee, and it has actually been tried quite successfully in a number of developing countries. See here for a full description:

http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm

The unemployed are not participating in the market so if the government were to hire them and put them to productive work this would by definition not create inflation (assuming our productive capacity has not declined since before the financial panic). As for "running out of everyone else's money," this assumes that government spending is financed by taxation. This is not true. The government provides the money that citizens spend. Recognizing this truth is neither liberal conservative. One can craft whatever kind of policy one desires around that truth.

Posted by: nklein1553 | January 19, 2010 5:46 PM | Report abuse

One last thing, the government does not "print" money (mostly), it credits or debits accounts via computerized transactions. Cheers.

Posted by: nklein1553 | January 19, 2010 5:49 PM | Report abuse

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