Network News

X My Profile
View More Activity

Why Ben Nelson thinks we're ready to move on to the deficit


In a post late yesterday, I took aim at Sen. Ben Nelson's stated reason for voting against the latest jobs bill. "Seventy-seven billion dollars or more of this is not paid for," he said, "and that translates into deficit spending and adding to the debt, and the American people are right: We've got to stop doing that." I didn't agree. Today, Nelson's spokesman Jake Thompson sent along a fuller version of his boss's argument:

Certainly everyone's entitled to their own opinions, but let me share some facts related to your post on Sen. Nelson and why he believes additional deficit spending is not wise.

1. Nebraska's unemployment rate is 4.9%.

2. The federal debt ranks as the second most worrisome issue to Americans according to Gallup.

3. Leading economic index in US rises in sign of lasting rebound, according to a just posed Bloomberg story.

4. The estimated $1.4 trillion deficit is higher than any time since WWII as % of GDP, 10.64%.

5. In Nebraska, according to the state's recovery website. Likely, many other if not all states still haven’t spent all of their recovery money. My point is billions in stimulus funds haven’t yet reached the economies of the states, which could help state budgets and job prospects.

6. To be sure, Sen. Nelson understands hardship continues for millions of Americans and might support additional borrowing to extend unemployment benefits. But there is much in the bill that is not a true emergency, should be paid for, and would potentially stall the recovery, he says.

7. Borrowing in an economic crisis is justified, borrowing in a recovery is risky, he believes.

Hope you'll consider these points.

First, I really appreciate Jake's e-mail on this. It's good for the political debate when commentators and voters have a fuller picture of what legislators are thinking.

I'd group Nelson's objections into three buckets. The first is that Nebraska's unemployment rate isn't that high, and so from their perspective, it's time to worry about the deficit rather than jobs. The second is that the public is very worried about deficits, and their feelings shouldn't be discounted. And the third is that recovery has taken a fairly firm hold, and so stimulus spending is no longer so necessary. It's worth taking each of these separately.

In the first case, there's often some tension between the conditions of individual states and the conditions of the country. But given that we're talking about the federal deficit, that tension recedes a bit. There really is no way to imagine the federal budget coming into balance in a world of 9 percent, or even 8 percent, unemployment. That world has too little in tax revenue and too many people who need unemployment insurance, Medicaid and other social supports. The sooner we get unemployment down to manageable levels, the sooner we can realistically get started making our revenue and spending lines meet.

There is an argument, however, that Nelson is there to represent his constituents, even if their opinions don't make for good policy. I trust that the senator from Nebraska knows Nebraskans better than I do, so I won't attempt to argue about their preferences. As for national preferences, they're muddier than that Gallup survey suggests. A Pew poll conducted June 3-6 found that "the job situation" was far and away the top concern, with 41 percent. "The federal budget deficit" lagged with 23 percent. An AP/GfK poll (pdf) done June 6-14 found that 91 percent thought the economy extremely or very important, and 77 percent thought the federal budget deficit extremely or very important. Jobs beat deficits in most of the head-to-head matchups I've seen.

It's of course true that Americans are concerned about both the jobs picture and the deficit. But to some degree, that's a call for leadership, not poll reading. Repairing the economy might require a short-term increase in the deficit, and repairing the deficit requires long-term changes in spending. Nelson is one of the few with the credibility to explain that to Nebraskans, and one of even fewer who could propose such a compromise in the Senate. And I, for one, would gladly see a large stimulus paired with even larger long-term deficit reduction.

Finally, there's the question of economic recovery. I agree that the economy is recovering. But I don't agree that we're recovering with adequate speed. The Bloomberg article says that "the economy will expand 3.2 percent this year and 2.9 percent in 2011," which is far, far too slow to really dent unemployment, as the forecasts out of UCLA's Anderson School demonstrate. That growth will leave unemployment near 10 percent for many years, and that means we'll be dealing with millions of workers who've been out of the job market for some time, and are very difficult to reintegrate. Leaving the situation to sit could turn a bad recession into the new normal, where 7 and 8 percent unemployment simply become an accepted fact of life.

And that scares me. I understand Nelson's concern that borrowing during a recovery is dangerous. But I don't think we're far enough into the recovery for it actually to be dangerous. Interest rates remain historically low. That means that the effects you worry about -- higher interest rates, as federal borrowing crowds out private borrowing -- are entirely absent. As economist Bruce Bartlett said to me yesterday, we can think about ending our stimulus efforts when interest rates begin to rise back to normal levels again. But not before.

As a final word, I've invited Nelson's office to respond to this, and will post the reply in full as soon as it arrives.

Photo credit: Chip Somodevilla/Getty Images.

By Ezra Klein  |  June 17, 2010; 2:05 PM ET
Categories:  Economic Policy  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Lunch Break
Next: No country for old workers


Multimillionaire Ben Nelson more concerned about his own reelection than the plight of the unemployed. Where was his concern for the deficit when he was voting for tax cuts for the wealthy like him and two wars and medicare part D all put on the national credit card.

Posted by: srw3 | June 17, 2010 2:30 PM | Report abuse

I believe you didn't address #6:

"6. To be sure, Sen. Nelson understands hardship continues for millions of Americans and might support additional borrowing to extend unemployment benefits. But there is much in the bill that is not a true emergency, should be paid for, and would potentially stall the recovery, he says."

What else is in the bill besides unemployment benefits extension and the MediCare "Doc Fix"?

Posted by: jnc4p | June 17, 2010 2:33 PM | Report abuse

If Ben Nelson is that concerned about the deficit, let's start cutting the farm subsidies that go to his state. The country could save billions if he doesn't think unemployment is such a big problem in his state.

Posted by: saratogian | June 17, 2010 2:35 PM | Report abuse

I think Ezra we need to get out of this bind of 'deficit spending to get out of recession'. Actually what Market wants and what is right is as follows:

- austerity is required when it comes to spending for 'entitlements' including unemployment;

- deficit spending is okay for infrastructure and risky futuristic investments where paradigm shifting change occurs for the society and direct jobs are created.

I think that is what people want. Deficit spending for saving some teacher jobs - that is okay at a certain 'stage' of the recession. But you will need to change the 'gear' and start applying deficit spending only to projects which are for general good in some specific ways.

I do not think Dems and Obama are getting that message. They are behaving like stupid Republicans who say 'tax cuts for every occasion' as the solution. Dems are sounding as like 'deficit spending for every occasion'.

Posted by: umesh409 | June 17, 2010 2:41 PM | Report abuse

If Nebraska is really doing so great why not end farm subsidies and use a portion of those funds to pay reduce the debt and another portion to actually assist Americans in need.

While we're at it, why doesn't Nelson push to reduce the liabilities connected to Medicare Part D -- we could easily trim $150 to $200 billion of the long-term cost of the plan.

As far as the cost of the program goes, he should talk to the CBO or some economists about the real cost of the program. It's a pretty safe bet that 30-40 percent of the top-line cost will be recouped within the first year based on primary and secondary revenue sources (e.g. tax revenue generated by the cost of the program).

Posted by: JPRS | June 17, 2010 2:53 PM | Report abuse


The markets in their infinite wisdom priced Lehman Bros. at $65 a share in 1Q2008.

Bear Stearns was also rocking it at $85 a share in the first month of 2008.

If the markets are any guide right now they're saying Japanese bonds are worth holding for about 1.1 interest over ten years; the U.S. T-Bills are trading at incredibly low rates too.

I don't see them saying "sweet Jesus no! No! $50 billion spending! Nooo!!! NO!!!"

And even if they were . . .

Bottom line: screw the so-called wisdom of financial markets.

Posted by: JPRS | June 17, 2010 3:02 PM | Report abuse

Does Ben Nelson say how many of those workers in Nebraska are unauthorized immigfrants em,ployed at large meat packing plants that have sprung up away from the bigger cities?

And I concur--if Nebraska is doing so well, they obviously don't need all those farm subsidies he fights so hard for.

Ben Nelson is probably the dumbest Democrat in the Senate. Not in Jim De Mint or Jon Kyl territory, but the dumbest Democratic Senator. He doesn't understand economics at all and is just doing what pleases his wealthy campaign contributors. Unfortunately, he is not up for reelection until 2012.

Posted by: Mimikatz | June 17, 2010 3:12 PM | Report abuse

Ben Nelson is one reason why my spending is going down too.

I will NEVER spend money to support a party that then gives money to politicians like him.

Are you hearing me Dems?

Stop asking me for more money. You ain't getting any more from me. And now that Obama and Clinton worked real hard to get that corporate Democrat, Blanche Lincoln renominated, Obama can count me out too.

I strongly urge real progressive Democrats to resign from the Democratic party and run as independants.

I also strongly urge no one send any money to Obama or the DNC, because they are just going to use it to elect more ConservaDems.

Posted by: Lomillialor | June 17, 2010 3:13 PM | Report abuse

"The estimated $1.4 trillion deficit is higher than any time since WWII as % of GDP, 10.64%."

I think this statistic is interesting, because it argues for exactly the opposite course of action than the writer intends.

Many people like to point out that WWII, not the New Deal, ended the Great Depression. They like to point this out because for some reason they think they are arguing against Keynesian pump priming. But what they are actually saying is that getting out of the Great Depression required massive, sustained public expenditures that dwarfed the New Deal.

My point is that the deficit is higher than it has been in the entire postwar era because the U.S. has not faced difficulties like this since WWII. People seem bizarrely unaware of that.

Posted by: dollarwatcher | June 17, 2010 3:19 PM | Report abuse


I agree with you that it makes little sense to promote one type of fiscal policy for every occasion; but in this case, Ezra has (in this post and previous ones) spelled-out why deficit spending is called-for during the current economic environment:

1. Unemployment is at 9-10 percent

2. Relative lackluster GDP growth (at 3.2 - 2.9 percent)

3. Historically low interest rates

Factors 1 and 2 call for policies that both create jobs and put money into peoples' wallets. When more people are employed (or when less people are unemployed) there is more taxable income to increase the Federal government's revenues and address the deficit.

Extending unemployment benefits puts money in peoples' pockets that they can then spend on good and services, which puts money into the hands of businesses, which requires those businesses to make/build/provide more goods and services, which then results in more jobs- all of which contribute to increasing our GDP (which decreases the deficit).

And finally, number 3 (low interest rates) makes it possible for the Federal government to borrow money, and deficit spend, in the short run at very low cost.

So I think there is a clear rationale for doing some deficit spending now, in the short run, to get our economy a much needed boost (by decreasing unemployment and increasing GDP) and then implementing an aggressive long-term deficit reduction plan focuses on cutting/controlling spending over the next 5-10 years.

Is this a perfect policy? No. Is it absent risks? No. But I think the potential costs associated with deficit spending now (under these specific conditions) with plans to aggressively address the deficit in the out-years are lower than the costs of (the real potential for) a 7-8 percent unemployment and GDP stuck between 2-3 percent over a long-term.

Posted by: alopata2000 | June 17, 2010 3:27 PM | Report abuse

The US effort in WWII was the biggest public works program we have ever known. Military recruitment after Pearl Harbor and then the draft sucked up the unemployed to such a degree that women had to enter the workforce in large numbers to produce the ships, tanks, planes, munitions uniforma etc that were needed, all at factories where production was contracted for and controlled by the federal government.

And it worked.

Posted by: Mimikatz | June 17, 2010 3:28 PM | Report abuse

Dems are sounding as like 'deficit spending for every occasion'.

NO that would be 8 years of Bush and the republicans "didn't pay for a lot of things then" (Hatch) like 2 wars, medicare part d and 2 rounds of tax cuts...More than 3/4
the deficit is directly tied to bush era policies.

Posted by: srw3 | June 17, 2010 3:30 PM | Report abuse


I think 4/5 of the deficit is due to Bush. The other 1/5 is for fighting the recession Bush caused.

Posted by: Lomillialor | June 17, 2010 3:35 PM | Report abuse

Kind of boggles my mind that Nelson's spokesman would say, unemployment in Nebraska is low, so to hell with the rest of you.

Posted by: randrewm | June 17, 2010 3:38 PM | Report abuse

The comments from umesh409, dollarwatcher, and mimikatz writing above are fascinating.
Discussion on energy, economy, and entitlements is beginning to be less utopian and more practical... and that's a welcome change from Pelosian Progressivism.

It's true that the New Deal was partnered with World War II just as the Great Society was partnered with the Vietnam War. Utopian socialism simply doesn't work -- it might be nice if it did, but it doesn't. By restoring debate to issues -- by strengthening the filibuster, so to speak -- it might be possible to avoid the bloody warfare which is the natural yet undesirable outcome of the current round of progressivism. As unpopular as it may be, it's helpful to compare the 24 Points of the NSDAP to the progressive agenda: health care reform was a critical element of both and had the effect of shifting power during a time of economic vulnerability.

Posted by: rmgregory | June 17, 2010 4:07 PM | Report abuse

Comment by ‘JPRS’ - 'screw' markets. Could Greece say that? Why is that then there is tremor when there are rumors of Spanish bailout even though Spain maintains that they will not need any bailout?

By any yard stick you look at USA situation and you will realize that it is not sustainable. That is what Market is saying. Does that mean there is any difference while selling Treasury bonds? No, not so far. Does it mean it will not? Do you want to risk that when eventually deficit funds have to be raised from Market? If Markets were not important why would we do the TARP?

What Europe has clearly shown is the ‘limits’ of VAT lubricated entitlement oriented, welfare, state. What people want to see is concrete commitment that we are NOT on that road.

Comment by ‘alopata2000’ – My beef is deficit spending for what? People precisely want to stop this deficit spending for 99 monthers. I lost job in both 2001 and 2008 recessions. I did not get unemployment also in the first case. But you learn to live on, pull through. Where is that celebrated message of ‘American Self Help’? What do we want – President seen at promoting start-ups, helping them to define new markets, helping them to raise money; or President who is dolling our borrowed money to a long line of ‘welfare queens’? Later is what looking like today.

The ‘message’ coming out from this President is very horrible. You want to do the deficit spending, do it on start-ups which are ready to employ young graduates out of school who cannot get jobs. (Tom Friedman)

You see at some point you have to stop ‘carrying the foolish cross’ of saving teacher’s job or every union workers job. Rather you want to focus on creating new jobs. If that needs borrowed money, spending there is better than the former one.

Recessions give you an opportunity to restructure economy. One way you do that by creating ‘new jobs’ in new emerging technologies and markets. You do not do that by saving job of union teachers and police to whom cities promised the ‘world’ in the first place.

Posted by: umesh409 | June 17, 2010 4:09 PM | Report abuse

since ben nelson's office is paying attention, perhaps they could explain to us why nelson wasn't troubled about the deficit during years of growth? had we actually maintained the "lockbox," then we could afford additional deficit spending now.

more broadly, liberals don't favor fiscal stimulus in the face of all circumstances (unlike right-wingers favoring tax cuts in all circumstances): they favor them in the conditions that call for them.

like a period where interest rates have been cut to the zero bound and yet the economy is still vastly underperforming: that's exactly when we should be running deficits, say liberals.

and during the '90s, when the economy was growing well, liberals were prepared to run surpluses - general fund surpluses - because that was the right thing.

(i'd like to know more about this "utopian socialism" that rmgregory has sighted: who is out there calling for the ownership of the means of production.)

now, as for ben nelson, i'm perfectly willing to accept that he has discovered the importance of fiscal prudence: as soon as he signs on to defense spending reductions, i'll take that discovery seriously. until then, i'll assume it's a sincerely held fashion that has no deeper meaning.

Posted by: howard16 | June 17, 2010 4:28 PM | Report abuse


Unemployment insurance makes up only a portion of the jobs bill the Senate was considering. The bill also includes funding for some of the very things you listed as worthy investments, such as tax relief for businesses, including a new markets tax credit.

Not to mention the fact that the Administration has (with Congress) already invested (and continues to invest) a great deal of money to promote and support new/emerging markets. For example, the Recovery Act (stimulus bill) included $80 billion in clean energy investments to support that emerging renewable energy market in the US with the hopes of creating millions of new jobs for Americans over the next Century. The Recovery Act also provided $15 billion to help unlock secondary markets for small business loans, to facilitate the ability of lenders to make new loans to small and/or start-up businesses.

Also, it appears that you're assessing the value (or lack of value) of unemployment insurance through a lens of 'deservedness' and generalized assumptions of laziness. Aside from being inaccurate (as unemployment data has repeatedly reported that millions of those unemployed during over the past several years have been searching for jobs for months), it completely misses the point from a macro-economic policy point of view. Economic policies, especially at the Federal level, are designed to result in specific macro economic outcomes, such as raising increasing GDP. In the case of unemployment insurance, the Administration is not extending it to provide a handout- but to address an unusually harsh economic environment in which 9.7 percent of Americans are out of work. So in addition to making it possible for unemployed individuals, including parents with children, to purchase vital goods (food, clothes etc), it also provides them with the means to purchase goods and services, which results in positive impacts on the economy.

Also, and lastly, public school teachers aren't being laid off because the market calls for it; they're being laid off because states can no longer afford to pay them. This not only hurts teachers (who, despite 'belonging to unions', represent a pretty honorable but often thankless profession), it also hurts kids who hose education suffers.

Posted by: alopata2000 | June 17, 2010 7:06 PM | Report abuse

Congress wasn’t worried about the deficit when that big insurance company and Wall Street execs were giving themselves bonuses with taxpayer money!!! Next election – let Congress feel the sting of the unemployment lines!!! – How many years have you paid taxes? 30? 40? Your government bails out bankers and Wallstreet execs using your tax dollars – but unemployment is allowed to expire? What happened to "by the people" or "for the people"? Or are the big campaign contributors the only "people" who count to congress? They are playing games AGAIN FOR THE THIRD TIME while you are wondering how to feed your kids? Figure it out! Malfeasance – Failure of a public official to perform their duties!!! Next Election MAKE YOURSELF MATTER BY VOTING!!! 10% unemployment carries 10% of the vote! Use it!! Fire them all next election or recall every Congress member NOW for Malfeasance – Failure of a public official to perform their duties!!! Next Election - Lets get people elected who actually represent tall the People- this current congress represents only special interest groups!

Posted by: agh1 | June 17, 2010 9:11 PM | Report abuse


With respect to "screw markets" effectively the Greeks have been saying it.

Much like the investment banks threats to take down the U.S. economy if they didn't get a maximum payout in the Fall of 2008; the Greeks have been putting a gun to the heads of the French and the Germans who own most of the Greek debt (e.g. "Mr. German: You want to enjoy the currency and trade benefits of having our dysfunctional economy in your stinking currency? You don't want us to default? Put some more money on the table").

The ratings agencies too have been way behind the curve on this.

Markets have value in gauging the current temperature, but as far as the future is concerned, it's important to realize that markets are not omniscient. The conventional wisdom can be stunningly wrong -- even with respect to developments that are just around the corner.

The double-paradox here: If you really do believe that the wisdom of markets must be obeyed . . . in the form of low-interest rates, they are telling the U.S., Germany, and Japan right now -- please give us some more of your triple-A debt. Please, spend, spend, spend. A 4 percent interest rate on a 30 year T-bill isn't a view of doom and gloom.

Without consulting the Market Oracles, it's easy enough to understand that long-term debt is an issue, and that it can easily become a major drag on future growth if the debt is created from wasteful sources.

A person can learn those lessons from economic history. Divining the answer from contemporary markets isn't necessary.

Based on that same understanding, it's clear that if we are ever going to spend, spend, spend on the basis of debt this is precisely one of those occasions where it actually makes sense. Personally, I'd prefer that the money is spent in ways that increase efficiencies in the economy (with respect to transportation, energy use, etc), so that we can get some long-term growth benefits from them, but the most important thing is that we are spending the money on activities that stimulate growth.

Posted by: JPRS | June 17, 2010 10:28 PM | Report abuse

I get it 'alopata2000', we are on the same side. I am registered Democrat too.

But I find it hard to swallow all this. Any time we talk inordinately about vagaries of recession and how those are lashing out American people, we loose our 'mind share' in exploiting new vision, new world. It is not to say suffering of people is not real.

But it is like what Ezra quoted E.J. Dionne - a kind of 'malaise' is engulfing Democrats. That is happening because this President is NOT leading by talking about 'tomorrow', talking about our own individual industriousness to overcome these difficult times.

If I have to teach 'inspiration' to one Barack Hussain Obama, there is something seriously wrong with this world. I would hate to be in the world.

I did not give up my all extraordinarily strong, emotional family bonds and given easy prosperity, to come to this land just to get unemployed twice and live in a 'malaise'. Obviously there are millions like me and beyond that those who serve in armed forces of this country do much more sacrifice than anyone of us.

Point is we are on the path of Carter 'malaise'; there is tremendous amount of 'letting down' happening in this country irrespective of how much material happiness is made possible or thwarted.

Talking about specifics - check Ezra's other graphics about forms of Energy creation and consumption in USA. Check out how much is lost in transmission. Other smart comments have already pointed, based on that, the vitality of Smart Grid.

I think experts are saying around $1 Trillion required for this infrastructure over a decade. You are talking around $5 to $8Billion for Smart Grid!

Does it make sense this President invoking China in saying how they are spending more than us on 'alternative energy' when T. Bone Pickens have to essentially shelve the Texas Wind mill project due to lack of transmission? This just does not square, it is not convincing.

Posted by: umesh409 | June 17, 2010 10:43 PM | Report abuse

economy recovery trumps the deficit issue.. Our country will never recover if we do not do it right.. you don't pull the plug so quickly- you don't send a broken leg patient to a marathon race 3 months after breaking the leg. you will never recovery fully if you don't heal correctly... stimulate the economy fully, before worrying about rich hedge fund tax exemptions & big oil tax exemptions... some of these senators are absolutely corrupt, that much is obvious... this bill is about the peoples benefits & the states economy!...prioritize!!..

Posted by: LPG11 | June 18, 2010 8:47 AM | Report abuse

I'd like to hear Senator Nelson explain how he could have voted for much of this structural deficit -- two rounds of tax cuts, Medicare Part D, unfunded wars if he and his constituents have such concerns about the deficit. It doesn't make sense to be ob board with creating them when they were not needed, but when working people have been screwed by the economy he would tell them to eat cake.

Posted by: ctmde | June 18, 2010 10:19 AM | Report abuse

Let us also not forget that with lousy gdp growth and lousy employment the taxes on those of us who are employed will have to be higher to pay for the debt service we've already committed to.

Posted by: paul314 | June 21, 2010 11:47 AM | Report abuse

The comments to this entry are closed.

RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company