Exposing the Deficit Obsession

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Ben Cohen
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Debt by a.tanski.

During George Bush's first term, Dick Cheney told former Treasury Secretary Paul O'Neill that "Reagan proved deficits don't matter". In a recent article in the Wall St Journal, Karl Rove argued that the nation's most pressing issue is the reduction of the deficit, and that Obama is angering voters with his domestic spending program.

Why the change of tune?

It certainly has nothing to do with a renewed sense of fiscal responsibility. Writes Matt Taibbi:

It’s time to stop talking in coded language about this stuff and just
admit that we’re in a survival drama, with too many mouths and not
enough food in the lifeboat. Last fall, when Lloyd Blankfein’s bonus
was at stake, the economy was an urgent international emergency and no
limit was placed on how much money could be borrowed to stave off The
Unimaginable. But now, when unemployment in the general population is
soaring and the middle class is quickly turning into an underclass,
suddenly we’re putting on our tweed jackets and talking in professorial
tones about the dangers of deficits and fiscal irresponsibility.

U.S debt levels are enormous, there is no doubt about that. But when the government spends over $8 trillion bailing out financial institutions with Republican consent, it's time to call B.S when they make a fuss over stimulus spending that amounts to less than a 10th of that.

The truth is, the ballooning deficit isn't really a problem - at least not at the moment. Government spending is an absolute necessity in a deep recession. When private capital dries up, only the government has the necessary spending and borrowing power to reverse the inevitable economic contraction. If it has to go into deeper debt, then so be it. It is better than risking a complete economic meltdown.

The Republican's new found obsession with reducing the deficit is not
just deeply hypocritical, it is a dangerous political scam that
ultimately aims to stop government spending on the poor. Deficits can be taken care of when times are good. When times are bad,
worrying about debt only exacerbates the problem, most of all for
working people who desperately need a life line.

If the argument to curb domestic spending succeeds, unemployment and foreclosures will continue to rise. Republicans surely know this given the data, and most likely, they just don't care.

(photo by a.tanski)