Government Deficits Are Easily Manageable if Taken in Context; Otherwise, They are False Claims that Drag Down the Economy

Here’s a quote from a recent New York Times article online that is worth repeating:

“From a budget perspective, that means ending and reversing the misguided focus on the deficit. It was never wise or necessary to cut the deficit while the economy remained weak. The political imperative to do so, driven by Republicans and clumsily adopted by Democrats, has had devastating results. Over the past three years, the depth and pace of federal spending cuts have reduced growth by about 0.7 percentage point, equivalent to over $300 billion in lost output and roughly 2 million fewer jobs than would otherwise have been the case. That so-called fiscal drag has been the single biggest weight on economic growth.”

In other words, the Republican screaming about deficits and how horrible they are has caused a loss of two million jobs by preventing the passage of stimulus bills like infrastructure spending.  What is the most important thing that we need in the USA right now?  Jobs.   Once again, we see demonstrated the Republican anti-reality focus.  They complain about the deficit when the real problem is a lack of jobs.

The deficit is manageable, if the economy grows.  Cutting spending to avoid deficit spending right now costs jobs and is a drag on the economy.  It is necessary to spend money to live, and in all historical cases, we have been able to “spend our way out of a recession.”  The best example is the US economy after WW II.  We had a deficit of over 120% of our GDP, and in twenty years, we reduced that to below 50%.  The deficit as a percent of GDP continued to drop until 1981, when  Ronald Reagan became President; it was well under 40% by then.  Under Reagan and the first Bush, debt rose above 60%.  under Clinton, the ratio dropped a bit, but under the second Bush it climbed rapidly, ballooning (as of 2009) to over 100%, before dropping again under Obama.  These are facts, and we must not let Republican lies get in the way of reasonable living and reasonable responses to economic problems.

The reason our deficit was so high in 1945 was that we had to pay for a war.  The reason the deficit is so high now is that we had to pay for the wars in Afghanistan and Iraq (on top of an excessive deficit inherited from Reagan), and the bank bailout (for all of which Bush, and not Obama, is solely responsible.)  If we had followed good economic policy after the crash of 2008, our recession would not have been so bad, and economic growth would have rebounded to easily 4% by now.  With reasonable economic growth, tax receipts would go up dramatically, and the deficit would rapidly recede.  There would be no more talk of the deficit being a ball and chain for future generations by anyone but Rand Paul and a few nuts in Arkansas.

To solve the rest of the country’s problems in one paragraph: we can prevent Medicare from going broke by adopting European medicine (which cuts the bills in half) and encouraging the immigration of young, hardworking Mexicans and South Americans who will pay in to the insurance pool.  We can prevent Social Security solvency problems by raising the cap on contributions and making the contributions progressive, like regular income tax; and by encouraging the immigration of young, etc. who will pay in to the Social Security pool.  End of economic problems for the foreseeable future.