Deficit hawks are in the news a lot lately, and it seems that the label is one that every politician aspires to earn. Who wouldn’t want to be associated with “fiscal responsibility” and “sound financial management”? In the interest of full disclosure, I must admit to being proud of President Clinton’s accomplishment (achieved through the Deficit Reduction Act of 1993, and not through the efforts of a GOP-majority House not in office until 1995). He managed to start paying down the debt largely incurred on President Reagan’s watch. I was even aggressively critical of President Bush’s expansion of federal debt (for those with short or tea-compromised memories, he doubled the debt during his term).
Here’s the thing; in as much as I was critical of debt and deficit for debt and deficit’s sake, I was wrong. Basic economics tells us that, for the United States, there is no term risk of bankruptcy to worry about. Large and accelerating structural debt is a problem when matched with a national economy humming along near full capacity. The threat, if the above happens, is inflation. I know that techno-jargon is annoying friends, but this is important. When you hear someone frantically warning of “our debt crisis”; ask them why. Our economy is currently nowhere near full capacity, and won’t be anytime soon. The market continues to accept low interest rates on long term federal debt, meaning that it does not consider that debt to be risky. We are not Greece. We can print the money that our debt is denominated in, with the risk again, being inflation. Greece can’t print their own money. and they can’t manage interest rates within their economy either. We can.
Given the lack of a real and immediate threat to our economic health as a result of deficit spending, and given that the threat borne by underspending is a permanently slowed economy, it should be asked why the hawks are so interested in our deficits. But there is even more to the story than that. It should be a curiosity to all of us, that conservatives frantic about the threat of “the new world order”, are emphatically pointing to the projections of the International Monetary Fund (IMF). The United Nations and the IMF are risks to our freedom (to believe a common conservative thread), but we should listen to what they have to say? The IMF (which receives much of its funding from us!) is the international banking entity that forced austerity measures on the nation of Greece, and conservatives are using that scenario as a warning to liberals of the impending decline of the U.S. welfare state. Friends, this is ridiculous; moreover, there are plenty of Wall Street insiders and Republicans who know better, and are spreading this nonsense anyway.
I always counsel that purveyors of conspiracy theories must prove motive to be credible. As such, the goal of committed deficit hawks, is the death of Social Security and Medicare. Make no mistake, deficit hawks don’t care for a future for your children. If they did, they would be addressing the health care costs that have accelerated at four times the rate of wage growth over the last 15 years. They don’t have their eyes on the horizon. If they did, they would hasten the investment in and development of an energy infrastructure removed from the long term risks and costs associated with fossil fuels. There are other ways that could be used to deal with this problem as well, as this article from economist Dean Baker highlights. In fact, the hawks are interested in doing the opposite; they propose draconian cuts in federal spending that place the onus for capital infrastructure improvements on the marketplace.
Will that private marketplace be able to take the necessary actions for the United States to remain at the top? Doubtful. For as much as we complain about government, we rarely consider the alternative. So how is your private investment portfolio coming along these days? Do you feel comfortable that it will be there when you need it? Do you have enough in your nest-egg to retire on? Have you begun setting aside the $250,000-$300,000 it will take to pay your medical expenses during your golden years? Is your disability insurance through work enough to give you a regular check for the rest of your life if you are injured? Or will you have to rely on family and friends to keep a roof over your head after a lifetime of employment? These programs fill a need in the economy that the market struggles with. They do it at relatively little cost through what conservatives like to call a “fair tax”.
Social Security and Medicare are, emphatically, socialist programs. Guilty as charged. There is no denying that fact. That democrats will run from that fact is evidence of their cowardice only. That conservative seniors will stand up in town halls and tell the “government to keep its hands of their Medicare” is just hilarious. There is a place in our democracy for social programs; most conservatives haven’t fought the notion of public schools, and they are also, Socialist. The historical record is clear that the majority of an economy can’t, however, be based on that method. And so we remain a capitalist nation that balances social programs with the larger economy. Balance is the key.
Privately held capital works; I don’t support bank nationalization, and I despise traditional welfare programs (where you perpetually get a check for nothing) and some current food assistance structures. But the ability of a working class citizen to know that they will be able to retire with dignity after a lifetime spent in productive work is something Americans should be proud of. The notion that those programs are just “elements in the nanny state” is repugnant. Deficit hawks are interested in ridding us of that security, because they want the $2 trillion or so that would go to private management if Social Security and Medicare are privatized. We have seen that the fund managers and “sharp minds” on Wall Street will make billions per year on a sum of that size; whether the investments are successful or not.
Economies don’t come out of recessions on the strength of cost savings; tax cuts just don’t help in that scenario. Our government has the ability to spend us out of recessions, and then manage inflationary effects later. It was done by Roosevelt in the Great Depression, and it was done by Reagan following the economic blight of the 1970’s. During Reagan’s time, a number of books were printed on America’s impending collapse, and a man famously constructed a debt clock to illustrate the danger. Almost thirty years since Reagan tripled the nations’s debt have passed, and the clock has yet to strike midnight. It won’t happen this time either; not because of blind faith in America (although a little faith helps), but because the risk simply isn’t there. Don’t believe the hype America! It isn’t time to pull back in fear. It is time for America to get back in the future business.
The Rational Middle is listening…