The GOP’s Three Fiscal Lies
Modest deficits are fine. Cutting spending harms the economy. And balanced budgets don’t create jobs. Michael Tomasky rebuts the three key GOP budget lies and calls on Democrats to do the same.
As we immerse ourselves in March Madness this weekend, a thought experiment for you: imagine that a majority of Americans were under the impression that the team that committed fewer fouls won the game. After all, not committing fouls is a good, even salutary, thing. It demonstrates self-discipline. It gives the other team fewer opportunities for what are literally called “free” throws. The propensity not to foul reflects a house in order, a group that plays by the rules, a team rich in inner—nay, even moral—strength. That is all self-evidently preposterous, of course. But it is exactly how we talk about the budget in Washington, such talk being driven by a Republican Party that is way out of the mainstream, saddled with near all-time-low approval ratings, and desperate for a campaign issue with which they can hold on to the House in 2014. How can the public be educated not to buy this nonsense?
Dick Cheney went a little overboard (as he was wont to do) when he said “deficits don’t matter,” and of course it was quite a hoot coming from a member of the party that has been haranguing us about deficits for half a century now whenever it suited their purposes to do so. But as hypocritical as he was being, he had a point. Today the GOP has completely flipped on this point and is cynically hyping three fictions that will harm the economy—but (maybe) help them electorally.
The first is this canard that we have to balance the budget. Absurd. There is no reason to balance the budget. None. Ever. Oh, it’s nice if it happens—that is, if it happens as a result of an economy that’s shooting skyward like a bottle rocket, as Bill Clinton’s was. That’s something to feel good about. It was an astonishing accomplishment for Clinton, that he brought us into surplus for that brief golden age before George W. Bush and his advisers, those secret agents of world communism, started destroying American capitalism.
But there is no need for a balanced budget. Deficits of modest size as a percentage of the gross domestic product are entirely sustainable. Please read this brief (15 pages) and lucidly written report published last December by the Congressional Research Service. It explains the whole thing in very straightforward language. High deficits of the sort we’ve had since the meltdown are unsustainable over the long-term because they’ll require that too much money be spent servicing the debt. So that would be a problem. However, the deficit has already fallen (since 2009) from 10 percent of GDP to 7 percent, and it’s falling even more. It’s probably headed down to 4 percent of GDP. That’s fine. It’s going to be fine.
Provided: the economy comes back strongly. And this brings us to the second key point. What would help a still struggling economy come back strongly? A little boost, obviously. A little—dare I say it!—stimulus. A modest infrastructure program. The one thing that will hurt the economy? Serious economists agree: austerity. Austerity slows the economy down. Ask David Cameron. Well, he might not tell the truth. So don’t ask him. But ask most Britons.
And this in turn brings us to the third falsehood: the idea that balancing the budget will create jobs, which Paul Ryan says every time he opens his mouth lately. This is not just wrong, it’s ass backward. Jobs can help balance the budget, because of all the extra tax revenue collected from all those employed people and all those cooking-with-gas businesses. That’s what happened in the late 1990s.
So let’s review. The GOP is advancing three crucial lies: that we have to balance the budget; that public investment at this point is irresponsible; and that if we do slash spending and balance the budget, jobs will come. It’s all nonsense. In fact every assertion is the exact opposite of the truth. So why do they say it?
Different reasons. I think someone like Ryan must actually believe all this. He is such an ideologue that I assume he wakes up at night after having reread John Galt’s sermon in a cold sweat thinking about debt and inflation and interest rates (the CRS report also explains why these dystopian fears are canards, too). I think a lot of the Tea Party people just hate government and think poor people are irresponsible, and they came here to chop away and haven’t given it much more thought than that; it just seems intuitively right to them that when you’re in the hole, you cut spending. Then I think there are other Republicans who know better but play along anyway because it’s all the rage in their circles, and because if they don’t play along they’ll be primaried, and possibly beaten, by someone who does believe it.
Looking back over that last paragraph, I see that what I have described is a rather mad situation—kind of a fantasy feedback loop where the critical mass of people sustain a fiction and the few who know it to be fiction put their position at risk in saying so. And this is how our country is being governed.
The Democrats have to do a much more forceful, unapologetic job of exposing these fictions for what they are. For starters, no Democrat should ever again compare the federal budget to a family budget. The two aren’t remotely comparable. Please read this column by Josh Barro of Bloomberg on why: essentially, people have a life cycle, so it makes sense for people (and families) to seek to retire their accumulated debt as they age, so that they don’t die as debtors. But governments, like corporations, will exist indefinitely, which makes the calculations completely different.
All this can’t be said often enough. Modest deficits are perfectly sustainable. Budget cutting, far from being “responsible,” hurts the economy. And balanced budgets don’t create jobs—it’s the other way around. The next year and a half (at least) is going to be nothing but grueling budget fights and deadlines, and Obama isn’t going to win them unless he get these three points into Americans’ heads and directs them away from the Republicans’ March madness.