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Hullabaloo


Saturday, November 28, 2009

 
Causes And Cures

by digby

As deficit reduction fever grips the nation and, as expected, the White House looks to be responding with some sort of blue ribbon panel of poobahs based on the base closing commission concept, it's important to recognize the politics for what they are, (which is the perspective I usually take when discussing the subject.) But there are, obviously important economic policy implications and Krugman pulls both the political and policy string in this short but instructive post and says that the causes of deficits are what matter. When they're created because of irresponsibility or for cynical political purposes ("starve the beast" for example) then they undermine confidence and are dangerous in and of themselves. When they're in response to an emergency, not so much --- depending on if, in the end, America is still America:

Most though not all of our current budget deficit can be viewed as the result of a temporary emergency. Revenue has plunged in the face of the crisis, while there has been an increase in spending largely due to stimulus and bailouts. None of this can be seen as a case of irresponsible policy, nor as a permanent change in policy. It’s more like the financial equivalent of a war — which is why the WWII example is relevant.

So the debt question is what happens when things return to normal: will we be at a level of indebtedness that can’t be handled once the crisis is past?

And the answer is that it depends on the politics. If we have a reasonably responsible government a decade from now, and the bond market believes that we have such a government, the debt burden will be well within the range that can be managed with only modest sacrifice.

OK, that’s a big if. But it’s not a matter of dollars and cents; it’s about whether America is still America.


Some of us obviously believe that many of the bailouts represent "irresponsible" spending, but I think the point is that they were done in response to a real crisis, not one created with the express intent of using it as an excuse to cut hated social programs. Unfortunately, if the fiscal scolds and their compatriots in the White House have their way that may end up being the result anyway --- in which case motives and causes won't matter at all.

And when it comes to deficits, the stimulus and the bailouts and any other causes or reasons are completely irrelevant to Village thinking. They simply think that the people of this country are spoiled and need to suffer.

This is something I wrote on January 11th of this year, before Obama was inaugurated:
In case you were wondering what the spoiled, wealthy celebrity villagers believe Obama should do to pay for his agenda, here it is on CNN this morning:

Gloria Borger: Out of crisis comes opportunity. And they're thinking, as long as we're not paying so much attention to the deficit this year, next year, why not go for it all? Why not do what we want to do on healthcare and energy? Got it done with the understanding that two or three years down the road we're going to have to start paying for this.

Blitzer: But if he wants to deal with the deficit, the national debt, he's got to deal with those entitlements, social security, medicare, medicaid.

Borger: This is the opportunity. This is the opportunity, because everybody understands right now that he won't have the money. So this is what you call a teachable moment here right now for Barack Obama. The American public can't keep these entitlements at these levels.

That's completely incoherent, of course. Universal health care is the very definition of an "entitlement" and will be vociferously opposed on the very grounds that Borger cites: "we don't have the money." (And if the "grand bargain" is that these programs have to be paid for on the backs of social security, I have a feeling it's going to run into some resistance from a large political constituency as well. )

This is why talk of "entitlement reform" at a time of great economic peril is a dangerous thing. The Republicans and wealthy villagers get all excited again at the prospect that they might finally be able to destroy social security and this provides them with a great new excuse to push for it. And in doing that, they scare the hell out of people who are more dependent on those "entitlements" than ever. They make no sense and nobody should ever listen to them.

It's not that deficits don't matter, mind you. But they don't matter more than anything else and they certainly don't matter right now. And by putting "entitlements" on the menu it becomes nearly impossible for Obama to pass health care and makes cuts in social security and medicare the price that must be paid for the Republican sponsored financial meltdown. How convenient.

(I didn't anticipate the cynical scare talk about Medicare, but I should have. It's perfect.)

The deficit mongers among the cognoscenti really do think that most Americans just don't understand the meaning of sacrifice. They are personally immune from such required lessons in suffering, of course, because they have plenty of money, thus proving they are responsible people who already make good decisions.


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