What’s
Wrong Today:
(Sorry for the radio
silence. Family and personal issues made blogging tough.)
Did you notice that debt
paranoia is back? Both amongst the people who are checking out National Debt Relief options in their area, and on the federal level? Once the government shutdown ended, America’s politicians and
the debt scolds returned to hand wringing about the debt. There’re back talking about the disastrous consequences
to the Republic if we fail to reduce our federal debt. Media
Matters reported that the coverage
of budget priorities were far more likely to mention the need for debt reduction
than they were to mention economic growth and job creation.
This, despite continuing
warnings from economists that growth is the more pressing concern. Here are the
statistics based on frequency of mention by each paper:
Across these three
print outlets, of the 46 articles mentioning the need for debt and deficit
reduction as a priority, 24 mentioned that addressing costs of entitlements,
such as Social Security and Medicare, was necessary. We’re back to talking
about deficits, despite the fact that demand for our debt via US Treasuries is extremely
 strong (our debt is oversubscribed by 2x
whenever it is offered). This is simply mind boggling, debt is not the #1 problem facing America.
Jared Bernstein in the
NYT Economix
Blog: (emphasis by the Wrongologist)
that the politicians turned not to the
budget deficit but to the jobs deficit, the infrastructure deficit, to poverty,
wage stagnation, immobility and inequality. Along with a budget conference
— and don’t get me wrong; I’m glad they’re talking — imagine there was an
economic conference to make recommendations on what’s really hurting the
country, which I assure you is not our fiscal situation. That’s taking care of
itself for the short term, as is always the case after a recession (deficits go
up in recessions, for obvious reasons)…I wanted to point out that this is not
the debate we should be having. It’s the preferred debate of those who seek to
shrink the role of government, to undermine social insurance, to reduce needed
investments in public goods and human capital, and to protect the concentrated wealth
of the top few percent.
For those
who still like facts, here is a perspective on our “deficit problem”:
- Federal
Budget deficit 2009 – $1.4 trillion
- Federal
Budget deficit today – $759 billion
That means it was
halved in the past 4 years. While today’s deficit becomes tomorrow’s debt, here
is Paul
Krugman in the NYT:
Â
three-plus years in terror of a debt crisis that keeps not happening, and, in
fact, can’t happen to a country like the United States, which has its own
currency and borrows in that currency. Yet the scaremongers can’t bring
themselves to let go
Let’s remind ourselves
who these “scaremongers” are. They include the Fix The Debt coalition of big businesses and
CEOs. This group is headed by Erskine Bowles and Alan Simpson, who, right after
the end of the shutdown, felt the need to warn America
that:
our debt is letting a fire burn that could get out of control at any moment
But today we have record
income inequality, record corporate profits and no growth in real median income in
America since the 1970’s. This results in lost consumer demand and in persistently
high unemployment that creates a chronically weak economy. That’s what we need to
concentrate on fixing, not the debt.
Remember: the rich do
not create jobs, despite Republican hype. The
goal of a corporation is to create as few new jobs as possible. More
jobs means more overhead; more overhead means less profit. The only reason for
a business to create jobs is if employing more people will generate more
business and create more profit. But that only happens with new paying customers.
A thesis to consider: We mostly have a revenue problem, not a debt problem.
- In
1950, the corporate tax contribution was 32% of Federal revenues. It’s now less
than 17%, despite corporate profits being at their highest since 1943 (adjusted
dollars)
- In
1950, individual contributions to Federal revenue were 45% of Federal revenue.
Individuals now contribute 63%
- In
years in which the corporate tax rate was less than 50%, growth has averaged
2.7%. In years they were 50% or more, growth has averaged 3.7%
We’ve
been here before. The Great Depression finally ended when our unemployed went
to work. They went to work as the Home Front of WWII, but they went to work. At
the end of the 1930s, 17% of the American work force remained unemployed, which
is close to today’s 13.6% U-6 Unemployed
number (unemployed plus those working part-time who want a full-time job).
Â
So, we have been here before. We fixed it before too, and not just
by cutting expenditures. If we took the concerns of debt scaremongers at face
value, the fix is to employ people, not to simply push them to the side. Republican
debt fears are best addressed by fixing our economy.
But, corporate America
is doubling down on fear. They believe that attacking the social safety net
will pre-empt any move to increase corporate taxes and taxes on the 1%. So, what
we really have is a lack of care and concern problem by Plutocrats and Republicans.
More from Krugman:
serious-looking man in a suit declaring that we’re teetering on the precipice
of fiscal doom, don’t be afraid. He and his friends have been wrong about
everything so far, and they literally have no idea what they’re talking about.
We are swimming in corporate
wealth and middle class income stagnation. That has a much greater impact on our
country’s and our children’s future than our debt level.
Building innovation while
destroying inequality are the keys for America’s future, not cutting our debt!
completely agree. if concerned about debt, then the correct move by Republicans would be to: 1) raise taxes carefully and 2) look for expense reductions that make sense (like military spending – especially on armed forces overseas – this money LEAVES our economy.