The deficit is not the problem

They want to sell the American people on killing Social Security the same way they did the Iraq War. Here’s the seminal post on the subject, Washington Post Alternate Reality: Public More Concerned About Deficit Than Jobs or Economy Overall.

Unsurprisingly, people are more worried about the economy and jobs than about deficits.

The Post Tells Readers that the Public Is More Concerned About Deficits Than Jobs.

Here’s a video of a crazy man who is a member of the “catfood Commission“*.

There’s also more from Krugman, The Facts Have A Well-Known Keynesian Bias.

Robert Reich clears it all up with this post about his father, My Father and Alan Greenspan.

When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. “Bobby,” he said with obvious concern, “you and your children and your children’s children will be repaying the national debt created by Franklin D. Roosevelt.”

I didn’t know what a national debt was, but I remember being scared out of my wits.

Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR’s debt. My granddaughter (almost 2) will never pay a penny of it.

Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.

But now another gaggle of deficit hawks is warning us against more federal spending. “The current federal debt explosion is being driven by an inability to stem new spending initiatives,” warns Alan Greenspan in Friday’s Wall Street Journal, calling for budget cuts and saying “the fears of budget contraction inducing a renewed decline of economic activity are misplaced.”

My dad learned from his mistakes. Alan Greenspan obviously didn’t.

This point is key to understanding our current fiscal dilemma an how to get out of it. When the middle class is hurting and can’t spend, the government must. It needs to be on infrastructure projects that the future economy can grow on like our economy did after World War II. And that future growth will take care of today’s deficit. Focusing on creating jobs should be through government spending should be the focus, that it isn’t is the problem and very disconcerting.

*catfood Commission is the term for the bipartisan non-binding deficit reduction commission. Whose main goal looks like cutting, if not ending Social Security, as we know it. Therefore leaving the elderly and the disabled to be able to afford only catfood to live on. More here.

Trust Krugman, flush Greenspan

Paul Krugman’s column today, That ’30s Feeling.

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. Arguing with German deficit hawks feels more than a bit like arguing with U.S. Iraq hawks back in 2002: They know what they want to do, and every time you refute one argument, they just come up with another.

[...]

So the real motivations for their obsession with austerity lie somewhere else.

In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion.

As if on cue, discredited former Fed Chair Alan Greenspan – discredited by his own admission – has an austerity column in today’s WSJ, via Tapped, Greenspan Is Back, Baby.

Former Federal Reserve Chair Alan Greenspan apparently misses being the wisest economic manager, like, ever, and despite recent setbacks — the 2008 financial crisis and his admission that maybe he shouldn’t have been such a doctrinaire libertarian — he’s back with an absurd column in the Wall Street Journal arguing that, you guessed it, we need to STOP BORROWING MONEY. Here are my favorite parts:

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

I am also filled with regret when economic statistics do not behave according to my preset ideological narrative.

The current federal debt explosion is being driven by an inability to stem new spending initiatives.

Actually, much of our current borrowing is driven by three things: the economic downturn, Bush-era tax cuts, and the wars in Iraq and Afghanistan

Greenspan and his ilk are long past there prime and need to fade away.