Who Cares About the Deficit?
James Poulos, Ed. ·
Jul 14, 2010 at 8:14am
That's not a rhetorical question. On the left, Matt Yglesias insists that conservatives don't care, and Jon Walker cites polls suggesting that most Americans don't care so much either. So let's hear it. Who cares about the deficit? How much should we care? And why?
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Jun '10
Re: Who Cares About the Deficit?
The problem with growing deficits is that they reduce the confidence of lenders, which makes the next dollar you borrow even more expensive, which increases the deficit even faster, which further reduces confidence in your IOUs, and on and on. If you don't get a handle on it soon enough, you end up like Zimbabwe. There's a point of no return. But, you can increase confidence by having a rational plan to fix the problem, and part of that plan has to be deep budget cuts. Where are they? No nation has ever dug their way out of this hole with tax increases alone. That's never happened. Where are the budget cuts?
Jun '10
Re: Who Cares About the Deficit?
The deficit is a harbinger of the massive ill that will befall Americans. A deficit may not have the immediacy of a heart attack, but it will without doubt kill the economy for generations as one government after another is forced to pull money out of the economy either through taxation or by means of inflation (a slow motion default on national debt). The consequence, impoverishment of future generations, although not immediate is real and devastating, so we should all care.
Jun '10
Re: Who Cares About the Deficit?
The answer to the question "Who cares?" is more bi-partisan than you might think. I attended a town hall meeting sponsored by "America Speaks" about three weeks ago in Albuquerque. The event was sponsored by the Peterson Foundation in two dozen cities which were linked together by audio and video. Total attendance as I recall was something in the neighborhood of 6,000 people nationwide. The headline speaker was Alice Rivlin.
I thought the event would be dominated by conservatives because it was promoted by talk radio. I was wrong. By their own admission the sponsors showed that conservative attendance amounted to a mere 20%. The political ideology of those in attendance ran the gamut from very conservative to moderate to very liberal. My group of six worked well together despite the diversity of our ideologies.
The main criticism I have of the effort was all the false choices on offer. We had a choice to increase taxes or cut spending. I frequently abstained in the voting because suggestions like grow the economy were not among the choices. But, yes, I can testify that at least the concern is bi-partisan.
May '10
Re: Who Cares About the Deficit?
... which is why no one cares.
The problem is that deficits are difficult to trace to one's everyday life or even to recall as a change in one's life as a whole. Americans who experienced the Great Depression are dying out, along with our collective memory of useless money. Since we left the gold standard, our currency hasn't been bound to any real value that the average American, conservative or liberal, can explain. It's obvious that national deficits and debts don't work the same way as personal deficits and debts. Hell, "deficit" isn't even a word many Americans use unless they're involved in business finance.
Most Americans can't conjure a lot of angst over deficits because government finance seems inherently like a boondoggle, regardless of who's in charge. It's hard to convince people that what they grew up with will lead to disaster.
May '10
Re: Who Cares About the Deficit?
There are two problems with a deficit that grows faster than the economy (deficits that stay at the same relative level as the economy maintain the status quo; secondly, the US budget "deficit" is quite misleading, because it doesn't count off-budget items and treats capital equipment, such as a 40 year life submarine, as an expense rather than amortized good): 1) debt service costs- if you have to pay $400 billion a year in interest and debt rollover cost, that money can't be rebated or used for some other purpose; and 2) sucking everything out of the caplital markets; the economy grows most when there is lots of investment capital available to fund lots of new ventures that provide lots of opportunity.
Right now, venture capitalists can't invest much because they are sending it all to Washington. The next Amazon.com could be starving due to Treasury Bills.
May '10
Re: Who Cares About the Deficit?
I care, for multiple reasons. I believe deficits should exist only in the event of a national emergency or crisis - war, Reagan's initiative to end the cold war etc. Deficits in non emergency situations, encourage more fiscally irresponsible spending, leading to more still, with every step increasing the size and scope of government and reducing individual liberty.
To make matters worse, there is the insane accounting practice of the government as Duane covers above. These practices permit huge, debt accumulating deficits to pose as "no big deal" Eg. approx. even with economic growth. Even Keynes insisted on balanced budgets or surpluses in normal years. We have sort of forgotten that and have accumulated unfunded obligations in excess of $100 Trillion.
Deficits matter.
Jun '10
Re: Who Cares About the Deficit?
I am no macro economicist, but without someone buying our debt (lending us money) we cannot continue spending unless we just print more. By doing that, however, we devalue the money in current existence. So perhaps you have managed to save for your retirement. Those , and all savings, will be worth considerably less. The cost of living will be considerably higher and everyone will suffer. This is not some theory discussed in college classes. This is real economic pain that everyone will suffer.
Re: Who Cares About the Deficit?
This seems to me a point extremely well taken, Aaron. The issue does tend to get politicized in the banal sense, as Ezra Klein suggests from a lefty perspective. And as Thomas Marier warns, Newt-era conservatives got slapped around by the mainstream media when they got tough on the budget.
Edited on Jul 15, 2010 at 7:54am