July 2010, Week 3


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Mon, 19 Jul 2010 00:19:27 -0400
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Deficits of Mass Destruction
Christopher Hayes
This article appeared in the August 2/9, 2010 edition
of The Nation.
July 15, 2010

First, the facts. Nearly the entire deficit for this
year and those projected into the near and medium terms
are the result of three things: the ongoing wars in
Afghanistan and Iraq, the Bush tax cuts and the
recession. The solution to our fiscal situation is: end
the wars, allow the tax cuts to expire and restore
robust growth. Our long-term structural deficits will
require us to control healthcare inflation the way
countries with single-payer systems do.

But right now we face a joblessness crisis that
threatens to pitch us into a long, ugly period of low
growth, the kind of lost decade that will cause
tremendous misery, degrade the nation's human capital,
undermine an entire cohort of young workers for years
and blow a hole in the government's bank sheet. The best
chance we have to stave off this scenario is more
government spending to nurse the economy back to health.
The economy may be alive, but that doesn't mean it's
healthy. There's a reason you keep taking antibiotics
even after you start to feel better.

And yet: the drumbeat of deficit hysterics thumping in
self-righteous panic grows louder by the day. Judging by
its schedule and online video, this year's Aspen Ideas
Festival was an open-air orgy of anti-deficit moaning.
The festival is a good window into elite preoccupations,
and that its opening forum featured ominous warnings of
future bankruptcy from Niall Ferguson, Mort Zuckerman
and David Gergen does not bode well. Nor does the fact
that there was a panel called "America's Looming Fiscal
Emergency: How to Balance the Books." This attitude
isn't confined to pundits. The heads of Obama's fiscal
commission have called projected deficits a "cancer."

The hysteria has reached such a pitch that Republican
senators (joined by Nebraska Democrat Ben Nelson) have
filibustered an extension of unemployment benefits
because it was not offset by spending cuts. Keep in
mind, the cost of the extension for people unlucky
enough to be caught in the jaws of the worst recession
in thirty years is $35 billion. The bill would increase
the debt by less than 0.3 percent.

This all seems eerily familiar. The conversation-if it
can be called that-about deficits recalls the national
conversation about war in the run-up to the invasion of
Iraq. From one day to the next, what was once accepted
by the establishment as tolerable-Saddam Hussein-became
intolerable, a crisis of such pressing urgency that
"serious people" were required to present their ideas
about how to deal with it. Once the burden of proof
shifted from those who favored war to those who opposed
it, the argument was lost.

We are poised on the same tipping point with regard to
the debt. Amid official unemployment of 9.5 percent and
a global contraction, we shouldn't even be talking about
deficits in the short run. Yet these days, entrance into
the club of the "serious" requires not a plan for
reducing unemployment but a plan to do battle with the
invisible and as yet unmaterialized international bond
traders preparing an attack on the dollar.

Perhaps the most egregious aspect of the selling of the
Iraq War was its false pretext. It never really was
about weapons of mass destruction, as Paul Wolfowitz
admitted. WMDs were just "what everyone could agree on."
So it is with deficits. Conservatives and their
neoliberal allies don't really care about deficits; they
care about austerity-about gutting the welfare state and
redistributing wealth upward. That's the objective.
Deficits are just what they can all agree on, the WMDs
of this manufactured crisis. Senator John Kyl of
Arizona, speaking on Fox, has come out and admitted as
much. All new spending increases must be offset, he
said, but "you should never have to offset the cost of a
deliberate decision to reduce tax rates on Americans."
So there you have it.

Remember that the Iraq War might have been prevented had
more Congressional Democrats stood up to oppose it.
Instead, many of those who privately knew the entire
enterprise was a colossal disaster in the making buckled
to right-wing pressure and pundit hawks and voted for
it. That mistake is being repeated. Despite White House
economists' full realization of the need for stimulus in
the face of astronomically high unemployment, the New
York Times has reported that the political minds inside
the White House, David Axelrod and Rahm Emanuel, have
decided that the public has no appetite for increased
spending. "It's my job to report what the public mood
is," Axelrod explained. He then showed up on ABC's This
Week to wave the white flag, saying that the president
would continue to press to extend unemployment benefits;
conspicuously omitted was any mention of aid to state
governments, which had originally been included in the
president's June letter to Congress asking for a new
stimulus package.

There is hope, however: the public is nowhere near as
obsessed with the deficit as are those in Washington.
According to a USA Today/Gallup poll, 60 percent of
Americans support "additional government spending to
create jobs and stimulate the economy," with 38 percent
opposed. A Hart Research Associates poll published in
June showed that two-thirds of Americans favor
continuing unemployment benefits. There is also very
little public appetite for "entitlement reform," a k a
cutting Social Security.

The lesson of the Iraq War is that over the long haul,
good politics and good policy can't be separated. If the
White House is tempted to support bad policy in the
short term because it seems less risky politically, it
should give John Kerry a call and ask him how that
worked out for him with Iraq.


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