That deficit problem we keep hearing about is gone. When it comes to spending cuts, it's time to follow the advice a general offered when we were mired in Vietnam: Declare victory and get out.
We had a deficit problem, once, although it was never as urgent or as important as our jobs crisis. Nor was it as important as the wealth inequity that's destroying the middle class, killing the hopes of a better life for lower-income Americans, and stifling growth. Wealth inequity hasn't been this high since the Great Depression.
Our problem now is that we're not spending enough.
Washington needs to spend more money now if we want a balanced budget tomorrow. That's called investment, and we've needed more of it for the past four years. Instead the President and other Democrats bought into that right-wing narrative which said that "The Deficit" -- something that's described in static, singular, and slightly scary terms, like "The Blob" -- was our biggest problem. Good thing it's, as Paul Krugman says, "mostly solved."
In fact, other cuts in this battered economy would make the economy worse -- and would make deficits go up. Don't take our word for it. The world's leading institutional deficit hawk, the International Monetary Fund, reached the same conclusion.
To understand why reality's so different from the Beltway's fantasy we need to know how we got here:
The Big Score
Some Democrats don't like hearing this, but the seemingly miraculous "Clinton economy," including the government surplus we heard about when Bill Clinton left office, was primarily driven by a stock market bubble.
That bubble, and the one that followed it, were largely driven by irresponsible Wall Street deregulation --together with Republican collaborators like Sen Phil Gramm, got rich on Wall Street -- and the bubble kept inflating.
We didn't use that bubble money to rebuild our social safety net. We didn't put it in the bank, either. Instead the Bush Administration pushed through an irresponsible set of tax breaks for the wealthy, who were already being taxed at historically low rates. And despite the end of the Cold War, we went on a military spending spree that include two wars of choice, massive weapons purchases, and continued staffing and maintenance for the thousands of military installations which span the globe today.
The deficit soared as a result of these profligate moves. The long-term deficit outlook became grim, too, as our profit-driven healthcare system led to soaring medical cost inflation, a growing number of uninsured Americans, and a rising wave of medically-caused bankruptcies for people with health insurance. But that was off the table in the halls of corporate-funded political power.
Holding the Bag
Then came the financial crisis of 2008 -- brought on by the same Clinton-era deregulation. Taxpayers paid billions to rescue Wall Street -- money which has not all been repaid, despite the government-sponsored mythology that says otherwise. Then the same taxpayers were left to face the consequences: massive and long-term unemployment, continued wage stagnation, and millions of homes "underwater" as the result of bank malfeasance and criminality.
Statistics show that corporations and wealthy individuals reaped all the benefits of the taxpayer-funded recovery -- and they're paying record-low taxes. Meanwhile, as the New York Times reports, "Wages have fallen to a record low as a share of America's gross domestic product." Low wages mean low tax revenue. They also mean that a lot of Americans can be described as the "working poor" -- more than ten million of us, in fact, at last count.
We're still 9 million jobs short of full employment, too.