What really amazes me about this
piece on federal budgetary deficits is that it's written entirely
from the hysterical deficit scold's point of view. The writer is
careful to quote two Republicans and two Democrats, but it never seems
to occur to him to quote any economists.
Why is the deficit a problem now? Well, Republicans are "...stirr[ing]
up their core voters and [are making] inroads with independents by
accusing Democrats of profligacy..." and "Facing a rank-and-file
revolt, Democratic leaders began trimming the measure...". I can
understand why Republicans would be making inroads with deficit
fear-mongering among their own membership and among uninformed
independents, but I can't imagine why the Democratic rank-and-file
would have a problem with deficits, unless they were being fed a steady
diet of baseless fear-mongering. The author doesn't appear to feel the
need to quote anybody on the Democratic side, either a rank-and-file
member or someone who might know what the rank-and-file actually
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If we observe another member of the NY Times' writing staff, Paul Krugman, an economist who, unlike many other people, saw the housing bubble, his views on the deficit worries of Congress are not at all in agreement with that of the deficit scolds.
Sure would be nice if the NY Times used what it supposes are the
natural advantage that traditional media has over bloggers, i.e.,
editors. An editor with some competence and ability would have been
able to take a broader view than the writer could and could have said
"Gee, maybe we ought to account for what the economists think and not
just rely on the hysterical deficit scolds." Krugman is amazed and flabbergasted
(As am I) that "inflicting economic pain has become the accepted thing"
and states that the danger of a double-dip recession (A wiping out of
all of the fragile gains made so far) is very real.
This fear of the deficit is having immediate, real, and very destructive effects.
Deficit hawk Democrats forced the excising of two health care-related
programs a subsidy for the jobless to keep them on the insurance of
their former employer, and increased funding for state Medicaid
programs so they can keep up with increased demand during a time of
mass unemployment because they feared the price tag and the cost to
the deficit in the short term.
Adding further injury, the proposal from Tom Harkin and George Miller to spend $23 billion dollars keeping teachers employed looks dead and buried
for the same reasons that the COBRA subsidy and state aid for Medicaid
went by the wayside. State budget shortfalls could cost up to 900,000
jobs this year alone.
Economist Dean Baker adds:
The plans by the deficit hawks seem likely to trim $30 billion in
unemployment benefits and aid to the states from the bill. Using the
methodology in the Romer-Bernstein paper
put out by the Obama administration to promote its stimulus package,
the cuts will reduce GDP by approximately $50 billion. This will
correspond to a job loss of more than 300,000 people. It is
irresponsible to report on plans to reduce deficits without noting
their likely impact on the economy.
What could account for such hysterical, baseless fears? Krugman says:
The answer, as best I can make it out, is that the organization [The O.E.C.D.]
believes that we must worry about the chance that markets might start
expecting inflation, even though they shouldn't and currently don't: We
must guard against "the possibility that longer-term inflation
expectations could become unanchored in the O.E.C.D. economies,
contrary to what is assumed in the central projection."
My own guess is that the billionaire deficit scold Pete Peterson and
his deficit commission that couldn't win enough votes in the Senate,
but was established by President Obama's Executive Order anyway, is the real culprit here.
The commission, which began meeting on Tuesday, has been barraged
with letters demanding that it conduct all of its meetings including
those held by subgroups of the 18 commissioners out in the open. One
came from Michigan Rep. John Conyers and 15 other Democratic House members, another
from House Republican minority leader John Boehner of Ohio. The third
was signed by 77 social service organizations ranging from the NAACP to Vietnam Veterans of America.
What are they so worried about?
That's an extremely good question. One shouldn't need secret, closed-door meetings for a commission whose business was legitimate and whose goal was an honorable and legitimate one. Unfortunately:
...the White House appears to be using a self-described "independent, non-partisan" group, called America Speaks
to carry out what appears to be an "astro-turf" campaign to simulate
public discussion of these issues. Heads up, folks. They announce on
On June 26, 2010, thousands of Americans, in hundreds of
locations across the United States and online, will weigh-in on
strategies to ensure a strong economic recovery and a sustainable
Sounds like a cool, grassroots, online democracy kind of project -
until you read further and find one of their big funders: the Peter G.
Just as with the Tea Party, progressives aren't faced with just fear
and panic. We're facing fear and panic backed by the deep pockets of
corporate astro-turf operators. How will the commission go about making its case?
Obama's deficit commission will be participating in a 20-city
electronic town hall meeting, put together by an organization called
America Speaks. It is financed by Peterson, along with the MacArthur
Foundation and Kellogg Foundation. This is a truly unusual event
because it marks the first time a presidential commission's activities
are financed by a private group that has long been lobbying the
government on the very subjects the commission is supposed to "study."
As has been pointed out, Obama seems to be awfully comfortable
dealing with the big money people in industry and finance. His
statement upon learning that BP didn't have a working plan to deal with
undersea catastrophes was:
Where I was wrong was in my belief that the oil companies had their act together when it came to worst-case scenarios.
Let's hope he's not similarly misguided when it comes to the financial security of regular Americans.
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