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Rick Moran


April 28, 2013 - 1:09 pm

When are trillion dollar deficits not an “immediate crisis ? When the deficit as a percentage of GDP goes back to “normal” levels.

That’s the reasoning of a growing number of Democrats on Capitol Hill who want all this budget cutting nonsense to stop so they can go back to good old fashioned deficit spending in order to “stimulate” the economy.

Fueled by some outside commentators like the New York Times’ Paul Krugman who believe there is no immediate debt crisis, a growing number of Democrats are resisting more budget cuts, believing that slashing government spending slows the economy.

A column by Ben White and Tarini Parti in Politico looks at the growing number of Democrats who believe “austerity” has run its course and the time is now to increase spending as a stimulus to get the economy growing faster.

It should be noted that many of the Democrats mentioned in this article are not far left liberals. And the authors point out that even some conservative think tanks have issued papers recently urging caution in cutting more from the budget.

These Democrats and their intellectual allies once occupied the political fringes, pushed aside by more moderate members who supported both immediate spending cuts and long-term entitlement reforms along with higher taxes.

But aided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.

This group got a huge boost this month with the very public demolition of a sacred text of the austerity movement, the 2010 paper by a pair of Harvard professors arguing that once debt exceeds 90 percent of a country’s gross domestic product, it crushes economic growth.

Turns out that’s not what the research really showed. The original findings were skewed by a spreadsheet error, among other mistakes, and it’s helping shift the manner in which even middle-of-the-road Democrats talk about debt and deficits.

“Trying to just land on the debt too quickly would really harm the economy; I’m convinced of that,” Kaine, hardly a wild-eyed liberal, said in an interview. “Jobs and growth should be No. 1. Economic growth is the best anti-deficit strategy.”

And the intellectual shift away from austerity is not just coming from the left.

The conservative American Enterprise Institute issued a paper last week saying Congress has already achieved enough deficit reduction for now. Other organizations not typically associated with free-spending liberalism, including the International Monetary Fund and Goldman Sachs, have cautioned that the austerity movement — which favors rapid reduction of national debt — may be worsening Europe’s economic problems and slowing down the U.S. recovery, as well.

“American fiscal austerity has been moderate and probably, at the current pace of deficit reduction of about $300 billion per year over the next half decade, has proceeded far enough for now,” AEI scholar John Makin wrote last week.

Does cutting the budget cause a slowdown in growth? As we all know, Washington isn’t “cutting” anything, but rather reducing the rate of growth in government programs. In the sense that the “normal” growth in spending for a government program is cut back slightly, it may affect certain procurement programs like weapons purchases. This would indeed be a loss of economic activity and thus put a damper on the economy.

Regardless of any justification for cutting spending by scholarly papers, the need to cut the budget and cut it now is a necessity. What Krugman and other “stimulus” advocates never mention is the politics of budget cutting, which is not concerned with the numbers of deficit reduction as much as it is with the art of the possible in negotiating a fix for our short and long term deficit problems.

Does anyone seriously believe if we get back to robust growth in the economy — 4% or more — that the political will to deal with our long term debt problems, our entitlement problems, and further deficit reduction will exist? It isn’t so much that the deficit and debt are “immediate” crisis in the sense that unless we balance the budget by next year, the economy will collapse. But once the economy improves, and revenue begins to recover, the need for deficit reduction disappears and Congress will go back to business as usual.

That’s the political reality. Without a spur to their behinds, Congress won’t deal with our debt and deficit problems. And that spur — uncontrolled deficits and a continual increase in our national debt — will disappear once the good times are rolling again.

Rick Moran is PJ Media's Chicago editor and Blog editor at The American Thinker. He is also host of the"RINO Hour of Power" on Blog Talk Radio. His own blog is Right Wing Nut House.

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All Comments   (6)
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Let's say they are right. That does not mean we can't do better. If we cut the spending, we can cut the printing of money and the hidden inflation. We'd get a strong dollar again, a stable currency. Doing okay is not the same as doing well.

The economy is limping along, despite what their numbers say. The results are there to see. The economy has already been crushed. We are already there, and we teeter constantly on the edge of worse. This Spring is shaping up badly, just like the last two.

The problem is, they see this as normal, and it is NOT normal. We have roughly stabilized, but at a far lower level. This is not a recovery. This is a ship dead in the water, a floating hulk, close to sinking. 2% growth per year... of a far lower economy... with hidden inflation bloating the numbers? That's just the crew of the ship making immediate repairs at sea, but the ship needs to head back to the shipyard for serious repairs.
1 year ago
1 year ago Link To Comment
And the "recovery' is largely a jobless recovery at the same time the core economic corprations are logging record profits largely supported by the printing presses and corrupted street values mutiple, multiple times book values. Corrupted commodities speculators manipulate commodities to leverage profit taking for themselves, leaving the commodity producers in a volital state.

The 79th to the 19th percentile of wealth and income bracket have progressively lost ground since the 80s in dollars and even worse when adjusted for inflation. Consumer debt in that bracket has risen to $1 trillion dollars as has education debt now slight more than $1 trillion dollars. Unsustainble home mortage debt for that bracket is multiples of trillions of which is progressively adding to the national debt even more.

Our allies and global economic partners are all in equal shape or worse. Who has any answers for reconstructing a legitmate sustainable economy in this global circumstance? The non political partisan economic experts don't either! The housing bubble collaspe was only a 'minor' symptom of very deep and complex underlying problems that have came home to roost.

All these self serving political partisan diversions by activists away from the cancer killing us is...........
1 year ago
1 year ago Link To Comment
I'm pretty sure that you'll find many economists across all political ideologies who understand that 'spending' in and of itself is not necessarily a bad appoach --so long as a vibrant and sustainable economy returns independently or as the affect of come strategic plan. The latter, being the problem neither politcal party and their ideologies want to approach seriously. Why? The global economic enviroment doesn't represent a natural retun of any vibrant sustainable growth and more importantly, neither party has a clue how to legitimately approach ALL the complex and interconnected underlying problems that came home to roost and bringing our domestic and global economies to this point of circumstance.

In the meantime our national domestic liabilities and debt liability will continue to increase with NO reconstruction of our domestic and global economies being resolved. The nation is consumed with petty political ideological infighting and national division by self serrving activists, that is far removed form the nations most critical problems now and in the future.
1 year ago
1 year ago Link To Comment
If we have a "vibrant and sustainable economy," what do we need government spending for?
1 year ago
1 year ago Link To Comment
Sorry Buzz, but I don't quite understand question.

I said: " long as a vibrant and sustainable economy returns independently or as the affect of some strategic plan."

How many years or quarters has the economy failed to respond to any level of resemblance of acceptable muchless vibrant and sustainable? How many of our allied and or global partners have returned to vibrant and sustainable economies? Even Chinas growth rate has taken a recent dump all the way down from its high and mean line to 5.4 if I remember correctly. Japan is really beginning to teeter in very dangerous waters. We haven't truly had a sustainable econcomy for a very long time and especially from the 80s but for federal monetary propping up.

Until somebody comes up with something toally new to experiment with, we have one of two choices from experience and both dependent upon a *return* of some kind of vibrant sustainable economy. Do you have any ideas of what kind of sustainable economy might be in the tea leafs and how to implement it? If not, neither do the non partisan internal and external economic experts, muchless anybody in congress. Thats why everybody is ignoring it and wishing upon a star for a miracle.
1 year ago
1 year ago Link To Comment
To All PJMedia Readers:
Please don’t waste your time and energy on Freke1. He/she has a completely twisted, skewed and perverted perception of reality. He/she sees the world reflected in a funhouse mirror, much like his/her idol Jim Harrishmuck. He/she evades questions and throws tantrums.
1 year ago
1 year ago Link To Comment
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