Republicans claiming to represent fiscal conservatives signed a pledge not to raise taxes, though even conservative economists such as Alan Greenspan are adamant that continuing the Bush tax cuts for the uber-wealthy is irresponsible and indefensible. Those who decry the national debt, and exaggerate its significance, have proven that they are also unwilling to maintain a revenue stream capable of paying it down.
Economist and Money Manager Zachary Karabell (http://en.wikipedia.org/wiki/Zachary_Karabell) writes in the November 8 issue of Time Magazine, echoing what 2008 Nobel Prize winning Economist Paul Krugman and many others have long maintained, that the populist Tea Party obsession with debt is not only misguided, but economically and fiscally self-destructive (http://www.time.com/time/magazine/article/0,9171,2028095,00.html). “Whatever the Tea Party says, we haven’t mortgaged our future. We’ve endangered our present.” The national debt “isn’t excessive. On a relative basis the federal debt burden has hardly changed over the past 20 years. In fact…, the percentage of the federal budget spent servicing the debt has actually decreased…. [I]n 2009, net interest payments on the debt decreased from the year before, and the overall percentage the U.S. pays to service the debt (currently less than 3% of GDP) is lower than it was in the late 1980s and most of the 1990s.”
Karabell also tackles the currently popular Right-Wing mythology that New Deal stimulus spending prolonged The Great Depression, another step in the gradual revisionism of historical fact, moving from the long-held accurate recognition that The New Deal stimulated enormous economic growth (see The Economic Debate We’re Not Having) but failed to end The Great Depression due to Roosevelt’s compromise with fiscal conservatives in 1937, sending the economy back into a downward spiral (rescued by the massive public spending project called “World War II”). Prior to The Great Depression, he notes, “the orthodoxy of austerity and budget cutting hobbled the world and led to a decade of deflation and depression.”
Ironically, despite the enormous success of stimulus spending in avoiding the complete economic collapse that we were teetering on the edge of two years ago (see How Do We Stop The Insanity? for a discussion and link to a graphic depiction of how effective the stimulus bill was at turning around the growth in unemployment from rising at an accelerating rate to rising at a decelerating rate), “rational argument about (debt and deficit) is as rare as levelheaded discussion of sex and religion” (see “Political Fundamentalism”, comprised of the unholy trinity of “Constitutional Idolatry”, Liberty Idolatry, and Small Government Idolatry, for a discussion of the reasons for the similarity).
Karabell goes on to describe how the “simple narrative” of the Tea Party, “as economic policy…is the 2010 version of what the blind, rigid bankers of the 1920s and ’30s offered –and it will sink an already leaking ship.” “Debt is simply a cost,” Karabell emphasizes, “a powerful tool when properly used…. [W]ise fiscal policy–focused on investment—is a spark plug when activity sputters…. [A]ny business leader will tell you that you can’t cut your way to prosperity.”
As I’ve frequently repeated, there are legitimate debates to be had. A minority of economists (adherents of The Chicago School, which has been eroding for decades due to accumulating countervailing evidence) disagrees with Karabell and Krugman, and their analyses should not be dismissed out of hand. But neither, certainly, should the majority view of economists and historians, whose narrative, better informed and better reasoned than the popular Tea Party narrative, insists that this populist push for austerity is going to cripple rather than save our economy. The risk that those who know what they’re talking about might be right, and those who don’t might be wrong, is not a risk that rational people should take lightly.
As Karabell writes, “our children and grandchildren will not praise us….” They will reproach us for “running scared,” echoing President Obama’s apt characterization of the choice we now face: “A Choice Between Our Hopes and Our Fears”.