“Can we now start talking about unemployment?”
My position, and one that seems stunningly obvious to me, has always been that jobs and the economic recovery deserve precedence over debt reduction, even though long-term debt is a problem that has to be addressed.
For those of you who don’t follow Brad DeLong, the professor of economics from Berkeley, you are missing something valuable in the debate you see on television or read in the paper every day, almost all of that debate focused solely on deficit reduction. (Go here and read DeLong’s bona fides, if you think he’s just another liberal economist.)
Sunday, DeLong posted a blog entry with the title,
[Note: BCA is the Budget Control Act of 2011 (that “settled” the first debt-ceiling fight and which brought us the so-called fiscal cliff at the end of 2012) and ATRA is the American Taxpayer Relief Act, signed on January 2 of this year (the fiscal-cliff “settlement”).]
Here is Krugman’s description of the graph:
The vertical axis measures the projected ratio of federal debt to GDP. The blue line at the top represents the projected path of that ratio as of early 2011 — that is, before recent agreements on spending cuts and tax increases. This projection showed a rising path for debt as far as the eye could see.
And just about all budget discussion in Washington and the news media is laid out as if that were still the case. But a lot has happened since then. The orange line shows the effects of those spending cuts and tax hikes: As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon.*
Krugman makes the point that,
for the next decade, the debt outlook actually doesn’t look all that bad.
True, there are projected problems further down the road, mainly because of the continuing effects of an aging population. But it still comes as something of a shock to realize that at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.
We know that most Beltway journalists have bought into the hype over deficits and debts, since that is just about all that Republicans want to talk about now that they aren’t in the White’s House. But the focus of congressional and presidential efforts in the short term should be on keeping the economy stimulated enough to really catch fire.
Brad DeLong offers this stinging rebuke of the President:
In focusing in 2013 on further deficit-reduction deals rather than on policies to boost employment growth and infrastructure investment, President Obama is making yet another hideous economic policy mistake.
Now, to be fair to Mr. Obama, he can’t entirely control the debate. He has constantly talked about the dangers of deep cuts in government spending and the need to keep the economic recovery going.
But he faces stiff opposition in Congress from austerity-drunk Republican teapartiers who are aided and abetted by an establishment press, a press that pushes on the public the weird idea that we are going to bleed to death if we don’t slit our throats now.
You figure it out. I can’t.
In the mean time, we need to stop worrying about the damn deficit for a while and start worrying, even exclusively worrying, about jobs and economic growth.
* For budget geeks: About that red line on the graph above, the one that shows deficits leveling out as a percentage of the economy, that was the point of the Center on Budget and Policy Priorities original piece, which explained it this way:
Achieving $1.4 trillion in additional deficit savings would stabilize the debt at about 73 percent of GDP by 2018. Some analysts prefer a lower debt ratio, such as 60 percent of GDP, a goal that the European Union and the International Monetary Fund adopted some years ago. No economic evidence supports this — or any other — specific target, however, and IMF staff have made clear that the 60 percent criterion is an arbitrary one. In addition, even if such a target were the best one before the recent severe economic downturn pushed up debt substantially in most advanced countries, it would not necessarily be an appropriate target for debt over the next ten years, given the severity of the downturn and continued economic weakness. The critical goal now is to stabilize the debt in the coming decade.