What You May Not Know About The Debt But Should

“Can we now start talking about unemployment?”

—Paul Krugman

for almost four years now, we have argued back and forth on this blog about deficits and debts and jobs.

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,


He borrowed from Paul Krugman, who borrowed from the Center on Budget and Policy Priorities (peer review?), this graph:

deficit reduction and stabilization

[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.

Don’t Look, Mom!

Just last month, Paul Ryan was telling us how proud he was of his mother.

Today, I wonder just how proud she is of her son.

Right before our very eyes, day by day, interview by interview, campaign speech by campaign speech, Paul Ryan’s character is shrinking.

At this rate, what’s left of it on November 6 wouldn’t make a meal for a titmouse.

Look, I know that Paul Ryan had some trouble with the truth before he hooked up with the Olympian Liar Mitt Romney. But it is sort of sad to see Mr. Ryan, eagerly and willingly, offer up what integrity he did possess as a sacrifice for becoming Vice Vulture to a possible Vulture Capitalist-in-Chief.

Take, for yet another instance, what happened to Ryan on CBS’s Face The Nation on Sunday. Since he became the VP pick, Ryan, echoing Romney, has been running around the country (not at record pace, though) telling folks that President Obama wants to slash a trillion bucks out of our defense budget. But finally Ryan—who voted for those threatened defense cuts himself— faced a journalist armed with, uh, the facts.

Norah O”Donnell began the subject of defense cuts with this:

O’DONNELL: Let’s talk about some of the cuts that have been agreed to. Mitt Romney said in an interview on NBC that Republicans were wrong to agree to a deal last summer that included automatic cuts to defense spending in exchange for this agreement to raise the debt ceiling. He said it was big mistake by Republicans.

He’s talking about you because you voted for those cuts, correct?

Before I let Ryan answer, lets review. There were 174 House Republicans, including Paul Ryan, who voted for the Budget Control Act of 2011, which was a settlement of the ridiculous fight Republicans started over the debt ceiling. A bipartisan “super committee” was established and charged with coming up with $1.2 trillion in budget cuts or else across-the-board cuts in defense and entitlements, amounting to $1.2 trillion, would begin to happen after the end of this year.

Because Mitt Romney wants to stick those threatened across-the-board defense cuts around President Obama’s neck, he has had to also criticize Republicans for voting for the legislation that would allow the cuts to begin to happen, if there is no agreement before then.

Now, here’s Ryan’s response to O’Donnell’s question:

RYAN: I did, you know why I voted for it? Because I was working to find common ground with Democrats to get a down payment on deficit reduction.

I worked with President Obama to find common ground to get a down payment on deficit reduction. It wasn’t a big down payment but it was a step in the right direction…

Mr. Ryan then tried to deflect by bringing up Bob Woodward’s new book and once more referenced the “devastating defense cuts that are now coming due,” but O’Donnell pressed:

O’DONNELL: Congressman, these defense cuts are part of the Budget Control Act. You voted for the Budget Control Act. In fact I went and looked. You put out a statement at the time it was passed and you called it a victory, and you called it a positive step forward.

So, you voted for defense cuts. And now you’re criticizing the president for those same defense cuts that you voted for and called a victory.

RYAN: No, no, I have to correct you on this, Norah. I voted for a mechanism that says a sequester will occur if we don’t cut $1.2 trillion spending in government. We offered $1.2 trillion in various — the super committee offered it. We passed in the House a bill to prevent those devastating defense cuts by cutting spending elsewhere. The senate’s done nothing. President Obama’s done nothing…

Blah, blah, blah. But Ryan soon gives the game away with this admission:

RYAN: The goal was never that these defense cuts actually occur, the goal is that we get to work and cut spending so that we prevent those defense cuts. We’ve done that. The president hasn’t.

Ah. Finally the truth, or at least yesterday’s version of it, emerges, albeit via journalistic pressure: “The goal was never that these defense cuts actually occur.”

Fortunately, there are folks, sometimes we call them journalists, who pay attention to this stuff, especially when a politician once bragged about the cuts he is now criticizing. From Talking Points Memo:

Despite Ryan’s new attack, he not only voted for the bill containing the cuts, he went out of his way to tout just how difficult it is to undo them.

What conservatives like me have been fighting for, for years, are statutory caps on spending, legal caps in law that says government agencies cannot spend over a set amount of money,” Ryan told FOX News’s Sean Hannity shortly after the agreement was reached last August. “And if they breach that amount across the board, sequester comes in to cut that spending, and you can’t turn that off without a super-majority vote. We got that in law.”

We got that in law.” “We” did it. We. You know, we conservatives.

You see, Paul Ryan, speaking to folks these days, hopes they don’t find out that just a year ago he was sitting in Sean Hannity’s lap telling Baby Jesus how wonderful it was that across-the-board defense cuts—”sequester”—represented good conservative governance.

And Ryan, good Catholic boy that he is, hopes his dear mother isn’t watching, as he sows the countryside with lies designed to produce a Romney presidency. Liquidating one’s personal integrity is messy business, the kind most moms wouldn’t be all that proud of.


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