Tag Archives: deficit

Deficits

I remain convinced that America has two deficits–one fiscal, and one informational. The economic deficit is important, but the deficit in basic understanding of the world we inhabit is arguably the bigger problem.

Case in point, as Steve Benen reports at Maddowblog: debates about the deficit.

As it happens, the budget deficit is getting smaller. In fiscal year 2010, which was President Obama’s first full fiscal year in office, the budget deficit was $1.3 trillion. In fiscal year 2013, the Congressional Budget Office projects the deficit will be $845 billion. That’s a 35 percent decrease in terms of dollars, and it’s even bigger—41 percent—if you are computing the deficit as a share of the GDP. The percentage drop is even bigger—roughly 50 percent—if you start from fiscal year 2009, which overlapped the final year of the Bush presidency and the first year of Obama’s.

The fact that the deficit is declining is not reason to ignore it, of course, but its size and trajectory are important factors–or should be–in any economic analysis, including proposals about appropriate measures to address it.

The problem is, when Bloomberg News commissioned a survey asking Americans whether they believed the budget deficit was growing or shrinking, just six percent answered the question correctly. Ninety-four percent had no clue. (Of the clueless, 62 percent actually thought the deficit was growing.)

So far as I know, Bloomberg didn’t ask a related question, of equal importance. It would be interesting to determine the percentage of Americans who could explain the difference between the deficit and the national debt.

For that matter, it would be interesting to know what percentage of our elected officials could correctly answer either of those questions.

 

Burning Down the Village to Roast a Pig

One of my favorite lines from a Supreme Court decision was delivered in the opinion striking down the mis-named “Internet Decency Act.” The Court compared the measure to burning down a village to roast a pig.

The “pig” this time is the budget deficit, which is unquestionably a very significant problem. Unfortunately, Congress is attacking America, not the problem.

Any credible economist will confirm that even if we zeroed out all discretionary spending–that is, if we spent only on the military and entitlements, and absolutely nothing else–we would not erase the deficit for twenty-plus years. (Actually, we would never erase it, because that would destroy the economy and lose billions in tax revenues.) If we are to get the budget balanced, we must couple responsible, judicious spending cuts (including military cuts) with measures to grow the economy and increase tax revenues. We might begin with rolling back the Bush tax cuts on the wealthiest 2% of Americans.

Instead, Congress is merrily proceeding to destroy civil society.

There has been a lot written about the effect of defunding Planned Parenthood on the health of poor women, and about the effort to kill public broadcasting. Those proposals are in the news. But another proposed cut that has been less discussed would defund the single most successful civic education program we have. The “savings” wouldn’t pay for a single fighter jet, but the cost would be incalculable.

The program is “We the People.” In a 2010 study conducted for the Center for Civic Education, students who completed We the People were far and away more knowledgeable about the country’s democratic principles and institutions compared to their peers.

We the People national finalists also were:

* More likely to register to vote, write to a public official, investigate compelling political issues, participate in lawful demonstrations, and boycott certain products or stores.

* More likely to agree that keeping up with political affairs, influencing the political structure, developing a meaningful philosophy of life, becoming a community leader, and helping others in need are of strong to absolute importance.

* More likely to agree that people should be able to express unpopular opinions and that newspapers should be able to publish freely, without government interaction.

As a graduate student who has worked with the program put it in an email to me:

“It’s mind boggling to me that right now, when we need it most, the best program in the country on educating citizens would be eliminated. This is very real, as the Center for Civic Education had to cancel the We the People – Frontiers partnership. Frontiers is a 70+ year old organization providing civic engagement opportunities to the African American community. Four years ago, we teamed up with them to provide We The People to their inner-city and urban club students on nights and weekends, since their schools are no longer teaching civics. These kids traveled to Birmingham, Alabama, competed in We the People competition and experienced the civil rights movement first-hand, learning from Foot Soldiers who marched when they were their age. That event was scheduled to take place in July and has been cut. 600+ inner-city and urban youth from around the country have already been hurt by this, not to mention the millions more in the future who may never know We the People.”

I wonder what those who are stoking the fire will do when our civic village is gone.

Moral Deficit

There are plenty of issues that people of good will see differently.

For example, most Americans—at least the ones I know—consider themselves fiscal conservatives, but that doesn’t mean they necessarily agree about which policies are fiscally responsible. Depending upon their understanding of economics, some people will argue that now is the time to cut back spending to concentrate on deficit reduction; others insist that cuts now will delay economic recovery and reduce tax receipts–that we should spend to stimulate the economy and create jobs, because more jobs will both reduce government expenditures and generate more tax revenues with which to pay down the deficit. Both groups want to reduce the deficit; it’s an honest disagreement over the best way to do so.

Other disagreements are harder to understand.

The Zadroga 9/11 Health and Compensation Act would pay health care costs for 9/11 first responders who were sickened by toxic fumes and debris when the Twin Towers fell.  I don’t use the word “hero” very often, but that’s what these firefighters, police officers and medics were. They braved the inferno in order to rescue those inside, and they are now suffering from injuries and illnesses caused by that desperate effort. It passed the House with 90% of Republicans opposed. Then Senate Republicans refused to allow a vote on it, because “it would add to the deficit.”

Concern for the deficit would have been more believable had GOP Senators not been holding this and other measures hostage to their insistence that the richest 2% of Americans retain the favorable tax rates they received from George W. Bush.

Extending those rates would cost many billions more than providing much-needed medical care for first responders. Marginal rates are at historic lows: in 1945, the rate was 91% of every dollar earned over 200,000; in 1982, 50% of everything over 106,000; in 1993, 39.6% of earnings over 250,000.  It is now 35% of everything over 357,700. If the Bush tax cuts expire, rates will revert to 1993 levels. Those levels would remain very low by historical standards, but even so, expiration would generate billions to reduce the deficit.

Republicans argue that low taxes on the wealthy spur job creation. The evidence for that assertion is mixed, to put it mildly. If we really want to encourage job creation, we’d be better served giving businesses tax credits for new jobs.

The income gap between rich and poor in this country is wider than it has been since the gilded age. Joblessness is at its highest point since the Depression. These indicators are warning signs, not just for our economic health, but for our civic well-being.

Denying first responders desperately needed medical treatment so that millionaires won’t have to endure a 4.6% marginal tax rate increase cannot be excused as a good-faith policy dispute. It is, quite simply, disgraceful.

Americans are facing two kinds of deficits right now: monetary and moral. Ultimately, our fiscal problems—difficult as they seem—may be easier to resolve.