The Three Reasons Republican Deficit Hawks Are Wrong
By
Robert Reich
To watch this directly on YouTube: https://www.youtube.com/watch?v=-LlbW5SHGGA
Congress
is heading into another big brawl over the federal budget deficit, the
national debt, and the debt ceiling.
Republicans
are already talking about holding Social Security and Medicare “hostage” during
negotiations—hell-bent on getting cuts in exchange for a debt limit hike.
Days
ago, U.S. Treasury Secretary Jacob Lew asked whether our nation
would “muster the political will to avoid the self-inflicted wounds that
come from a political stalemate.”
It’s
a fair question. And there’s only one economically sound answer: Congress must
raise the debt ceiling, end the sequester, put more people to work, and
increase our investment in education and infrastructure.
Here
are the three reasons why Republican deficit hawks are wrong. (Please watch and
share our attached video.)
FIRST: Deficit and debt numbers are meaningless on their own. They have to be viewed as a percent of the national economy.
That
ratio is critical. As long as the yearly deficit continues to drop as a percent
of the national economy, as it’s been doing for several years now, we can more
easily pay what we owe.
SECOND:
America needs to run larger deficits when lots of people are unemployed or
underemployed – as they still are today, when millions remain too discouraged
to look for jobs and millions more are in part-time jobs and need full-time
work.
As
we’ve known for years – in every economic downturn and in every struggling
recovery – more government spending helps create jobs –
teachers, fire fighters, police officers, social workers, people to rebuild
roads and bridges and parks. And the people in these jobs create far more jobs
when they spend their paychecks.
This
kind of spending thereby grows the economy – thereby increasing tax revenues
and allowing the deficit to shrink in proportion.
Doing
the opposite – cutting back spending when a lot of people are still out of work
– as Congress has done with the sequester, as much of Europe has done – causes
economies to slow or even shrink, which makes the deficit larger in
proportion.
This
is why austerity economics is a recipe for disaster, as it’s been in Greece.
Creditors and institutions worried about Greece’s debt forced it to cut
spending, the spending cuts led to a huge economic recession, which reduced tax
revenues, and made the debt crisis there worse.
THIRD
AND FINALLY: Deficit spending on investments like education and infrastructure
is different than other forms of spending, because this spending builds
productivity and future economic growth.
It’s
like a family borrowing money to send a kid to college or start a business. If
the likely return on the investment exceeds the borrowing costs, it should be
done.
Keep
these three principles in mind and you won’t be fooled by scare tactics of the
deficit hawks.
And
you’ll understand why we have to raise the debt ceiling, end the sequester, put
more people to work, and increase rather than decrease spending on vital public
investments like education and infrastructure.
ROBERT B. REICH, Chancellor’s Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies, was Secretary of Labor in the Clinton administration.
Time Magazine named him one of the ten most effective cabinet secretaries of
the twentieth century. He has written fourteen books, including the best
sellers “Aftershock, “The Work of Nations," and"Beyond Outrage."
He is also a founding editor of the American Prospect magazine and chairman of
Common Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes,
Amazon. His new book, "SAVING CAPITALISM: For the Many, Not the Few"
is out 9/29.