New World Blog
It's Not the Deficit Stupid!
By Colin Greer on January 18, 2010
A record budget deficit coupled with increased government spending has much of America in an uproar. The Economist projects that based on current trends, government debt in the big economies (Japan, America, and Britain to name a few) will reach about 106% of GDP in 2010, close to 30% higher than before the recession. As the economy recovers slowly and unemployment numbers continue to rise, Obama’s popularity has skidded, falling about 3%. Although the deficit is framed as the cause of our problems, it’s become a scapegoat for a larger set of issues.
It’s not really about the deficit—unless you close your eyes and throw a heat sensitive dart to pick the major economic issue of the day. The presumption of the deficit pick is that our economic distress comes from government spending. Forget that its government spending that saved the economy. Forget rising unemployment for which both parties share responsibility over time, following globalization and, deregulation. It’s not the deficit stupid!
Blaming America’s problems on government spending – and holding up the current deficit as proof of our downhill plunge -- is a tactic the Republicans are using to discredit the Democrats. How do we think and find our way out of cyclical recession and periodic disasters if our brains are shackled and our voices programmed by anti-government toxins? Both parties got us into this mess and finger pointing will not get us out. The real solution will be to balance the Democrats’ cries for more government spending with Republicans’ fiscal conservativeness.
It will take a lot of smart people from across party lines to find a way out of this economic tug-o-war. That’s why we decided to ask our readers for their thoughts on a few questions about the deficit: When does a deficit lead to tight credit and when does it become a drain on the market? What are the real constraints that need to be applied to public spending? Not ersatz or political limitations. Is deficit spending by governments never justified? Why is it the modus operandi for business and personal finances? How is the latter borrowing fundamentally more productive and less harmful than the former?
About the author
Name
Colin Greer
Biography
Dr. Colin Greer has been the President of The New World Foundation since 1985. He was a Professor at Brooklyn College, CUNY, and has written several books. Colin Greer has participated in and directed several studies of U.S. immigration and urban schooling policy and history (at Columbia University and CUNY), and Chairs numerous organizations. See full biography, here.
Comments
Government intervention vis a
Government intervention vis a vis the Federal Reserve and GSEs (Fannie Mae/Freddie Mac) is what got us into the current economic mess. Deficit spending is only delaying the real day of economic reckoning. This problem has been building over decades. George Bush and company extended the problem over his 8 years in office and now Obama and company are making things substantially worse. Eventually, this will all come to a head in the form of a hyper-inflation. Do you want to know the real solution? It's limited government. Let people and institutions fail and you will see a lot of pain in the short run, but lessons will be learned and people and institutions will become more responsible because they will realize that they will not be bailed out. This is the real long term solution. Let the market take care of the economy. You may say that we tried this and it failed, but that is a huge lie. Again, look at the Federal Reserve, Fannie/Freddie and company. Without their involvement over the last couple of decades, we wouldn't have ever had a housing and credit bubble.
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