18 Jan 2010
by Colin Greer
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It’s Not the Deficit Stupid!

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?

 

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