Why Have So Many DUers Bought The RW Meme That "Deficits Spell Doom?"

[stopbush]

About a month or so ago, the argument was rightly made that the government needed to get money into the system through stimulative efforts because the private sector wasn't spending money creating jobs or investing.

The notion - supported by Krugman and others - was that if the private sector isn't pumping money into the economy, the government has to step in and do so to keep the economy from collapsing and, hopefully, lifting the economy on the road to recovery. Krugman was one who said (rightly, IMO) that the first Obama stimulus wasn't big enough.

On the other side of the aisle, we had Rs arguing that nothing was worse than deficit spending, that it had to be avoided at all costs, and that any stimulative measures needed to be offset by spending cuts ("you want to extend unemployment benefits, then cut something else."). This from a party that ran up deficits under bush that were massive, and that was with them putting the biggest unpaid-for deficit growers off budget, like the wars and the prescription drug plan.

After Obama's tax cut compromise, it seems that many Ds have taken up the RW mantra on deficits. Every other thread on DU is pissing and moaning about deficits being the worst thing imaginable. Are they? Is there a way to NOT add to the deficit right now to stimulate the economy? If there is, I'd like to hear it.

We can argue the fine points - what KIND of stimulus spending actually helps the economy (ie: unemployment benefits, big help; tax cuts for rich people, not so much) - but the reality of the situation is that whether a particular form of stimulus spending reaps a pile of gold or a pile of shit, it ALL adds to the deficit.

Most of the threads I'm reading here are not arguing the fine points. They're peddling the RW meme that deficits are the worst thing that can happen in today's economy.

Why is that?

[valerief]

1. I think the cracking open of social security is far worse. Of course, the WAR deficit helps

no one but the world's super-rich.

[tabatha]

2. Because tax cuts for the rich do not put money in the economy.

Otherwise Bush would not have had such a dismal job creation record.

And guess who will be paying down the deficit?

[texastoast]

7. Thank you. n/t

[BzaDem]

9. What about the 5/6 of the bill that is not for tax cuts for the rich? n/t

[texastoast]

11. Hmm

Pay me now or pay me later. Only if you pay me later, you gotta pay interest.

China knows this.

China=smart.

USA=must have instant gratification.

[stopbush]

28. Hmm. Sounds like a mortgage to me.

[texastoast]

50. Yep.

Only you don't get to choose the house nor have the option to save up a substantial portion of the price as a down payment so you don't have to pay so much interest. You just get to pay for someone's house on whatever terms "they" tell you.

[Chisox08]

30. That is true but that 1/6 gives the rich a larger tax cut

then the average American worker earns in a year. Also the extension on UI does nothing for the people who passed, getting close to or at 99 weeks.

[tabatha]

58. If you rate the $ per person

the rich are definitely getting more per person than the rest of us.

To provide an example, suppose there are $1000 and 100 people, 2 of whom are rich and 98 are not.
I do not know the real numbers, but this is enough to show the difference:

The benefits will be:

(1/6*1000)/2 = $83 per person for the rich

(5/6*1000)/98 = $8 per person for the rest

[Life Long Dem]

35. Economists say

The tax deal struck by President Barack Obama and congressional Republicans essentially gives Americans a pay raise -- pumping money into the economy almost immediately and probably creating hundreds of thousands of jobs over the next two years, economists say.http://www.boston.com/business/taxes/articles/2010/12/07/tax_deal_should_help_economy_analysts_say/

[DJ13]

3. I dont understand it either

The party of FDR now sounds more like Reagan.

Deficts are NOT the problem, GROWTH is the problem.

The deficit will go down if the economy begins growing again.

[katnapped]

6. So of course the solution being

Shovel all the rest of our money to the rich, and they promise to create jobs!

Why didn't I think of that?

[Statistical]

14. What bills shovels ***ALL*** our money to the rich? Certainly not the one currently debated.

[emulatorloo]

31. Tax cut part - $544.3 billion. $463 billion of that is for 250k below, $81.5b for top 2%

[texastoast]

4. Because they do.

They are bad.

And I said that before Obama was on the horizon.

[msongs]

5. hve seen few threads that deficits are are the worst thing...or even bad nt

[BzaDem]

8. Because they find RW talking points convenient. n/t

[tekisui]

13. No, that isn't it at all. It is that deficits lead to cuts in social services.

[tekisui]

10. I'm not so concerned about deficits, I am concerned about what politicians

do with deficits. They cut the social services. The ever increasing deficits are the excuse given to cut so many social needs.

That is my problem. Just you watch, it will happen again. It is a common cycle that has been played out for at least three decades.

[Pholus]

36. +1 but that doesn't play with the "you're sanctimonious" crowd.

It's like they haven't been around the country for long. We blow the deficits now, not that it matters, but what we're going to hear next year is how bad the deficit is and how we need immediate and deep cuts *NOW*

[corpseratemedia]

37. +1,000,000,000

[Jackpine Radical]

12. Deficits that we piss away on wars, military expenditures, etc.

will eventually kill us.

Deficits that we turn into investments in our future by building infrastructure, educating our people, etc. are actually investments. Money we spend to provide decent circumstances for the disabled and elderly will also help to strengthen us, if only by giving each of us some compassion training and a sense of communual solidarity plus the assurance that we, too will be cared for if something terrible befalls us..

[girl gone mad]

19. This ^^^

is the correct answer.

Deficits which lead to economic development and expansion are good. Deficits which amount to the top 1% looting our national treasury, leaving us less prepared to meet future demands, are bad.

[Forkboy]

24. +1

[Cid_B]

32. Meh...

As for "compassion training and a sense of communual solidarity" I'd rather have a better interest rate but that's just me.

Honestly, warm fuzzy totally emotionally based stuff like that is the reason that this issue is being stomped on in the court of public opinion.

[vi5]

15. I think it's a few things....

1) The blatant hypocricy and selective concern about the deficit on the part of the wingnuts. In other words all the programs that can't be funded and all that can't be done because the deficit is so bad, yet we can give more money back to the rich which will add to the deficit.

2) The tax cuts to the wealthy don't pump money into the economy or create jobs. Extending unemployment benefits will, stimulus spending on infrastructure will and so on and so forth. So the former is just pumping more money into the deficit, while the latter is pumping money into the economy that will eventually make it back through other taxes on companies that do well when people have money to spend on their products.

There are other aspects to this but it's not a clear cut "We think the deficit is bad." It's that deficit spending is good when done right and done in the way that is recommended by economists and that history shows has a stimulative effect, but not when done badly in a way that will not stimulate the economy.

So yeah, it's great that we got some stimulus spending out of this, but the benefits of that for the deficit are completely offset by extending the tax cuts to the wealthiest americans.

[tekisui]

16. I hope you ask the question: "Why do so many Dems buy the RW meme

that the appropriate response to deficits is to cut social services"? when that time comes, and it is coming.

[shaayecanaan]

17. Because eventually deficits do spell doom...

as is being seen in Portugal, Greece, Spain, etc.

The current US deficit isnt huge by international standards (its about two-thirds of GDP). However, the US has a very significant structural deficit. Resolving that deficit will require significant cuts to Medicare/Medicaid and defence spending. I do not oppose stimulus but at the same time the US govt needs to get its fiscal house in order.

Ideally, significant savings on Medicare could be realised by allowing it to negotiate prices and establish a formulary. Obama did intend to do this but like everything else he ended up caving on it.

[jefferson_dem]

18. Fact is some will grasp at any flimsy straw - any right wing talking point - in order to

bash Obama and the Democratic agenda.

So-called progressives become deficit hawks overnight... 'Scuse me while I :rofl:

[Hello_Kitty]

60. You'll be a deficit hawk as soon as the President signals support for austerity measures

We'll be hearing from the likes of you that we're all going to have to make sacrifices to reduce the debt.

[gratuitous]

20. Who's buying "deficits spell doom"?

It seems contradictory, however, to claim on the one hand that deficits spell doom, while on the other hand depriving the Treasury of hundreds of billions of dollars by maintaining artificially low tax rates on excessive (and yes, I'll use that word) income. Apparently the doom threatened by deficits takes a back seat to taxing Paris Hilton and the overrich and additional three cents on their "earnings" above a quarter million dollars a year.

Low tax rates on the rich both deprive the government of much-needed capital, as well as do nothing to stimulate the economy, if the last 10 years are any indication. The glaring contradiction is what's being brought forward, not anyone "buying into" a meme.

[stopbush]

27. Well, here's a thread that was apparently started while I was typing up

my OP: "The Massive Debt Bomb Threatening You And Me"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x9909

[gratuitous]

29. One might also ask

Why are so many at DU buying the RW meme that tax cuts for the wealthy will stimulate the economy?

[stopbush]

39. I have not seen a single person on DU has said anything close to that.

Quite the contrary. I and others have said plainly and clearly that the tax cuts to the rich aren't stimulative, but that they are the Republican-demanded poison pill that we must accept at this time to get progressive stimulative efforts through like the extension on unemployment benefits.

Show me a single post where a DUer says that the upper-level tax cuts are stimulative. You won't find it.

[Warren Stupidity]

45. that has been clearly stated in support of the Bush-Obama Tax Cuts several times here.

[stopbush]

54. Provide links, please.

Otherwise I'll just assume you're lying.

[Angry Dragon]

21. cheney says deficits don't matter

the republicans are now saying cheney was a big f@@@ing liar??

[JamesA1102]

22. Wasn't Krugman arguing for months that big deficits

are not that serious?

[spanone]

23. deficits were NEVER mentioned during the bu$h* years, and when they were

cheney ended the conversation with 'deficits don't matter'


the agenda is ALWAYS set by the republicmedia

[Davis_X_Machina]

25. Herbert Hoover, D-CA -- I'm always the last to find out....

In Chicago, you can vote long after you're dead, but on DU, you can actually change your party registration.

[TexasObserver]

26. Ignorance of the truth that deficits are required for resurgence.

[Chisox08]

33. I think they mean the opposite of what the RWers say when they say "Deficits equals Doom"

I'm looking at what the Republican controlled House will start to cut. We all know they wont cut military spending. So when they start crying about budget cuts it will come on the backs of people who needs government assistance the most.

[City Lights]

34. There's a RW talking point for every occasion.

Here's another: Reagan showed us that deficits don't matter. ~ Dick Cheney

Are you buying into that one?

[DemocratAholic]

38. huge deficits are not good

First, I would disagree with the idea that Republicans are concerned about deficits. They may state that in their election campaigns, but the fact it, the deficits under Republicans are always bigger than under Democrats. Republicans feign outrage about deficits, but the truth is, they don't care about them at all.

Deficits run over long periods of time, the way that we have been doing for the past ten years, is really bad. It is money that is pissed away, because we have to borrow money to pay for them, and we have to pay interest on that borrowed money. Many people have gone bankrupt because they have borrowed too much money, they reach a point where practically every dollar they earn goes to paying interest on their credit cards. It is the same with our debt. A HUGE amount of the money our gov't takes in taxes goes to paying interest on the debt. That is money that is can not be spent on things that the gov't should be spending money on.

Having said that, there are times when running a deficit is simply necessary. If we were borrowing money for infrastructure, or for a war to protect us from being annihilated, of course those would be investments in the future, and you could make the argument that it benefits future generations (who will end up paying for them). But running huge deficits over protracted periods of time to pay for everyday expenses is very bad idea. Just as it would be very bad if you were getting bigger and bigger credit card balances just so you could pay for your food, gas and rent every month. Eventually, that's going to come back to bite you in the ass.

There are many economists who are arguing right now that it is not a lack of stimulus that is causing this anemic recovery, but rather a lack of consumer confidence. People just are not spending money, they are preferring to save it. They are afraid about their financial future, and don't want to make those big ticket purchases that could really do something to speed the recovery. Running bigger deficits in an attempt to "stimulate" the economy isn't going to do anything to help that situation. This is one of those times when we just have to wait it out, for people to feel more confidence to spend. Attempting to stimulate the economy by borrowing money in that kind of situation is not money well spent. I would argue it is a rather dumb idea. It has very little benefit toward speeding the recovery.

[Warren Stupidity]

46. The largest deficits in our history, during WWII, took us out of a depression

and initiated a 25 year era of unparalleled egalitarian prosperity- all accompanied by a highly progressive income tax that had the really wealthy paying their fair share of the freight.

[DemocratAholic]

61. interesting point but....

This is a very complicated subject and there is no way we could ever examine all these points on a message board. But, let me address this point about WWII having taken us out a depression, and causing prosperity that followed.

I do not believe that you can compare what our country or our economy was at the end of WWII to what it is today.

First of all, after the war ended, the massive deficit was steadily decreased. What we are looking at right now is huge deficits for the past 10 years, and for as far as the eye can see.

Medicare did not exist. The demographics of our population was vastly different, with a much larger percentage of working age Americans. Social Security was taking in more than it was paying.

The United States economic prospects in the world economy was vastly different from those of other countries. USA did not have its infrastructure destroyed by an invasion. We emerged from the war in a far superior economic position than that of any country in the world. We were not competing with other countries the way we are today. We were a leader in technology. While Europe and Japan had to rebuild, we shifted from manufacturing for war to peaceful purposes. The "peace dividend" was vastly better for our economy than any other country. You could certainly make an argument that USA benefited from the war because we emerged in a stronger position than other countries. We did not have a trade deficit. In short, our prospects for emerging from that debt were far rosier.

I am not opposed to deficit spending to stimulate the economy. I actually think what we did with General Motors was a very good idea. It was beneficial to us in the long term. We saved an important part of our manufacturing and tax base. The auto industry recovered, and we actually made a profit in the long run. That was a win-win.

The point I was trying to make earlier is that attempting to stimulate the economy with tax cuts in the current economy, where consumer confidence is so low that people are refusing to spend money is not going to solve the problem of consumer confidence. We need people to spend money. Throwing money at people who refuse to spend it has no effect.

Even John Keynes never argued for the kind of long-term, protracted deficit spending that we are involved with today. What he was advocating was deficit spending for specific things (like infrastructure) at particular moments which would stimulate the economy, which in theory would be followed by a recovery during which we could pay down the debt. He was not advocating deficit spending for everyday government expenses which had no stimulative effect and for which we had no prospect to recover.

As far as a progressive income tax, I was never arguing against that. But that's a completely different topic.

[laughingliberal]

40. Deficit spending is not good or bad in and of itself. It all depends on what it's being spent on.

Spending that's thrown down a black hole like tax cuts for the rich is useless at best, harmful at worst.

Spending on things that put money back into the economy is a good thing and has a synergistic effect.

Black and white thinking is characteristic of a developmental stage people normally outgrow in their preteen years.

[customerserviceguy]

41. It depends

In good times, heavy deficits mean inflation. In bad times, they don't.

If we ever get anywhere near a full employment economy, inflation will reach the 20% mark (or more) that it did during a brief period in 1980.

[TheKentuckian]

42. I disagreed with Darth Cheney when he claimed that deficits do not matter

However, for investment and stimulative purposes you go into the red because such actions will boost the economy and make our country more competitive.

You don't run massive deficits during boom times like the Republicans led us into.
I have never, ever supported the tax cuts and while I think the code should be restructured to take more weight off the poor and working class folks, it should be revenue neutral. I think rates should be raised on the top bracket or two or a new higher bracket should be created to offset reductions for the bottom bracket or two.

I don't see going into substantial debt to mostly benefit the top 20% of earners is good policy or particularly stimulative. The 98% game is weak and a tactic to cater to comfortable suburbanites who operate well above what the average person is expected to be doing fine and dandy on.

We have long been making the wrong argument for the situation. We have millions with nothing or close to it and a few with the vast majority of the resources and opportunity which has completely jacked up the distribution which kills demand.
What on Earth makes anyone think that maintaining the status quo is sound ground to build on? We are continuing to feed a structural trainwreck that will fall hardest, quickest, and longest the very people the sacrifice is supposedly made for.

We are inherently limiting the ability of the government to act to promote the general welfare as well and that isn't very wise either, especially in the face of the austerity wolves hard on the prowl.

It simply isn't a matter of deficits good or deficits bad. It makes a difference if you borrow 150k for a house or if you borrow it for a big pile of blow.
We have a two trillion dollar infrastructure deficit and have for the most part not modernized in 50 or 60 years and we have a large surplus of human resources.

This is a poor overall use of finite resources, that interest must be paid on. When you look at the country's needs and where the need actually is it should be pretty apparent that this package is a waste. The 98% rhetoric and the disgusting tie in with unemployment benefits provides cover for a whole shitload of rot.

Because deficits matter, it is critical to be judicious with them.

[RegieRocker]

43. Sound like they flip flopped to me.

[Warren Stupidity]

44. a 35 year torrent of unchallenged bullshit?

nobody even questions the assumptions, or looks at the historical record, or wonders why we can spend 1T a year on our military while asking food stamp recipients to take a cut.

[GoCubsGo]

47. It's not the deficits that are the doom

It's the way the republicans are going to see that those deficits will be reduced. They are using it as an excuse to cut social programs, as well as further gutting scientific research (e.g., NSF, NASA), the National Park Service, EPA, etc. How many employees from these agencies will be losing their jobs? This after having their pay frozen for the next two years? How many other positions will go unfilled because they don't have the funds?

[ipaint]

48. They are laying the groundwork for the attack on social security and medicare.

Tax cuts for the rich are pretty much pissing in the wind and extending tax cuts to the middle class is a bandaid on a mortal wound at best. And of course raising the taxes of 40% of the low income working population, even by a "small amount" according to myopic middle class haves, is suicidal.

The government needs to create jobs. Constantly goosing the haves with injections of more and more tax dollars is asinine.

People need jobs now. The wealthy private sector has no intention of stepping up to the plate. For them the recovery already happened.

Any moves towards austerity will sink this country right into a depression. And that is exactly where they are taking us.

[MadHound]

49. Let's see, Moody's considering dropping US credit rating,

The run on Treasuries, the rise in borrowing rates, the decline of the dollar as the world's reserve currency. All these actions are coming about due to our massive debt load.

Any other questions?

[reformist2]

51. Think of the government like Republicans do, like a big company.

The fastest way to kill a company is for it to borrow increasing amounts of money from the bank. You may think you can keep borrowing forever, but when the banker cuts you off, it's over in an instant.
The Republicans' goal is to make this government go bankrupt and force a radical downsizing. You may think this will hurt everybody, but it probably won't hurt the rich at all.

So in a way, Cheney may be right: Government deficits don't matter - to rich people. It's a company they'd rather see go bankrupt anyway.

[pokercat999]

52. The government DID pump in trillions, but to the wrong place!

They should have let the banks fail and pumped trillions into the infrastructure with WPA type programs.

Just one more Obama continuation of a Cheney/Bush failure.

[treestar]

53. The only goal is saying Obama is wrong

The view on the deficit shifts depending on the issue. The underlying logic is that Obama must be wrong.

so when the stimulus was not big enough because Obama was wrong, the deficit did not matter.

But when the rich get to keep their tax cuts, the deficit is wrong now, since in this instance, it must be so for Obama to be wrong.

[jtown1123]

55. Because any time the deficit is increased, GOP comes after ALL social programs

for draconian cuts. Deficit isn't bad (when it comes to spending on jobs programs, unemployment insurance to stimulate the economy) it's bad when we widen deficit in tax giveaways for corps. and billionaires.

[shimmergal]

56. Why worry about deficits?

Welll, the problem is whom we're borrowing the money from to finance them.

If it was just US fat cats who're buing those Treasury securities, what the heck? At least if the government eventually has to default, it might force a privileged class to finally live like the rest of us.

But with so much of the money owed to China (admittedly by China's own choice) the eventual outcome could be war. I hope nobody on DU wants a war to happen between these two superpowers.

The other biggest creditor, of course, is the current and future recipients of social security. TPTB might think it's better to default on them than on China and Saudi Arabia. And down that road lies not only revolution, but chaos. . .

[sadbear]

57. There are some things you just shouldn't go into debt over.

Like war and tax cuts for the wealthy.

[Hello_Kitty]

59. You haven't seen anything yet

Soon as the Catfood recommendations start coming down and the President signals that he backs them a large number of DUers will instantaneously transform into hardcore deficit hawks lecturing us about how "sacrifices will need to be made".

[DirkGently]

62. Good point. Deficits are not the problem that we're having. It's a framework for gutting benefits.