Why We Must Stop Obsessing About the Budget Deficit
Robert B. Reich
I wish President Obama would explain to the nation that the federal budget deficit isn't the nation's major economic problem and deficit reduction shouldn't be our major goal.
Our biggest problem is lack of good jobs and sufficient growth. And our goal must be to revive both.
Deficit reduction leads us in the opposite direction -- away from jobs and growth.
The reason the "fiscal cliff" is dangerous (and it's not really a "cliff" but more like a hill, because we won't fall off it immediately on
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy.
Recall the 1990s, when the Clinton administration balanced the budget ahead of the schedule it had set with
Policymakers need to understand that when unemployment is high and workplaces are idle, the best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low, or become even lower, on the middle class.
By the way, higher taxes on the rich don't slow economic growth, because the rich spend a much smaller portion of their earnings than does the middle class. And they'll continue to spend even if their tax rates rise. They're already taking home a near record share of America's total income and have a record share of total wealth.
Why don't our politicians and media get this? Because an entire deficit-cutting industry has grown up in recent years. It began with
As a result, much of official
Deficit mavens routinely warn that unless the deficit is trimmed, we'll fall prey to inflation and rising interest rates. But there's no sign of inflation anywhere. The world is awash in underutilized capacity. As for interest rates, the yield on the 10-year Treasury bill is now lower than it's been in living memory.
In fact, if there was ever a time for America to borrow more in order to put our people back to work repairing our crumbling infrastructure and rebuilding our schools, it's now.
Public investments that spur future job growth and productivity shouldn't even be included in measures of government spending to begin with. They're justifiable as long as the return on those investments -- a more educated and productive workforce, and a more efficient infrastructure, both generating more and better goods and services with fewer scarce resources -- is higher than the cost.
In fact, we'd be nuts not to make these investments under these circumstances. No sane family equates spending on vacations with investing in their kids' education. Yet that's what we do in our federal budget.
Finally, the biggest driver of future deficits is the rising cost of health care -- that same phenomenon that's causing headaches for individuals, families and businesses. America's wildly inefficient balkanized health-care system is already taking a far larger share of the total economy than that of every other rich nation (18 percent), and yet our health outcomes are worse.
So instead of fighting over how to cut the budget deficit, we should be having a constructive conversation about how to use government's bargaining power through
So can we please stop obsessing about future budget deficits?
They're distracting our attention from what we should be obsessing about -- regaining jobs and growth, and making our health-care system work.
- The Minimum Wage and The Meaning of a Decent Society
- The Hoax of Austerity Economics
- The Non-Zero-Sum Society
- Raising the Minimum Wage Would Boost Economy
- Poverty Still America's Vicious Cycle
- Government Spending That Isn't Smart
- Time to Break Up the Biggest Wall Street Banks
- The Hoax of 'Entitlement Reform'
- Report Highlights Economic Threat of Hacking
- Grow the Economy by Growing the Debate About It
- The Great Decoupling
- Why We Must Stop Obsessing About the Budget Deficit
- Christmas-Shopping Season Highlights Plight of Retail Workers
- The Holiday Shopping Guide for Hard Times
- The 'Land of Opportunity' is Becoming Hollywood Fiction
- The Fiscal Cliff: False Fears and Horrors
- Another Side of Economic Inequality
- Don't Cut Our Kids Out of the Budget
- Republicans and Democrats Playing Game of Economic Chicken
- The Trojan Horse in the Debt Debate
- The Dead-End Servant Economy
- Q&A with Joseph Stiglitz: 'The Price of Inequality'
- 8.1 Percent, 7.8 Percent -- Whatever
- Slowdown of the Chinese Economy Pushing The World Towards New Crisis
- Mitt Romney's Question-Mark Economy
- A Vanishing Act for Good Jobs
- Economic Recovery Hinges on Re-Creation of 'Basic Bargain'
- Tips for Adapting to the New Global Economic Reality
- Fix the Minimum Wage
- AT&T's Upside-Down World
- Rooting Out Fake Job Creators
- A Bold New Call for a 'Maximum Wage'
- Percolate-Up Economics
- A Modest Proposal: Three Weeks of Paid Vacation
Why We Must Stop Obsessing About the Budget Deficit | Economy
(c) 2013 Tribune Media Services, Inc.