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Thursday, October 31, 2013

Deficit Falling at Fastest Rate Since WWII -- And Not Because of Spending Cuts

Pile of cash
Republicans like to say that you can't spend your way to prosperity. Why that statement doesn't get them laughed out of whatever room they're in every time they say it remains one of life's great mysteries. Of course you can spend your way to prosperity; ask any prosperous person. The only wealthy people who haven't spent their way to prosperity are those who've inherited wealth. Even lottery winners spent something to gain all their riches, even if it wasn't much. Wealthy people became wealthy by spending money -- and even by borrowing money.

Conservatives are dead wrong on this point and, indeed, the opposite is actually true -- you can't save your way to prosperity, since you're never going to be able to save more than you make -- or at least, figuring in interest, not much more. It's a case of Republican talking points contradicting other talking points; you can't spend your way to prosperity, but successful people are "risk takers" who put money on the line to get things done. One the one hand, conservatives praise entrepreneurs, on the other, they argue that entrepreneurial efforts are obviously doomed and only a fool would believe that you can spend money to make money. No wonder people who listen to talk radio make no sense at all when they start talking about economics. It's all a muddled mess of contradictory propagandizing with no real connection to how things actually work.

All of this started bouncing around in my head when I read this:

The Hill: The federal budget deficit for fiscal 2013 was $680 billion, the Treasury Department reported Wednesday.

This is the first time that the deficit has fallen below $1 trillion during President Obama's time in the White House.

[...]

The deficit has dropped $409 billion from 2012, when it was $1.089 trillion.


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Is this a case of saving our way to prosperity? It's not. It's a case of bringing in more money. "Most of the change comes from higher tax receipts," the report goes on. "Receipts rose to $2.77 trillion in 2013, up from $2.45 trillion in 2012. Spending was $3.45 trillion, down from $3.53 trillion in 2012."

All those sequester cuts the Republicans love so much? Not doing a whole lot, other than slowing the rate of economic growth. You can't save your way to prosperity. As the economy improves, revenues rise. As revenues rise, the deficit falls. Therefore, if you want to reduce the deficit, you worry about the economy, not the deficit. Work on the economy and the deficit will fix itself. What's holding America back isn't poor economic stewardship from the White House, it's congressional obstructionism in service to an obsession with something that is simply not the problem. Deficit spending is a symptom, not the disease.

Republicans have everything bass-ackward here. You spend money when times are bad and save money when times are good. When the economy turns south, the last thing you want to do is cut back on government spending. It's idiotic. The economy staggers when people stop spending money -- so why would anyone think that this is the best time for the government to also stop spending money? All that does is make everything worse. I find it absolutely astonishing that this very, very obvious fact isn't very, very obvious to everyone.

"As a percent of Gross Domestic Product (GDP), the deficit fell to 4.1 percent, representing a reduction of more than half from the deficit that the Administration inherited when the president took office in 2009," said White House Budget Director Sylvia Mathews Burwell. "The deficit reduction since that point represents the fastest decline in the deficit over a sustained period since the end of World War II." If deficit reduction were the key to economic prosperity, shouldn't we all be rolling in the dough right now? Instead, we continue to live with a struggling economic growth. If austerity is such a great thing for the economy, why isn't it working?

No, what we need to do is unchain the economy by eliminating the sequester cuts and abandoning any and all austerity measures. Economics hasn't been suddenly reversed and the old cliché that it takes money to make money is as true as it's ever been.

-Wisco

[photo via Wikimedia Commons]


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