FacebookTwitterGoogle+RedditEmail

America’s Lost Decade

by MARK WEISBROT

The American Economic Association’s annual meetings are a scary sight, with thousands of economists all gathered in the same place – a veritable weapon of mass destruction.  Chicago was the lucky city for 2012 this past weekend, and I had just finished participating in an interesting panel on “The Economics of Regime Change,” when I stumbled over to see what the big budget experts had to say about “The Political Economy of the U.S. Debt and Deficits.”

The session was introduced by UC Berkeley economist Alan Auerbach, who put up a graph of the United States’ rising debt-to-GDP ratio, and warned of dire consequences if Congress didn’t do something about it.  Yawn.

But the panelists got off to a good start, with Alan Blinder of Princeton, former vice-chairman of the U.S. Federal Reserve, describing the public discussion of the U.S. national debt as generally ranging from “ludicrous to horrific.”  True that.  He asked and answered four questions:  (1) Is there any urgency (to reduce the deficit or debt)?  No.  The government can borrow short term at negative real interest rates, and long-term at about zero.  The world is paying us to hold their money. That is anything but a debt crisis.

The Fed is out of bullets, he said – referring to the fact that the U.S. Federal Reserve had lowered short-term rates to zero and had used quantitative easing to help keep long-term rates low.  So we need more fiscal stimulus, preferably spending that focuses on actually creating jobs. Amen.

(2)  Should we focus on the next decade? No, he said, and noted that the Congressional Budget Office’s (CBO’s) budget deficit projections over the next decade are about 3.6 percent of GDP, which is not much to get agitated about.  Also true.

(3) Is government spending the problem?  No, he said, it’s health care costs, and mainly the rising price of health care (i.e not the aging of the population).   Most important truth yet !  (More on this below).

(4)  Is the public really up in arms about the deficit?  No, actually they care more about the economy and jobs.  As they should.

Blinder concluded that since this is an election year, we can forget about having any fact-based discussion of these issues in 2012.  Happy New Year, he said, and the audience laughed.

Well that was refreshing, I thought — an economist telling the unvarnished truth to hundreds of his people at the annual meetings. But a rapid descent into Hell was imminent.

Former CBO director Douglas Holtz-Eakin was next, talking about the need to “repair” Social Security and Medicare.  The United States has all the characteristics of countries that run into trouble, he said. Then he warned that the U.S. is going to end up like Greece.  This is one of the dumbest things that anyone with an economics degree can say.

Hello, Mr. Holtz-Eakin!  Have you ever heard of the U.S. dollar, the world’s key reserve currency? The United States is not going to end up like Greece any sooner than it will end up like Haiti or Burkina Faso. A country that can pay its foreign public debt in its own currency and runs its own central bank does not end up like Greece.  In fact, even Japan is not going to end up like Greece, and Japan has a gross public debt of about 220 percent of its GDP, more than twice the size of ours and vastly larger – again relative to its economy — than that of Greece.  And the yen is nowhere near the dollar in its importance as an international reserve currency.  But the Japanese government is still borrowing at just 1 percent interest rates for its 10-year bonds.

At this point it was clear that this panel, other than Blinder, was living in a dystopian fantasy world. Next up was Rudy Penner of the Urban Insitute, another former CBO director. His perspective was not much different from that of Auerbach or Holtz-Eakin.  He complained about the polarization of the political process, which prevents the two major parties from reaching an agreement.  It’s not partisanship, he said – House Speaker Tip O’Neill and President Ronald Reagan knew how to be partisan but they were able to reach agreement on the 1983 Social Security package and the 1986 tax reforms.  And yadda yadda.  He might have added that we have had 25 years of lying about Social Security since then, and even Reagan didn’t dare try to privatize Social Security.  And of course Social Security can currently pay all promised benefits for the next 24 years without any changes.

These arguments about polarization really beg the question.  From the viewpoint of the 99 percent, it’s not polarization, but weakness in defending our interests that is the problem.  President Obama compromised much more than he should have last year, offering cuts to Social Security and Medicare in exchange for a long-term budget deal.  The 99 percent are just lucky that the Republicans are too extremist to make this kind of a “grand bargain” with Obama.

The last panelist was Alice Rivlin of the Brookings Institution, another former CBO budget director and Fed vice-chair, as well as a member of the President’s (2010) National Commission on Fiscal Responsibility and Reform.   She agreed with Blinder that we need more stimulus.  But we can only get this if we agree to long-run spending cuts, including Social Security, of course.  Yuck. This is a political strategy that is sure to end in disaster, given the prevailing state of misinformation and disinformation.

During the discussion, Blinder – who identified himself as a Democrat – expressed his frustration in not being able to convince fellow Democrats to cut Social Security.  Double yuck. The average Social Security check is about $1,177 a month,  and a majority of senior citizens are getting most of their meager income from Social Security. Why these people insist on creating more poverty among the elderly, especially when the program is solvent for decades to come, is beyond me.

I got to ask the first question for the panel.  I called attention to Blinder’s presentation of the long-term budget problem as almost completely a problem of the rising price of health care.  I pointed out that you could take any country with a life expectancy greater than ours – including the other high-income countries – and put their per capita health care costs into our budget, and the long-term budget deficit would turn into a surplus.  My question was simple: Are Americans so inherently different from other nationalities that we can’t have similar health care costs?  And if not, then why are we talking about long-term budget problems instead of how to fix our health care system?

None of the panelists offered a serious answer to this question.  Auerbach, the moderator, said that other countries have rising health care costs, too. And some of the others said or implied that health care costs were rising at an unsustainable pace worldwide.

But this is nonsense.  The United States pays about twice as much per person for health care as other high-income countries – and still leaves 50 million people uninsured. This is a result of a dysfunctional health care system that has had health care prices rising much faster than those of other high-income countries for decades.  What the budget hawks are basically telling us is that we must assume that insurance and pharmaceutical companies will have a veto over the provisions of health care reform for decades to come.  And that therefore we must find other ways to make up for these excessive costs, including cutting Social Security and other government spending, and pushing us into higher rates of poverty and inequality than we already have.

And even worse in the short run, all this crap about the deficit and the debt will be used to block the necessary stimulus measures – “stimulus” has already become a dirty word that Democratic politicians are afraid to utter.  This means high unemployment and a lot of unnecessary misery in the world’s richest country for the foreseeable future.

A dismal performance for the dismal science, on some of the most important issues of the day. Of course there are other economists, including Nobel Prize winners such as Paul Krugman, Joe Stiglitz, and Robert Solow (full disclosure: the latter two are members of CEPR’s advisory board), who would offer more sensible views.  But this panel was, sadly, representative of economists with the most influence on public policy.

With a brain trust like this, a lost decade for America looks likely – unless the citizenry can steer a different course.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This article originally appeared in The Guardian.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

February 23, 2017
Dave Brotherton
Trump, Moral Panics and Resistance
Jonathan Cook
One State: Trump Has Reminded Palestinians What It Was Always About
Bill Quigley
Ten Examples of Direct Resistance to Stop Government Raids
Linn Washington Jr.
Bigot Boy Business: Trump Exposes His Ignorance and Intolerance, Again
John W. Whitehead
The Illusion of Freedom: the Police State Is Alive and Well
Ralph Nader
Restricting People’s Use of Their Courts
David Macaray
Women As Labor Union Organizers
Kathy Kelly
Friendship in Defiance of War
Doug Weir
Why Did the US Use Depleted Uranium Weapons in Syria?
Steve Horn
Former GOP Congressional Staffer Follows Revolving Door, Now Latest Keystone XL Lobbyist
Binoy Kampmark
From Rights to Repentance: Norma McCorvey and Roe v Wade
Thomas Knapp
The Target of the “Border Adjustment Tax” is You
Chris Zinda
Open Letter to Neoliberal Environmentalists
February 22, 2017
Mike Whitney
Liberals Beware: Lie Down With Dogs, Get Up With Fleas
John Grant
On Killers and Bullshitters*
Peter Linebaugh
Catherine Despard, Abolitionist
Patrick Cockburn
The Bitter Battle for Mosul
Ted Rall
Sue the Bastards? It’s Harder Than You Think
Yoav Litvin
The Emergence of the Just Jew
Kim Scipes
Strategic Thinking and Organizing Resistance
Norman Pollack
Mar-a-Lago, Ideological Refuge: Berchtesgaden, II
Fred Donner
Nixon and the Chennault Affair: From Vietnam to Watergate
Carl Kandutsch
Podesta vs. Trump
Ike Nahem
To the Memory of Malcolm X: Fifty Years After His Assassination
Jesse Jackson
Trump’s Tough Talk Won’t Fix Chicago
Paul Donnelly
Betsy DeVos and the War on Public Education
Ebony Slaughter-Johnson
The End of an Alliance for Police Reform
Richard Lawless
Wall Street Demanded the Nuclear Option and the Congress Delivered
Liaquat Ali Khan
Yes, Real Donald Trump is a Muslim!
Ryan LaMothe
“Fire” and Free Speech
CounterPunch News Service
Bloody Buffalo Billboards
February 21, 2017
Sharmini Peries - Michael Hudson
Finance as Warfare: the IMF Lent to Greece Knowing It Could Never Pay Back Debt
CJ Hopkins
Goose-stepping Our Way Toward Pink Revolution
John Wight
Firestarter: the Unwelcome Return of Tony Blair
Roger Harris
Lenin Wins: Pink Tide Surges in Ecuador…For Now
Shepherd Bliss
Japanese American Internment Remembered, as Trump Rounds Up Immigrants
Boris Kagarlitsky
Trump and the Contradictions of Capitalism
Robert Fisk
The Perils of Trump Addiction
Deepak Tripathi
Theresa May: Walking the Kingdom Down a Dark Alley
Sarah Anderson
To Save Main Street, Tax Wall Street
Howard Lisnoff
Those Who Plan and Enjoy Murder
Franklin Lamb
The Life and Death Struggle of the Children of Syria
Binoy Kampmark
A Tale of Two Realities: Trump and Israel
Kim C. Domenico
Body and Soul: Becoming Men & Women in a Post-Gender Age
Mel Gurtov
Trump, Europe, and Chaos
FacebookTwitterGoogle+RedditEmail