FacebookTwitterGoogle+RedditEmail

The Debt is Not the Threat

by MARK WEISBROT

Various political demagogues and Wall Street interests have mounted a campaign to convince Americans that despite persistent massive unemployment for the foreseeable future, more than 15 million people underwater on their home mortgages and two unnecessary wars, what we really should be worried about is America’s national debt.

It doesn’t help that most of the media pretends not to understand the basic economics, accounting or arithmetic of the issue. Let’s start with the economics: The Obama Administration forecasts unemployment of 10.0, 9.2 and 8.2 percent, respectively, for 2010-2012. The rate does not fall to the 5.2 percent rate it considers full employment until 2018.

The difference between 10 percent unemployment and 5.2 percent is more than 7 million people without jobs. And that doesn’t count the increase in millions of people involuntarily working part time, or millions who leave the labor force because they can’t find work.

This is unacceptable in any civilized society; but even more outrageous in the world’s richest country. It means millions of ruined lives and permanent scars that will persist for years and possibly decades – in the form of increased poverty, lower educational levels, mental illness, suicide, crime and other social ills.

This means that our government’s stimulus package was too small, which fits with the data: In 2009, taking into account the spending cuts and tax increases of state and local governments, it was less than one percent of GDP. That is why the stimulus is estimated as having saved about 1.6 to 2 million jobs, whereas we are down about 8.5 million jobs since the recession began.

Bottom line: We need more stimulus, not less; this is not the time to be worrying about deficits or national debt.

It is clear that there is no short-term problem with running large deficits in a weak economy: Investors are buying up even long-term U.S. Treasury bonds at remarkably low real interest rates. Clearly the markets do not perceive that our government is heading into risky territory with its debt. Interest payments on the debt are currently just 1.4 percent of GDP.

For the long term, as the CBO has emphasized, the vast majority of the deficit and debt problem is just rapidly rising health care costs. Of course, we could be like other developed countries and have universal health care, and pay about half of what we are now paying per person. That is the average for the other high-income countries. This would take care of our long-term federal debt problems.

Another significant contributor to our long-term debt is the military. On an annual basis, we spent 5.0 percent of GDP on just the Defense Department budget last year. Before 9/11, the CBO had projected just 2.4 percent for 2009. The difference is more than twice the long-term shortfall in our Social Security system, and it is based on an understatement of military spending. Maybe we need to focus on protecting our airports from already existing terrorists rather than recruiting more by occupying foreign countries. Maybe we don’t need hundreds of military bases all over the world.

But thanks to the power of what President Eisenhower famously named the “military industrial complex,” President Obama has exempted the military from any spending freeze. Thanks to the two most powerful lobbies in Congress – insurance and pharmaceutical – getting health care costs under control is still a distant dream. And then there’s the people who make the nation’s major economic decisions and actually brought us this mess – Goldman Sachs and their Wall Street friends: They want to put Social Security on the chopping block to pay for their crimes (and bonuses).

MARK WEISBROT is an economist and co-director of the Center for Economic and Policy Research.

More articles by:

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).

Weekend Edition
January 19, 2018
Friday - Sunday
Paul Street
Dr. King’s Long Assassination
David Roediger
A House is Not a Hole: (Not) Caring about What Trump Says
George Burchett
How the CIA Tried to Bribe Wilfred Burchett
Mike Whitney
Trump’s Plan B for Syria: Occupation and Intimidation
Michael Hudson – Charles Goodhart
Could/Should Jubilee Debt Cancellations be Reintroduced Today?
Marshall Auerback – Franklin C. Spinney
Boss Tweet’s Generals Already Run the Show
Andrew Levine
Remember, Democrats are Awful Too
James Bovard
Why Ruby Ridge Still Matters
Wilfred Burchett
The Bug Offensive
Brian Cloughley
Now Trump Menaces Pakistan
Ron Jacobs
Whiteness and Working Folks
Jeffrey St. Clair
The Keeper of Crazy Beats: Charlie Haden and Music as a Force of Liberation
Robert Fantina
Palestine and Israeli Recognition
Jan Oberg
The New US Syria “Strategy”, a Recipe For Continued Disaster
ADRIAN KUZMINSKI
The Return of the Repressed
Mel Gurtov
Dubious Partnership: The US and Saudi Arabia
Robert Fisk
The Next Kurdish War Looms on the Horizon
Lawrence Davidson
Contextualizing Sexual Harassment
Jeff Berg
Approaching Day Zero
Karl Grossman
Disaster Island
Thomas S. Harrington
What Nerve! In Catalonia They are Once Again Trying to Swear in the Coalition that Won the Most Votes
Pepe Escobar
Rome: A Eulogy
Robert Hunziker
Will Aliens Save Humanity?
Jonah Raskin
“Can’t Put the Pot Genie Back in the Bottle”: An Interview with CAL NORML’s Dale Gieringer
Stepan Hobza
Beckett, Ionesco, and Trump
Joseph Natoli
The ‘Worlding’ of the Party-less
Julia Stein
The Myths of Housing Policy
George Ochenski
Zinke’s Purge at Interior
Christopher Brauchli
How Trump Killed the Asterisk
Rosemary Mason - Colin Todhunter
Corporate Monopolies Will Accelerate the Globalisation of Bad Food, Poor Health and Environmental Catastrophe
Michael J. Sainato
U.S Prisons Are Ending In-Person Visits, Cutting Down On Reading Books
Michael Barker
Blame Game: Carillion or Capitalism?
Binoy Kampmark
The War on Plastic
Cindy Sheehan – Rick Sterling
Peace Should Be Integral to the Women’s March
Kevin Zeese - Margaret Flowers
No Foreign Bases!
Matthew Stevenson
Into Africa: Across the Boer Heartland to Pretoria
Joe Emersberger
What’s Going On in Ecuador? An Interview With Wladimir Iza
Clark T. Scott
1918, 1968, 2018: From Debs to Trump
Cesar Chelala
Women Pay a Grievous Price in Congo’s Conflict
Michael Welton
Secondly
Robert Koehler
The Wisdom of Mass Salvation
Seth Sandronsky
Misreading Edu-Reform 
Ann Garrison
Full-Spectrum Arrogance: US Bases Span the Globe
Louis Proyect
Morality Tales on the American Malaise: the Films of Rick Alverson
David Yearsley
Winston and Paddington: Marianelli’s Musical Bears
FacebookTwitterGoogle+RedditEmail