In December 2002, Vice-President Dick Cheney, in a heated discussion with Treasury Paul O’Neal over the rapidly expanding national debt, famously said, “Reagan proved that deficits don’t matter.” Oddly, that was about as close to the truth as Cheney would ever come during the Bush administration, and the result of Cheney/Reagan and their theories of government and economics are looming darkly on the horizon.
Nobel prize-winning economist Paul Krugman wrote a series of articles for the New York Times at the end of 2011 and early in 2012 that gave a true picture of the “debt boogie man” we are cowering from today. He first described our foreign debt as being manageable, because for every dollar we owe foreign interests, those foreign interests owe us $.89. In other words, China does NOT own the United States and there is no threat, either imminent or remote, that they ever will. By far, the largest chunk of our national debt is money we owe to ourselves.
Our domestic debt is directly due to a dominant plan of tax cuts, mostly directed to benefit the wealthiest Americans, with no concurrent reduction in government spending. This domestic debt is large, but it is money we owe ourselves and it cannot be passed on to our children any more than money borrowed from our 401K can be passed on as debt to our children. It’s our money and it can and will be repaid through simple adjustments in the tax structure. Now that doesn’t mean it will be painless, but it does mean our domestic debt is NOT a huge guillotine hanging by a thread over our collective neck. We faced a similar debt crisis at the end of WWII and do you know how we handled THAT debt? We didn’t. It was never paid because we owed it to ourselves, and it was eventually made insignificant because of an effective tax plan.
As a matter of fact, there is a lot of evidence that the debt crisis is a manufactured crisis, designed by the supply side economics crowd and bolstered by the neo-con movement in the 1990s to shrink government. The plan was simple: 1) Cut taxes sharply and consistently along with a signed “pledge” to NEVER raise taxes for any reason. 2) Play “chicken little” about the resulting debt (the sky is falling!!!) and use it as a “weapon of mass destruction” to fight for cutting government programs. 3) Rinse and repeat. Famed neo-con and author of the “No New Tax Pledge,” Grover Norquist said it best, his goal was to “reduce the size of government until it was small enough to drown in the bathtub.” Simple, easy, and pretty damned hard to argue with… unless you read or think.
Krugman and many others have suggested that this massive crusade to cut the debt… to save our children from drowning in red ink… is a straw-man argument designed to distract us from the real economic crisis that is making our nation less secure with every passing minute, the vast and growing inequality of wealth that is pummeling our people and destroying the American dream. And, there are many serious economists today who agree with Krugman that what we are doing out of fear of the debt monster, is exactly the opposite of what we need to do to restart the American economy.
Remember the much maligned ”Obama Stimulus Plan?” The plan most Republicans preface with the adjective “failed?” Well, according to the non-partisan Congressional Budget Office, it worked! We spent money and the economy grew because of it. The CBO reported that in December of 2011 alone, the stimulus plan was directly responsible for nearly 2 million jobs. Not bad for a program that peaked in mid-2010 with 3.9 million jobs created by that point. (Please note here: “The government does not create jobs” is not an actual fact. It is only a right-wing talking point.) There is significant agreement among economists that if the stimulus package had been bigger and less inflated with “tax cuts,” the recovery would have been much faster and more robust. Why didn’t the Congress push for more stimulus? The straw-man… the debt!
The debt argument is now being used as a cudgel to push for the elimination of welfare programs, food-stamp programs, environmental protection programs, banking regulations, public schools and teachers, lower pay for police and firefighters, salary freezes for federal workers, reduction in health and retirement benefits for government workers at all levels, and a variety of other measures collectively known as “austerity measures.” What does “austerity” look like in person? Witness Greece and see for yourself what happens when government shirks its responsibility to serve the people and instead, elects to serve big business and money. Seems like large masses of real people don’t like being de-valued!
I sub-titled this piece, “Pay No Attention to the Man Behind the Curtain” from the wonderful L. Frank Baum story “The Wizard of Oz” because it’s relevant. We are Dorothy, we are the tin man, we are the scarecrow, and we are the cowardly lion cowering before the image of the “Wise and Powerful Deficit.” But look over there in the corner for a second. Right there in the quiet shadows. The man behind the curtain is pulling levers and pushing buttons for all he’s worth. While the overpowering glowing and fire-breathing image in front of us is shouting DEBT, that rich Republican over there is grinning from ear to ear. Where’s Toto when we need him?
About the author: Mike Walker, retired educator in the Montgomery Public Schools System, is living his golden years inspired by the words of Albert Einstein, “Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are even incapable of forming such opinions.” He likes to stir up the status quo. Visit his blog: Southern Liberal Man.