The Public Eye: Mad Deficit Disease

By Bob Burnett
Monday June 07, 2010 - 11:30:00 PM

As Congress rushed to adjourn, Democrats dithered over a jobs bill and ultimately reduced benefits to the unemployed because of the concerns of “deficit hawks.” It’s another indication of the prevalence of a form of political dementia, mad deficit disease. It’s insanity to worry about the US deficit when we’re struggling to pull out of a recession. 

It’s not that deficit hawks are operating in a bubble. A recent Gallup Poll found that 45 percent of poll respondents rated the budget deficit a “very important issue,” ahead of terrorism and just behind the economy, healthcare, and unemployment.  

Americans are split on US economic policy. An April CBS/NEW YORK TIMES poll found that 50 percent believed, “The federal government should spend money to create jobs, even if it means increasing the budget deficit,” but 42 percent felt reducing the deficit was more important than creating jobs. 

For those of us who took at least one college course in economics, or studied the lessons of the Great Depression, 2010 economic policy seems obvious: we should spend money to create jobs, even if it means increasing the budget deficit. Nonetheless, millions of Americans disagree. While their stance may be due to the fact that they’ve never taken an economics course or studied the great depression, there are several other explanations. 

There are few business people among members of Congress, most are lawyers or career public servants. The composition of the 110th Congress shows five accountants and no economists. (Arguably, there are more former members of law enforcement than there are congresspeople who started their own business.) When the economy gets in trouble, members of Congress are thrown into a complicated arena outside their personnel experience. 

Liberals and centrists, who aren’t sure what to do about the economy, are confronted by conservatives obsessed with shrinking the size of government. Dogmatic Republicans want to give the market free rein, arguing that a robust open market will ultimately solve all social problems. For years their primary tactic has been to cut taxes, believing that would reduce the size of government. But the Bush Administration cut taxes and the Federal government continued to grow, so conservatives adopted a new mantra: reducing the size of the deficit. 

The success of the new conservative tactic can be explained by several factors. Americans, in general, are concerned about debt. A recent Associated Press/GFK poll found that 46 percent of respondents reported “suffering from debt-related stress.” In order to survive, they’ve taken on mountains of debt. 

US public debt is $13 trillion and growing every day. That’s roughly $42,000 per citizen

Conservatives scream that the government is out of control and argue that no reasonable family or business would run up a trillion dollar debt and keep piling it on. But their argument fails on two accounts. First, the US government isn’t a family or a business. (Arguing that it is a logical fallacy of composition.) The government can print money and change interest rates, while a family or business doesn’t have that power. 

Second, conservatives ignore the reality that, under certain circumstances, families and business may operate in the red. A family may go into debt to buy a new home or to pay for someone’s education. A business may go into debt because it needs to build a new factory or expand its sales force. The average personal debt per US citizen is $53,455. If we asked American debtors if their debt load was justified, most would argue that it was because it enabled them to remodel their house or enhance their job prospects or pay for an operation. 

Two things lie behind the conservative reduce the deficit mantra. One is their blind drive to shrink the size of government no matter whom it hurts. The other is their belief that the federal government shouldn’t have an economic strategy; US fiscal policy should arise organically from the marketplace. 

Conservatives are wrong. In times of economic chaos, the federal government needs a comprehensive strategy. The 2008 financial crisis clearly demonstrated that we couldn’t trust Wall Street or the mythical marketplace to manage the economy. The Federal government needs to do that. 

The Obama Administration has a plan to revive the economy. It includes increasing the deficit, temporarily, to provide benefits for the unemployed and to stimulate employment. That’s a worthy objective, comparable to a family going into debt, temporarily, to put a son or daughter through medical school.  

Philosopher George Santayana famously said, “Those who cannot remember the past are condemned to repeat it.” Apparently, deficit hawks cannot remember the lessons learned from the Great Depression, which was made infinitely worse by the failure of the Hoover Administration to embrace deficit spending in order to save banks and spur employment. 

Blind opposition to increasing the deficit runs the risk of killing the recovery. We can’t let that happen. Liberals need to fight back. We need to eradicate mad deficit disease. 

Bob Burnett is a Berkeley writer. He can be reached at