In the movie Lars and the Real Girl, the main character imagines that a female blow-up doll is his fiancé. To humor Lars, his brother and sister-in-law go along with the charade. Over the course of the movie, more people are drawn into the circle, until eventually the whole town is treating Bianca the blow-up doll as one of its leading citizens.
This seems to pretty well describe the debate over the budget deficit, except it's not clear that many people realize it's a charade. The main story is that Lars' budget hawk counterparts are upset that the deficits projected for 2013 or 2019 are too large. They want President Obama to commit to spending cuts and/or tax increases in order to bring these deficits to levels they consider acceptable.
The unreality of this picture is striking because the budget hawks seem not to notice that we are in the middle of an economic meltdown.
People are losing their homes through foreclosures at the rate of more than 100,000 a month. The default rates on credit cards, car loans and other debt is at record levels. Most of our major banks are effectively insolvent.
Home and stock prices have plummeted, destroying most of the wealth of the baby boom cohort as they stand on the edge of retirement. The economy is shedding almost 700,000 jobs a month, with the unemployment rate rapidly approaching the highest level since the Great Depression.
In this context we are supposed to be up in arms over the deficit projections for 2013 or 2019? This is a bit like someone complaining about the lawn not being mowed at a time when the house is on fire, it's just not the first priority. And the media all seem to go along with the charade - yes, they are very concerned about the projected deficit for 2013, just as the characters in the movie expressed concern about the health of Bianca the blow-up doll.
It is especially annoying to hear the whining from this group of deficit hawks since their whining in prior years helped to drown out serious discussion of the dangers posed by an $8 trillion housing bubble. While some of us were yelling at the top of our lungs about the imminent disaster that would hit the economy when the housing bubble burst, the media chose to focus on these deficit hawks with their dire warnings about budget deficits 40 or 50 years in the future.
Because the media and political elites chose to pay more attention to the deficit hawks than those warning about the housing bubble, we now get to enjoy the current economic crisis. And, one result of the economic crisis is (drum roll, please) ........record deficits.
To put the point so simply that even a Washington Post editor can understand it: because the media highlighted the views of the people who were ranting about the deficit rather than the views of people who understood the economy, we both got a wrecked economy and larger deficits.
The moral to this story is that the economy must take priority, not only because the state of the economy is what most directly determines people's well-being, but also because the state of the economy will be the most important determinant of the deficit.
The experience of the 1990s provides an example of exactly this sort of story. In January of 1994 the Congressional Budget Office projected that the deficit in 1999 would be $204 billion or 2.4 percent of GDP. This projection incorporated the impact of President Clinton's tax increase and spending cuts.
It turned out that there was a surplus of $125 billion in 1999, or 1.4 percent of GDP. This shift from deficit to surplus of 3.8 percentage points of GDP (equivalent to $540 billion in 2009) was not caused by further spending cuts or tax increases, it was caused by the strong economic growth of the period.
There is no guarantee that President Obama's policies will be successful in restoring strong growth, but they are clearly a step in the right direction. If we have strong growth, then our deficits will be manageable. If the economy remains weak, the deficit will remain a serious burden no matter how much we raise taxes or cut spending.
Someone has to tell the deficit hawks that their blow-up doll is not real. The issue is the economy, not the deficit.
A recession IS lack of spending.
p.s. The doll in the movie was not a blow-up doll. It's a "Real Doll"....made out of plastic or rubber or whatever to be as lifelike as possible. It's a better analogy for your point, too, because the deficit hawks do seem to have substance and appear to have logic...more believable than a see-through blow-up doll that most resembles a prostitute. There's a good 40 minute video online somewhere that shows several guys who have bought Real Dolls as companions. Those guys have serious psychological problems.
A good analogy is a business faced with a product thats obsolete, like at&t, they could have just sat there and become irrelevant, or do what they did, invest heavily in new technologies. They had to make capital budgeting decisions, i.e. debt equity decisions, on purchasing equipment, building plants, e.t.c for the new economy that was coming. If you look at the debt that at&t or even verizon had in the 90's you would think they where crazy. Those investments in cell phone technology, internet service and cable, are now paying off for these companies. If they had stayed in the long distance business and not taken on that debt to invest in new technologies they would have been dead. That is business and it hapens all the time in business, and thats what the whole bond market and stock market is about.
Why not close down half the foreign bases and save some money now?
Obama's 23 month Iraq withdrawal waffle.....
http://video.aol.com/video-detail/the-obama-deception/1757361927
You are using an economic crisis to justify massive long term spending.
Keep plugging way, we need your viewpoints out in the mainstream and talked about. Thank you.
Democrats
Kent Conrad Kent Conrad (Chairman) North Dakota
Patty Murray of Washington
Ron Wyden of Oregon
Russell D. Feingold of Wisconisn
Robert C. Byrd of West Virginia
Bill Nelson of Florida
Debbie Stabenow of Michigan
Robert Menendez of New Jersey
Benjamin L. Cardin of Maryland
Bernie Sanders of Vermont
Sheldon Whitehouse of Rhode Island
Mark R. Warner of Virginia
Jeff Merkley of Oregon
http://budget.senate.gov/democratic/democrats.html
Republicans
Judd Gregg (Ranking Member) of New Hampshire
Chuck Grassley of Iowa
Michael B. Enzi of Wyoming
Jeff Sessions of Alabama
Jim Bunning of Kentucky
Mike Crapo of Idaho
John Ensign of Nevada
John Cornyn of Texas
Lindsey Graham of South Carolina
Lamar Alexander of Tennessee
http://budget.senate.gov/democratic/republican.html
Check out their voting records here:
http://www.votesmart.org/bio.php?can_id=53331
We must rid ourselves of the career politician who are on the payroll of lobbyists and vote against our interest.
And, that we have the power to avoid most of that deficit spending on the other.
In next year's Congressional elections, the economy will be IN THE TANK, and the Repubs will continually lay the blame squarely on the deficit spending used in Obama's grandiose plan for education, the environment and health. It WILL have a political impact because nobody knows who to blame.
On the other hand, the deficits are largely unnecessary because the federal government has the power to create all new money used to stabilize the economy as a debt-free payment directly to consumers and businesses, and allow the funds to trickle UP to the banks, rather than the other way around. Thus restoring consumer confidence.
What is needed is monetary reform.
The progressive-liberal media bent in support of Obama is deeply troubled by the Geithner-Summers-Rubinesque approach that Obama is endorsing.
But they have no alternative plan.
Some like Krugman abhor the particular zombie-bank approach as too great a contingent liability on the taxpayers. Like nationalization is safer.
But, to the person, Baker-to Galbraith, they all support the HUMONGOUS deficits as better than NO alternative.
There's only one bizschool curriculum.
Fractional reserve banking.
And THAT is the problem.
I agree. And I think those who are afraid of huge deficits often fail to realize that the stimulus plan will help pay for itself by increasing tax revenues. They should see the stimulus as an investment.