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If Deficits Are So Bad, Shouldn't We Be Celebrating the Coming 'Fiscal Cliff'?

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There has been a steadily growing drumbeat in recent weeks about the looming "fiscal cliff." Unless Congress and the President agree otherwise, automatic spending cuts and tax increases -- agreed upon during the 2011 deficit standoff -- are supposed to take effect in January. Major media outlets and politicians have been nearly universal in warning of the coming catastrophe of driving off this cliff. In an entirely characteristic report, NPR this morning cited a study by George Mason that if the automatic fiscal triggers go into effect, a series of disasters will ensue, including a loss of a quarter million federal jobs. NPR further noted that the triggers could prompt cuts to "everything" the government funds, including cancer research, individual and public health more broadly, education, homeland security, air traffic control, food inspection and Pentagon-related spending. According to virtually all such reports, the mass layoffs and cuts to vital programs will cause substantial economic pain to those directly affected and will also undermine economic growth more broadly, possibly reversing the fragile recovery and sending the nation back into recession.

It is debatable whether the immediate effects of the spending cuts and tax increases will have as disastrous an effect on the economy as the dire warnings insist. But what's important to point out here is the premise that there is virtually universal agreement that efforts to reduce the deficit are clearly harmful in the short run, if not beyond. In other words, the recent and mounting hysteria about the fiscal cliff reveals definitively the utter incoherence at the heart of our discussions about deficits in particular and the role of government in economic life more generally. It turns out that when the chips are down, everyone knows that during weak economic times, government spending is vital. It's well established by now that the GOP is simply full of baloney on deficits. Republicans generally only bleat about deficits when they are facing a Democratic President or as an excuse to fund their tax cuts for the rich by slashing programs like Medicaid.

For thirty years now, they've played a dishonest game of pretending to care about deficits only in order to slash government spending that actually helps ordinary folks. Democrats haven't helped matters by being generally weak and muddled on these issues, torn as they are between the Wall Street influences in the party clamoring for bogus entitlement "reform" -- i.e, -- cutting benefits that the majority of Americans rely on for income security in old age -- and their more genuinely populist elements, including public sector unions. Lost in all of this deficit alarmism is a rejection of some basic truths about the value of government spending, truths that, when it's time to actually face the music, almost no one disputes.

For example:

- Contrary to the idiotic pronouncements of many GOP leaders, government jobs, including those of teachers, health care workers, firefighters, food safety inspectors, researchers, police officers and so on are real jobs. There are millions of them and they support families and communities. In their absence, those same families and communities may be devastated and those job losses hurt the entire economy. In fact, there is strong evidence to suggest that the Reagan recovery was stronger than the Obama recovery has been in large measure because public sector jobs increased under Reagan (as they have in the several recoveries prior to the current one), whereas public sector jobs have declined under Obama due largely to state-level budget cuts.

- It also turns out that pretty much everyone has a stake in cancer research, air traffic control, public safety and health, environmental preservation and so on. These are public goods that really do benefit virtually everybody.

- Even GOP presidents know that running deficits during periods of recession or sluggish growth is good for the economy. Sure, they do so in relatively less economically useful ways - military spending and tax cuts skewed to the wealthy. But when it comes to voting with their feet, they show very clearly that they believe deficit spending is worth doing (turns out just about every American politician is a Keynesian when their own job is on the line).

As Dean Baker and others have pointed out repeatedly, our real spending problems are in our wildly inefficient health care system. If we spent, per capita, what every other wealthy democracy spent on healthcare, we'd have robust surpluses far into the future. But if you insist on ignoring the actual cause of our deficits and instead prefer moral hectoring about our profligacy and supposed indulgence of all those allegedly entitled Americans, you have to face the contradiction at the heart of your world view. If deficits are so bad, and if the only way to reduce them is to cut spending (reduce the "entitlement society") and increase taxes, then the looming triggers ought to be celebrated.

After all, we are about to cut spending and raise taxes (that the GOP rejects one part of this equation scarcely helps their case. They propose more spending cuts to make up for the lower taxes, a losing economic formula for all but the wealthy beneficiaries of the tax cuts). In fact, we really ought to be shopping around for metaphors that better reflect how good it is that we're about to (supposedly) reduce our deficits, like a coming fiscal soft landing, or fiscal nirvana. The fact that virtually NO ONE actually thinks this is a good thing when push comes to shove tells you everything you need to know about how absurd and besides the point our debates about these issues have been.