Everybody Knows

Paul Krugman states

"It’s hard to turn on your TV or read an editorial page these days without encountering someone declaring, with an air of great seriousness, that excessive spending and the resulting budget deficit is our biggest problem. Such declarations are rarely accompanied by any argument about why we should believe this; it’s supposed to be part of what everyone knows.

This is, however, a case in which what everyone knows just ain’t so...

It’s true that right now we have a large federal budget deficit. But that deficit is mainly the result of a depressed economy — and you’re actually supposed to run deficits in a depressed economy to help support overall demand. The deficit will come down as the economy recovers: Revenue will rise while some categories of spending, such as unemployment benefits, will fall. Indeed, that’s already happening."

Right now, our policy concern should not be deficits. This austerity push is actually slowing the economy. We should be concerned with spending [infrastructure] and getting people back to work.

Out-Of-Control Excuses

Lest the media be able to rewrite the causes and dictate the outcomes of Greece's problems, I need to squash some misinformation and falsehoods. This latest writing was motivated by the Journal Sentinel's "Lessons from Greece" editorial. In which, they fabricate or ignore the causes, and deduce the completely wrong conclusions.

They proclaim, "The central problem in Greece was out-of-control spending on government programs for aging populations." They talk of Greece's budget deficit and their debt, but no evidence backs up the claim of "out-of-control spending" and there is no mention of the numbers concerning these programs for the aging. If that is what actually caused their fiscal worries, some data corroborating such should be presented.

In reality, average annual government expenditures in Greece totaled 50.4 percent of GDP. Total spending for the European Union as a whole equaled 50. 7 percent of GDP. As Michael Linden and Sabina Dewan state, "Over the past 10 years, Greece has consistently spent less, as a share of GDP, than the European Union as a whole."

The Journal then, typically, brings the "over spending" meme back around to gutting American programs - like Medicare, Medicaid, and Social Security. And, of course, they use the Peter G. Peterson Foundation to support such claims. Dean Baker has more on the true intentions of Mr. Peterson. [Whenever a Journal article cites the Peterson Foundation, the Wisconsin Policy Research Institute, or the Tax Foundation be very skeptical.]

The Journal creates false reasons for Greece's troubles, they then compare the U.S. to Greece. Investors will not have faith in Greece's ability to pay its debt, the U.S. has debt too, therefore, investors will soon have no faith in the U.S.. Paul Krugman explained why this connection is ridiculous and a red herring.

From here the Journal jumps ahead to an whole austerity program for the U.S. Yes, with aggregate demand stifled and the private sector neither spending nor hiring, the editors believe now would be a great time tighten our belts. WTF?! We need "prudent budgeting" to solve out debt. Whatever that nebulous statement means.

Governments must continue to spend now: repair and improve infrastructure - bridges, roads, electric grids, sewer systems, water ways, etc.. Without this necessary (and overdue) maintenance and government spending the economy would grind to a halt and unemployment would skyrocket. Spending more now to ensure growth (which enables us to pay off debt) is better than allowing unemployment to ravage a generation.

The lesson we should learn from Greece is that the neoliberal age of tax cuts and deregulation has left all nations vulnerable to the whims of bond traders.

For Further Reading:
A Principled Europe Would Not Leave Greece To Bleed
Being Rude to the Deficit Hawks
Clinton's Bequest
Deficit or Depression?
Economy Needs More Big Government
From Keynesianism to Neoliberalism
Greece's Spending Cuts Are Making The Crisis Worse
Paranoia Overdose
Social Security: The Phony Crisis
The Bubble Economy
The Debt Delusion
The Liability Con
This Time, Don't Buy What Rubin's Selling
Where Have All the Keynesians Gone?

Paranoia Overdose

It's almost become cliche here that whenever John Torinus or Patrick McIlheran write a column in the Milwaukee Journal-Sentinel I have to spend a post correcting their many fallacies.

Well, Pat has done it again. So here I go.

In his piece - Not against taxes, just an overdose - McIlheran mumbles on about teabaggers and deficits. Let's do a point-by-point critique of the many falsehoods, embellishments, and misdirections.

First, I'd like to point out McIlheran's go-to research group, The Tax Foundation. Their work has been discredited over and over by many much more thoughtful social scientists. His continual reliance on them in article after article only weakens his arguments.

He then refers to deficit spending as a "deferred bill". Deficit spending is an investment like any other. Corporations use internally financed capital expenditures to grow their businesses (Henwood, Wall Street, p. 3). When the private sector is not providing the demand stimulus in the economy, the only entity left to do such is the government. Deficit spending is an investment in the future. Conversely the Republicans' tax cutting has led to increased inequality, allowed our infrastructure to crumble, and increased deficits with no tanglible improvements to show for it.

Next, Pat tried to revive the story that the Teabag fiasco was a grassroots endeavor. This is a display of delusion and cognitive dissonance on a grand scale. (Maybe Pat needs a history lesson regarding the original Tea Party.) He goes on and on about citizens rightfully uprising over onerous taxation. The Teabag theater was organized by well-funded Washington lobbyist groups - Freedom Works (Dick Armey) and Americans for Prosperity (Newt Gingrich). And, most importantly, President Obama has not increased taxes on 98 percent of the population. To keep claiming the opposite of reality just so that these right-wingers can hear themselves speak really does a diservice to the country, and muddles any attempt at a civil discourse - which seems to be their aim.

McIlheran then goes on to compare all Wisconsin municipalities with Washington County to prove there can be good government with little cost. Pat also states that these people have no problem with the share of taxation consumed by the Fire and Police departments. In the City of Milwaukee, the proposed 2009 total budget for general city purposes is $590,058,363; total wages and salaries for the police department are $159,065,554 - 27 percent; for the fire department $71,126,450 - 12 percent. I doubt most people know that fire and police consume 39 percent of the total budget for general city purposes. Across the U.S. these two departments, on average, account for 25 to 75 percent of budgets.

Moreover, Washington County (pop. 129,277) doesn't have the population, amenities, infrastructure, and concentration of poor people, like the City of Milwaukee (pop. 602,191). If we expand to Milwaukee County, the population is 953,328. So, comparing Milwaukee to Washington County is deceptive at best. And, to think that the surrounding communites do not benefit from the many amenities - the stadium, Calatrava, the lakefront, the theater, the riverwalk, the festivals, etc. - provided by the City is ridiculous.

Mr. McIlheran then bellows about an "ever-growing, unlimited government". Talk about paranoid. Government runs up its largest deficits and expands in size the most under Republican administrations. It also performs the worst economically under right-wing rule.

He then goes on to make snide insinuations toward "nationalized health care and vast new energy taxes." I guess he feels our health care system that doesn't cover 50 million people and cost twice as much as any other industrialized nation is just fine. He also must think our dependence on foreign oil and the fact that its pollution is destroying the planet isn't anything to worry about either.

He routinely comes back to the (I'm paraphrasing) 'government is taking your money' mantra. The fact is, most people feel government is a necessary regulator of the market, a provider of base services and institutions, and a means to ensuring equality of opportunity among its citizens.

McIlheran closes his rant by complaining about "subsidizing, taxing, regulating, and bailing out every corner of life." This completely ignores the fact that a lack of enforcement and regulation enabled our current mess. It also ignores the fact that the majority of government subsidization is corporate welfare. Only 1 percent of state and local budgets go toward assistance to the poor. And, the ones bailed out thus far have been corporate behemoths and the largest banks...the (auto) workers have been the only ones whom have had to sacrifice.

It is really work to correct and keep up with all the misinformation Teabaggers like McIlheran can imagine.

Having It Both Ways

Republicans complain about Obama’s pump-priming: trying to get the economy moving forward with the only entity able to invest at this point – the government. They duplicitously complain that the taxpayers will end up paying for this. (Putting aside that this argument shows an obvious lack of understanding about investment and multiplier effects), this completely ignores the Republican’s own deficits that they’ve run up over the last three decades. This also completely disregards the fact that if the government were to do nothing: unemployment would be increasing even faster, more businesses would be failing or filing for bankruptcy, more people would be losing their jobs and filing for unemployment and in need of government aid for medical care – who do they think would be paying for these costs?