Monday, April 8, 2013

Catch of the Day

I'll go with a Catch to a wonderful post by Dylan Matthews that goes through all the reasons why government budget deficits are thought to be bad -- and why each of them is either wrong all the time, or wrong some of the time.

It's very, very, good. It doesn't draw any hard-and-fast policy conclusions about what to do right now, but what it does do is explain that some of the anti-deficit rhetoric is pure fantasy that we should ignore, while other arguments are more serious.

I'm not sure that it really does answer the question, however, of why people love balanced budgets so much. I have a piece coming out sooner or later on that...I really don't think we do know the answer. But Matthews definitely captures the rhetorical support for eliminating deficits and why much of it -- but definitely not all -- is pure nonsense.

Nice catch!


  1. 1) How is it that the lunatic, balanced-budget fringe of the deficit alarmists became their spokespeople? In all related matters, the lunatics are properly called out, now they are Gospel. Curious, no?

    2) Matthews justifies the piling up of debt via the argument that most of that Treasury paper is held by Americans. In a related article, I expect Mr. Matthews to argue that the dramatic rise in the rich-poor gap over the last generation is irrelevant since "Americans" are, generally, richer.

    Is this what it comes to?

    1. There's nothing more reliable than the hypocrisy of conservatives on spending. When there's a Republican in the White House, well, things got to get done (eg, invading random countries), and you are a terrorist if you disagree. When a Dem is in the White House, it becomes: oh my god, who will think of the children? It is a clear guide to the bad faith and blatant nonsense of 99% of conservative talking points.

    2. “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. ... I therefore intend to oppose the effort to increase America’s debt limit.”

      — Then-Sen. Barack Obama, floor speech in the Senate, March 16, 2006


    3. backyard, if we had paid down some of the debt before the crisis, when we could afford it, we'd have been in a much better position when the crisis made deficits necessary.

  2. Even the article says it: "...No, really, you actually can run deficits — of a manageable scale — forever. “A balanced budget is an extreme outcome. The real question is how big a deficit you can run forever,...”

    So, what's that deficit again?

    FY 2013*: $901 billion
    FY 2012: $1,089 billion
    FY 2011: $1,300 billion
    FY 2010: $1,293 billion
    FY 2009†: $1,413 billion
    FY 2008: $459 billion
    FY 2007: $161 billion

    So what's the actual debt?
    FY 2013 $17.5 trillion
    FY 2012 $16.4 trillion
    FY 2011 $14.8 trillion
    FY 2010 $13.5 trillion
    FY 2009 $11.9 trillion
    FY 2008 $10.0 trillion

    Go ask the Greeks about deficts and debt. Or the Cypriots. Or the Portuguese. Or the Italians or the Spanish.

    1. Except those countries don't have direct control of their own money. The ECB exerts more control in the setting of interest rates. In the US with a central bank, you directly control the supply of money and therefore can never go bankrupt. Look at the interest rate charged on bonds and you'll see the discrepancy in rates charged on Italian vs US bonds. And as you show above, the budget deficit is falling so we're heading in the right direction. The truth is the situation in the US is very manageable and not a crisis at all.


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