Debt and deficit

I have lots of friends on Facebook, and politically they range from socialist to liberal to conservative to Tea Party. Makes for some fun conversations. Some of my conservative friends insist that President Obama is hopelessly and incomparably bad at being President, that he has visited incalculable harm on the United States during his time in office, that his Presidency is one from which our nation may never recover. And when you ask what events, what policies, what actions have led them to this preposterous conclusion, they will point out, accurately enough, that the deficit has never been higher, and go on to assert that the debt incurred during the Obama Presidency will cripple our economy.

I get that, I really do. If you point out that the deficit isn’t as high as conservatives think it is, that it’s falling rapidly, and that it’s not actually damaging the US economy, you will be accused of ‘drinking the Kool-aid.’ Which is to say, of blindly and thoughtlessly following Obama, of being swayed by this President’s charisma to believe in absurd and untrue things. Oh, and of complete ignorance of economics. The debt is huge, the deficit massive, and the only way out is via huge cuts in federal spending, especially cutting Medicare, Social Security, welfare, food stamps, and all other federal strands of the social safety net.

So the question is this: how sincere are the concerns of Tea Party politicians, of House Republicans and other fiscal conservatives? Is Paul Krugman right, when he argues that the debt and deficit are being used cynically by right wing ideologues to further their ‘small government’ political agenda? Or are the concerns about the debt and deficit genuine? Is US indebtedness an actual, for reals, honest-to-Pete national emergency? Or is it all a big bluff?

From the point of view of actual Tea Party folks, voters, of course their concerns are genuine. They see this issue in personal terms. If they had family members who were racking up huge amounts of credit card debt, they’d be terribly concerned, and they’d do whatever they had to do to fix it. That’s how they see this, through the lens of personal finance. They are terrified of burdening their grandchildren with debt. The fact that the federal government can do things, and is required to do things that no family would or could ever do is immaterial. It’s all about the grandkids.

(But only up to a point. In fact, the US is doing something right now that is quite absurd. We’re saying to young people ‘you should go to college. It’s the key to your financial future. But the reality of college nowadays will require you to incur debt equal to a home mortgage in order to get that education.’ That’s a rotten deal for young people, and they know it. Especially when they know perfectly well that, in Europe, college is free.  Ask the Tea Party folks if they support free college education, and I can predict the response. ‘We can’t afford it.’ Meaning the US. Can’t afford to educate our 18-22 year-olds. Uh, the richest country in the history of the world).

But back to the debt and deficit, because it’s much more comforting to worry about potential problems fifty years from now than actual-factual problems right now. Let’s suppose that the Tea Party is right, and that the national debt is a huge problem, crippling the US economy going forward, and the deficit adds to the debt annually and is dangerously fiscally irresponsible. To go back to the ‘family finance’ model, let’s suppose that your family has incurred a debt. Let’s suppose that you’re living beyond your means, spending more every month than you bring in. There are two things you can do (and you may have to do both). You can increase your income (perhaps by having someone work more hours, or take a second job), or you can cut family spending. So if the deficit is really a big problem, you need to do both things; increase revenues and decrease expenditures.

So lately, to be obnoxious, I’ve been conducting a little thought experiment with my Tea Party friends. Let’s suppose that you’re right. Let’s suppose that the debt really is destructive, that continuing deficit spending really does need to end. Let’s suppose that we’re facing a national emergency if we don’t do something about it.

All right then, what is the current budget deficit? Tea Partiers will usually say ‘it’s a trillion dollars.’ It isn’t. The deficit was $483 billion in fiscal 2014. But fine, we also need to pay down the debt, so let’s go with their figure; let’s say we need to reduce the deficit by a trillion dollars.

Now, this is a national emergency, right? This has to be done. And cutting discretionary domestic spending won’t get us there. We need to look at both sides of the ledger, at cutting spending, and raising revenue, right? As you would do with your family. So we ask two questions: what is the most bloated, irresponsible part of the federal budget? And what sector of the population is most conspicuously undertaxed?

The answers are clear enough; the US spends more on defense than the next seventeen highest countries in the world combined. Is it a national emergency if we shut down the six golf courses the Navy operates in Guam? No. Let’s cut $400 billion from the defense budget. We’d still be the highest spending country in defense in the world, by a wide margin. And the super-rich, the top 1% have seen their taxes decline for years. Let’s raise the top marginal tax rate to 1970 rates. And we just made another $400 billion. Add increases in capital gains taxes and estate taxes, and we’d come pretty close to reaching our goal. One trillion dollars.

Then I ask this: if in fact the national debt is a national emergency and eliminating the deficit our top national priority, would you support the budget I just proposed. Would you support cuts in defense spending, and raising taxes on the richest folks in the country? If you’re saying, we must do this, we have to do this, we are bankrupting the future of our grandchildren if we don’t eliminate the deficit immediately, all right then. I have a concrete proposal that would accomplish it. Granted, perhaps, cutting defense and raising taxes wouldn’t be your first choice. But would you support it? In an emergency? Which you insist we have right now.

There have been two usual responses. Here’s one: ‘look, squirrel!’ In other words, a very rapid change of subject. The second is anger: obviously, I don’t understand foreign policy or economics. Cutting defense spending would leave us open to terrorist attacks. (Not true; we’d still have plenty of resources to fight terrorism). Taxing rich people would destroy our economy. (That’s never been true historically; in fact, the economy has never grown faster than during times when the highest marginal tax rate was 91%).

But the Up response, the ‘look, squirrel’ one has been the response of the national Republican party. Right now, in fact, the Republican dominated House and Senate have both proposed budgets, exercises in fantasy really, because there’s no chance at all of President Obama signing either of them into law. And both those budgets include increases in defense spending.

Which suggests to this Hoosier boy one thing: conservatives are not serious about the deficit. They’re using it as a pretext to cut domestic spending. It’s not about fiscal responsibility, it’s about conservative small-government ideology. Sorry to be cynical, folks, but it’s so. The Republican party is, and remains, the party of the rich, of big business, of Wall Street excesses. The Democratic party, in instructive contrast, is only mostly the party of rich business interests. Meanwhile, kids really are getting screwed, but not in the nebulous future, by debt and deficits, but right now, by the student loans that make college, which is a good thing, possible. Some day soon they’re going to get fed up, and kick all the old rich white people out. Can’t happen too soon either, says this rich old white guy.

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