We are currently two weeks into the sequester, which was supposed to be a "mutually assured destruction" mechanism for which Obama and the GOP Congress could come up with a "Grand Bargain" of long-term deficit reduction so that clean cuts across the entire government wouldn't occur, because the defense department (typically, the one GOP spending cut they never propose) would be particularly hard hit. Two weeks into the sequester, though, we still actually have the sequester, and everyone agrees (except apparently the GOP Congress), this massive reduction in government spending will be a drag on the economy. So why is it happening? Why did it happen in the first place? And what can be done?
The easy answers are: Republicans. Republicans. And, nothing until we vote Republicans out of all offices entirely. But this is a liberal-leaning blog so you might not believe me. So I'll expand. Back in 2011, after the GOP took over Congress on a wave of supreme idiocy and racism called the "Tea Party", the new members refused to raise the debt limit, an articifial construct of American politics that calls for the president to ask Congress to raise the limit on our nation's debt in order to pay for money already spent. Yes, money already spent. Congress had already authorized that money to be spent but they hadn't authorized increasing the debt limit to actually get the Treasury to pay its actual debts already incurred. Despite that basic reality, the GOP Tea Party wing decided to take a stand against sanity and sense by refusing to increase the debit limit in the summer of 2011. So Obama had to be involved in all kinds of talks with economic idiots to come up with a way to dramatically decrease government spending -- without being allowed to ask for a single iota of revenue (taxes) -- so the GOP would agree to do something that the party in charge of Congress had done every single time in the history of the United States. And despite the fact that 90% of the actual deficit was due to two unpaid wars, the Medicare drug expansion to the drug corporations in 2005, and the jarring collapse of the world economy in 2008 -- all of which happened under GOP President Bush and a GOP Congress, years during which not one Republican ever openly mentioned the deficit. But OK, that's where we were. And Obama did what he could to secure the debt limit raise, and that was to agree with GOP ideas of massive cuts, no revenue increases, and then a "debt commission" to find other ways to get to $4 trillion in deficit reduction by the end of 2012. Head of the GOP House John Boehner called it "98% of what we wanted." But not before the economy took a massive hit due to the world's fears that this crazy idiotic wing of the GOP was actually going to let the US default on its debt (which would have definitely sent us into a deeper second recession). So anyway, of course the "debt commission" -- stacked with Republican ideologues who of course refused to consider revenue increases as any part of a Grand Bargain -- failed, leaving us with the sequester. And since Republicans still refuse to negotiate any revenue increases (even closing corporate loopholes on private jets or ending oil subsidies in the midst of record profits), despite Obama offering massive cuts to social spending programs, nothing has happened and the sequester automatically went into effect on March 1st. Tons of government furloughs are happening, cuts in hugely important social safety programs like Head Start and SNAP are happening, and oh yeah -- the only thing the GOP is complaining about -- the White House has stopped giving public tours as part of its forced cutbacks on the Secret Service. In other words, kids are going to go hungry because of the sequester but Republicans in Congress are only pissed that their wealthy donors can't have tours of the White House. What a bunch of fucking scumbags.
Anyway, so the way out of this is apparently going to be some Grand Bargain between Obama and the GOP members of the Senate (the slightly less batshit crazy part of the GOP) which will involve more massive cuts to things like Medicare and Medicaid and very little revenue generation. The Grand Bargain might end up being worse than the sequester in that case. And why is this all happening? Because we are run by fucking idiots. Everyone in Washington has bought the Tea Party made-up crap that the deficit is a problem. A problem that apparently only started when Obama came into office despite it being massive at that point. And a problem that we need to fix, now, in the midst of this Great Recession. It's all so fucking ridiculous and why we don't take any lessons from the failed austerity in Europe continues to make no sense to me. None of this makes any sense. And you know what's even crazier -- the deficit has been plummeting the past couple years. Even if it were a problem in 2010 (and it wasn't) it sure as hell isn't a problem now. Why are we still cutting???? Here's Paul Krugman, Nobel-winning economist, saying it better than I can.
What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.
Start with the raw numbers. America’s budget deficit soared after the 2008 financial crisis and the recession that went with it, as revenue plunged and spending on unemployment benefits and other safety-net programs rose. And this rise in the deficit was a good thing! Federal spending helped sustain the economy at a time when the private sector was in panicked retreat; arguably, the stabilizing role of a large government was the main reason the Great Recession didn’t turn into a full replay of the Great Depression.
But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013 (which began in October and is almost half over) to be $845 billion. That may still sound like a big number, but given the state of the economy it really isn’t.
Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.
Right now, a sustainable deficit would be around $460 billion. The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit — what the deficit would be if we were near full employment — is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.
So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.
Back to why is this happening? Well it's pretty obvious. Republicans have been theoretically trying to shrink the government for years (at least when they are not in office). But really they want to kill the popular programs like Medicare, Medicaid, and Social Security that have basically been the stalwarts of our social safety net since the Great Depression, signature liberal programs that in conservatives' warped worldview somehow slow down the growth of the private sector, even though there is no evidence of that and never has been. So deficits and debts are a way for them to start cutting these programs with Democratic hands involved, all as a way to be "fiscally responsible", even though cutting government spending right now is going to hurt the economy, in the near-term and long-term. But Republicans are nothing if not averse to reality and facts, and the media, such as it is, doesn't do a damn thing to educate a public that has called Fox News both the least trusted news source and most trusted (in a new poll out). President Obama does bear some responsibility in not being able to break through their obstruction and ridiculous demands but he has been using his bully pulpit since December to basically beg -- outright beg -- for Republicans to give up a few fucking corporate loopholes (which Romney actually campaigned on) and gotten no closer to a Grand Bargain than when this all started. But when faced with no other choices and the other side willfully ignoring economics and willingly sending the economy overboard just to live out their Ayn Rand-ian fantasies of no taxes ever, anywhere, I'm not sure what else he can do. It kind of makes you want to give up on politics and assume we're all just fucked. I mean Democrats got 1 million more votes than Republicans in Congress in 2012 and still couldn't win the House (due largely to gerrymandering and the concentration of Democratic voters in urban areas), and Obama won in basically a landslide and we're still here, where we've been ever since 2010, dealing with an intractible set of Tea Party nuts running Congress, way way way more conservative than a solid 80% of the rest of the country, yet dictating the terms in which the country will be run. Perhaps if ABC News run a story about this every single day... but I doubt it. No one even cares anymore.
Yes, we’ll want to reduce deficits once the economy recovers, and there are gratifying signs that a solid recovery is finally under way. But unemployment, especially long-term unemployment, is still unacceptably high. “The boom, not the slump, is the time for austerity,” John Maynard Keynes declared many years ago. He was right — all you have to do is look at Europe to see the disastrous effects of austerity on weak economies. And this is still nothing like a boom.
Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. People whose careers are heavily invested in the deficit-scold industry don’t want to let evidence undermine their scare tactics; as the deficit dwindles, we’re sure to encounter a blizzard of bogus numbers purporting to show that we’re still in some kind of fiscal crisis.
But we aren’t. The deficit is indeed dwindling, and the case for making the deficit a central policy concern, which was never very strong given low borrowing costs and high unemployment, has now completely vanished.