Bunning Fails Economics 101: Why Deficits Saved The World

Bill Scher

In Sen. Jim Bunning’s words, he’s not obstructing because he’s against unemployment insurance. (That would be Sen. Jon Kyl) . He just wants the cost of extending unemployment insurance to be offset by cutting back on the Recovery Act, so we don’t increase the budget deficit.

Congressional Democrats have not really challenged Bunning on this point, except to — correctly — call him and other congressional Republicans hypocrites for repeatedly voting to expand the deficit when it came to wars, tax cuts to the wealthy and handouts to drug companies.

Just because many Republicans are hypocrites who are only using the deficit issue now to score political points doesn’t by itself mean that it is wise to expand the deficit to extend unemployment insurance.

But it is.

Government stimulus, by definition, requires putting more into the economy than you take out — spending more than you get back in tax revenues.

A recession means the private market is contracting. Our government minimizes the pain by expanding to fill up the gap. (As Paul Krugman has said, “deficits saved the world.”)

And unemployment insurance is particularly good stimulus, because the money reaches it’s destination immediately, and recipients put all of it back into the economy.

That’s all there is to it. Unfortunately, congressional Democrats are afraid to make this point too loudly.

The media does such a poor job explaining basic economics — while conservatives deliberately conflate the bad economy with the deficit, when they are not in charge — that many voters view all deficits as examples of government incompetence — when some deficits are productive and others are wasteful. And many Democrats are afraid to go against public perception.

I fully understand the political difficulties in doing so. And in this instance of unemployment insurance, it is much easier to nail Bunning for kicking the jobless when they are down.

But if we don’t better educate the public on the budget, enacting an effective jobs agenda will continue to be tedious and painstaking.

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