Whom the gods would destroy, the old saying says, they first make mad. And there’s no quicker way to become completely untethered than to read economic reports, including the latest one from the Congressional Budget Office, and then watch the political debate go on as if reality didn’t even exist.
The short version of the CBO’s report is: Spending’s going down, but we desperately need jobs. So how did the president and Congress respond? They kept arguing about who’s got the better plan for making spending go down some more.
If you want to be taken seriously in Washington, you’re going to have to learn: There are some things you just don’t talk about.
1. Don’t Talk About Jobs
The CBO report predicts that the Federal deficit this year will be under $1 trillion, if the “sequester” or other cuts of similar magnitude go into effect, for the first time in five years.
But unemployment won’t be reduced to an acceptable level until 2018, according to the CBO – and Washington’s not talking about how to create jobs. Those spending cuts will make the unemployment situation worse. Apparently that’s now Washington’s official plan: Cut spending, and keep more people out of work.
If things happen according to our leaders’ plans – which are the basis for the CBO’s projection – it will have taken 10 years for the job market to recover from Wall Street’s misdeeds.
Corporate profits recovered in 18 months, and today they’re higher than ever.
2. Don’t talk about growth.
The CBO doesn’t expect the Gross Domestic Product to fully recover from the Wall Street recession for another four years, until 2017. The problem is the “output gap” between the goods and services we could and should be producing, and what we’re actually producing. That, too, is the result of the 2008 crisis. This gap results in lost prosperity for the great majority of Americans, excluding only the wealthiest among us.
If our GDP were large, the Federal debt would be less of a problem, because it would be a smaller piece of our economic “pie.” That’s one reason why economists L. Josh Bivens and Andrew Fieldhouse recently warned that “nearly all demands for specific, ambitious 10-year deficit reduction targets are likely to be terribly counterproductive in the current debate.”
And the problem’s getting worse. As Neil Irwin points out, the CBO report now estimates our annual “output gap” at more than $1 trillion this year. That means it’s going up, not down.
3. Don’t talk about stimulus spending.
Washington’s not talking about that. Instead the President has engaged in the debate on the Republicans’ terms. In his recent remarks on the sequester he said he and the Republicans had gone “more than halfway towards the $4 trillion in deficit reduction that economists and elected officials from both parties believe is required to stabilize our debt.”
The $4 trillion figure is not accepted by “most economists.” Many, if not most, would argue for increased spending in the form of additional stimulus programs as Bivens and Fieldhouse proposed – and for the same reasons. As Bivens and Fieldhouse wrote, arbitrary targets “can easily lead policymakers to embrace measures that will surely hamper economic recovery (which) should be the primary focus.” Ethan Pollock showed how debt stabilization can be achieved more effectively through short-term stimulus spending.
But Washington’s not talking about that, either. Instead, the president’s reinforcing a counterproductive and right-wing economic viewpoint by talking about deficit reduction targets in hard-dollar amounts.
4. Don’t talk about inequality in wages.
It’s very fashionable in Washington to talk about projections that show that Social Security is fully solvent for the next couple of decades – well, they don’t like to talk about that part of it – but that afterwards a shortfall would allow it to pay only 75 percent of projected benefits.
Here’s what’s not fashionable to mention: Nearly half of that shortfall is caused by an unpredicted income grab by the wealthiest earners among us. (Dean Baker has the specifics.) It’s gotten so severe that the United States has a more unequal distribution of income than Egypt.
Nobody saw that coming – not even Ayn Rand acolyte Alan Greenspan, who chaired the commission that adjusted Social Security benefits and revenues in the 1980s. Since Social Security is funded by a payroll tax with a fixed ceiling – currently about $110,000 per year in income – too much of our national income is earned without contributing to Social Security.
Restoring our income levels to better balance would help eliminate any future concerns about Social Security. So would an aggressive jobs program, which would put millions of people back on the job and paying their payroll taxes again.
5. Don’t talk about how much less expensive health care is in other countries – or how much more effective it is.
Federal health care spending is expected to grow from nearly 5 percent of GDP in 2013 to 6.2 percent of GDP in 2023. While there’s debate about health care spending in Washington, it’s generally limited to two set of ideas. The first involves arbitrary caps on health spending, which would either shift costs back onto the poor and elderly or force them to go without medical care. The second involves tinkering around the margins of our health care system in order to “bend the cost curve.”
Every other industrialized nation on earth has a government-sponsored health system, and every other industrialized nation provides much more comprehensive care at much less cost.
We’ve had proposals to move our system closer to these more cost-effective models. One was the “public option,” which would have allowed Americans to buy into a more efficient government system. Other proposals have offered to open the public system up to more of the population, or to everyone, under the “Medicare For All” label.
If our system was brought in line with those of other developed countries, our deficit problems would be largely addressed. Nobody mentions that.
6. In fact, don’t talk about Europe at all.
Our entire deficit debate is going down the trail first blazed by Europe. Like Europe, we’re insisting on hard and fast deficit reduction targets while we’re in the middle of economic hard times.
How’s that working out for Europe? Great Britain’s entering a rare and brutal triple-dip recession. Unemployment is soaring across the continent. And the countries that have been held to the hardest spending cuts are seeing their deficits go up, not down, as unemployment soars and their national economies shrink.
So, if you want to be part of the “serious” Washington debate, you can talk about the “hard choices” that must be made – which means you’ll make the choices and they’ll be hard for others. You can talk about how you plan to achieve your $4 trillion deficit reduction targets in a more clever way than the other party will.
Just don’t talk about jobs. Don’t talk about growth. Don’t talk about budgeting from percentages. Don’t talk about health care. And whatever you do, don’t talk about Europe. After all, we wouldn’t want to learn from experience.
(UPDATE: This piece originally included several sentences on Federal spending and health care costs which were confusing and should have been more carefully edited. They’ve been corrected since this piece was initially published and I apologize to readers for the confusion.)