The best way to reduce the deficit is to put people back to work.
For proof, compare the U.S. and Spain. The U.S. has witnessed slow growth since coming out of the Great Recession in 2009. The result has been a deficit that has come down from over 10 percent of gross domestic product to a projected 5.3 percent of GDP this year (slightly higher if Congress is sensible enough to repeal the sequester) and a projected 2.4 percent in 2015 (if congressional austerity bombs don’t blow up the weak recovery).
Spain was forced into austerity; as part of the Euro zone, it has no control over its currency. Harsh spending cuts and tax hikes have driven the economy back into recession, thrown workers out of work and slashed basic security supports. The result: The deficit has declined from 10.2 percent of GDP to 6.7 percent, but is projected to increase to 7.2 percent GDP next year as the unemployment rises, tax revenues fall and the expenses of even a pared-back unemployment system rise.
Austerity costs jobs, cripples growth — and makes deficit reduction harder, not easier.
So why — oh why — is there bipartisan agreement that we should focus on deficit reduction rather than jobs and growth? Why isn’t Congress repealing the sequester cuts that all agree are dumb? Why are Democrats arguing about how to pay for postponing the sequester until December rather than just moving to repeal the idiocy and stop manufacturing new crises?
The deficit is coming down faster than at any time since the demobilization after World War II. This is a bad thing, not a good thing. It is hindering the recovery, slowing growth and costing jobs. That is the unspeakable truth about today’s reality. We do have a deficit crisis — it is too small, not too big, and it is falling too fast, not growing out of control.