Why Are We Sequestering When the Deficit is Shrinking?

 

The mainstream media seems to be missing a big story here, and I welcome your thoughts on why.  While political reporters are breathlessly covering the brinksmanship on the sequester, they have stopped referencing the background. This deadline was supposed to force us to reduce the deficit, because we need to deal with this crisis, right?  Wrong. The deficit is dropping, at a faster rate than any time since World War II.   This is being covered by economists, (Paul Krugman has patiently explained this for years), the financial media, and even a few pundits on the right. Why not others?

We need to remind ourselves –and others– that the increase in the deficit was a result of necessary spending during an economic crisis, and not a fiscal crisis. It is coming down, as predicted, as more people go back to work, pay income taxes, and become less reliant on unemployment, food stamps, and other supports. We should not allow this phantom crisis as a justification for unraveling the social safety net.



Discuss

7 Comments . Leave a comment below.
  1. I wouldn't put much stock in the December numbers

    In my little world as a pension actuary, saw a lot of activity with Roth conversions in December (the equivalent of the government eating its seed corn by allowing people to pay taxes now on their retirement account balances and then never have to pay taxes again on these accounts). Frum’s disclaimer line “True, much of that shrinkage can be traced to individuals bringing income forward to avoid higher tax rates in 2013″. is an understatement if I ever saw one.

    We saw this same behavior in December of 1986 with massive capital gains inflows due to people selling before the TRA ’86 rates came in; don’t count on this behavior continuing into the 1st quarter of 2013.

  2. Voodo economics

    The voodo economics of supply siders like the kind that grace the Econ Dept at my alma mater (U Chicago) have gone from being the deranged fantasy of mathematicians to the enshrined bipartisan consensus of a the political-media industrial complex. Krugman, who I am not even a huge fan of, has been consistently right on this topic. I have far more respect for Joseph Stiglitz who has been consistently right that a) this financial crisis would occur b) we have failed to regulate against its reoccurence and c) balancing the budget is not nearly as important as getting people back to work.

    Creating jobs builds the economy and contrary to Romney-Ryan lies, taxes don’t destroy jobs they fund a government that is the greatest and historically best job creator in times of economic distress. Time for a second New Deal, not time for austerity. Look what good that has done Britain and the EU countries. Our credit is far better. While the West is wasting its time on crippling austerity the Chinese are investing in better infrastructure, better schools, and better healthcare. Its critical we do the same.

    • And yes

      This is a 180 from where I was three years ago, but the status quo has failed, it only emboldens the enemies of a sound progressive government that helps people which I have always supported, and its time we put people back to work. When they have a job they will have money to spend on taxes and consumer goods that grow the economy and shrink the deficit. Look at the post-New Deal, post-war boom Ike took the credit for. Look at the 90s boom. Time for us to be real Democrats again and stop negotiating with fiscal terrorists that would hold our economy hostage. As they have time and time again.

  3. To answer the question

    We’ve having sequestration because, a year and a half ago, a lunatic fringe threatened to blow up the creditworthiness of the United States of America if they didn’t get massive cuts with no tax increases. This is their delayed-action bomb.

    They either don’t understand, or don’t give a damn about, basic economics. The cynic in me thinks the economic disruption caused by more austerity is just fine with them. Makes workers more desperate and more willing to work for less, worse conditions, etc. And these guys are comfy in their gerrymandered districts with their duped supporters who think Obama is some kind of Kenyan Muslim Lenin.

  4. Agreed, but the question was

    Why is the mainstream media not reporting? Do they find economics too complicated? Or is there an unquestioned message in the echo chamber that “we have a deficit crisis”, similar to the messages we heard in the lead up to the Iraq War (e.g. “weapons of mass destruction”)? This is mystifying to me.

    • As I see it

      Do they find economics too complicated?

      Yes.

      Or is there an unquestioned message in the echo chamber that “we have a deficit crisis”, similar to the messages we heard in the lead up to the Iraq War (e.g. “weapons of mass destruction”)?

      Yes. In fact, Paul Krugman made this very comparison in his column today.

      DC is full of “insider” types who speak only to other members of their little tribe. They are not so good at macroeconomics and, frankly, are fine with economic suffering as long as they and their well-heeled friends are still cleaning up.

      Scarborough, for example, has been going nuts since Krugman made his usual points on the show. He keeps saying “nobody” agrees with Krugman on this. Actually, Joe Stiglitz, Robert Reich, Ben Bernanke, Dean Baker, etc. agree with Krugman. As I pointed out in another comment today, even the Wall Street Journal and Goldman Sachs are coming out against any more austerity. But there’s a severe lag time in penetrating that Beltway bubble. It’s maddening.

    • Don't forget

      that, to most professional DC media types, both parties must automatically be equally right and wrong, and equally to blame for everything, no matter the facts. If Elizabeth Warren says today is March 1, 2013, and Lindsey Graham says it’s August 27, 1821 (their ideal time machine date?), the mainstream media will conclude it must be late May of 1917. Buy War Bonds!

      If you look at actual facts and report them, you’re not being bi-partisan, which means you’re not serious in their world.

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