NYT Invents "Broad Agreement" About Budget Problem

The NYT ran a front page article today claiming a "broad agreement broad agreement among critics about Exhibit A: The unwillingness of the two parties to compromise to control a national debt that is rising to dangerous heights." The article presents no evidence to suggest a broad agreement of any sort among critics, nor does it point out that every one of the "experts" cited failed to warn of the housing bubble, the collapse of which is projected to add close to $4 trillion to the national debt.

The article then throws in the utterly absurd statement: "After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs."

The government has small deficits and then surpluses through the second half of the 90s and into the beginning of the last decade. Only people who completely ignored the data would at that point have been issuing "warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning." There was no basis for this concern at that time. It is true that the wars in Iraq and Afghanistan (which remarkably go unmentioned in this article) added substantially to the deficits in the last decade, as did the Bush tax cuts, but the situation did not qualitatively change until the collapse of the housing bubble through the economy into the worst downturn since the Great Depression.

At this point, close to 10 million people are out of work in large part because of the the ineptitude of the deficit hawks in being unable to recognize an $8 trillion housing bubble. Contrary to the assertions of the article, a very substantial number of economists and policy analysts believe that it is far more urgent to put these people back to work then to address the country's budget problems. The markets agree with these people at the moment, since they are willing to hold U.S. government debt at very low interest rates.

The article then implies that there is some serious consensus to begin cutting the deficit in 2012 a year in which the Office of Management and Budget projects that unemployment will average 8.2 percent. By contrast, the first stimulus package was passed when the unemployment rate was just 4.8 percent. Budget cuts at this point will slow growth and raise the unemployment rate:

"Many analysts say the president and Congress could send a strong signal to global markets by agreeing this year to a package of both long-term tax increases and spending reductions, especially in the popular entitlement programs, that would not take effect until 2012."

The implication that there is any consensus to slow the economy and raise the unemployment rate when it still above 8.0 percent is an invention of the NYT. It is also worth noting that inept management of the economy has destroyed most of the wealth of near retirees leaving them most of them in a situation where they will be almost completely dependent in the programs that the heroes of this article want to cut.

It is worth noting that much of the funding for the effort to cut Social Security and Medicare comes from Wall Street investment banker Peter Peterson. This fact is not mentioned in the article.

--Dean Baker

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