Stan Collender has a must-read post at Nieman Watchdog about how we talk about deficits and debt. It's a useful corrective to much of the nonsense we've heard lately. Read the whole thing, but here's an excerpt:
The bond market is being as unequivocal today as it was when Bob Rubin used what it was saying in 1993 to convince Bill Clinton that he had to push to reduce the deficit. The only difference is that, instead of demanding deficit reduction, the bond market today is exhibiting no worries about the deficit or federal borrowing at all. In fact it’s indicating that Washington should do more to stimulate the economy. ... More often than not, the federal budget deficit is a surrogate for something else rather than a standalone concern. Agitating about deficit reduction gives Republicans a reason to talk about their pet issue -- tax increases -- and to blame Democrats for them. Over the past two years the rising deficit has also been used by Republicans as a symbol of excessive government spending and involvement in people's lives.
That last point strikes me as particularly important and something advocates of activist government haven't realized or responded to effectively. While the Obama administration has been engaging these critics on their own terms, with the deficit commission, the budget "freeze," and other efforts at fiscal responsibility, the fact is that the deficit is just a useful symbol for government activity rather than a meaningful economic hinderance. What's needed to push back against this aren't examples of the administration's fiscal rectitude but perhaps a more affirmative case for why government action is important. Less talk about tightening the belt and more focus on how the government's helping when the citizens' belts are tight.
-- Tim Fernholz
