Even though the deficit did not matter to the Republicans when they were in control of the government, now that we have a Democrat as President they say we have to quit spending and adopt austerity, no matter the consequences – no matter that it will greatly hurt the most vulnerable people in our republic. To convince the public that it has to be done, the national budget is compared to a household, business or personal budget. In such circumstances it is true that one can not continue to incur increasing debt without going broke – unless income is increased at the same time.
But businesses, individuals, and the government can continuously carry debt as long as they keep up the payments.
The main difference between private debt and public debt is the ability to keep income coming in. Private debt does not necessarily have that ability. If the economy turns sour, a business or individual does not get needed income, they can default – or declare bankruptcy. The government has the ability to keep its income coming in. The United States must pay its debt – defaulting on our debt is out of the question. No matter what the ideology of one party or another, even though they threaten to shut down the government, none of them are really willing to have the government default on its debt.
We are stuck in an economic crisis that was largely the result of "Free Market" classical theory. That ideology failed. We have the proof of that failure – the Great Recession. But even so, the conservatives are unable to accept the facts and wish to continue on the same destructive path of cutting taxes for the rich because they are the ones who provide the jobs – only over the past 12 years those jobs have been provided to other countries, not Americans. Not only history but actual events do not seem to deter them from continuing to avoid taxes while they ship American jobs overseas. They believe what they believe – that their bottom line matter most. So they, through Fox “News” have brainwashed a willing right leaning faction of our pubic. To this particular group of people facts do not matter, only what they believe in their guts matter. And their guts tell them that Reagan’s trickle down theory works despite facts to the contrary.
Here are some facts:
1. The austerity policies of the Hoover administration, especially Andrew Mellon's advice to "liquidate" labor, stocks, farmers, and real estate to "purge the rottenness from the system" made the economy worse during the Depression era. Democrats ran successfully against "Hooverism" for forty years.
2. The budget was balanced as recently as the Clinton administration with Alan Greenspan worrying publicly that a rapidly disappearing national debt might not be good for the economy.
3. Rapidly rising inequality in both income and wealth is one of the most common indicators of a banana republic. Adjusting the progressive tax rate structure (i.e. having the rich pay just 3% more as they did under Clinton and Reagan) is a quick way to address that and reduce the deficit at the same time.
We know from past experience that cutting government spending in hard times leads to harder times (research the economic policies of Hoover). But classical economic theory says that in order to spend, the government must print money – which devalues the currency and causes inflation. That is what was done in the 1930s to put people to work. As a result, people could not afford to buy more than the basic necessities, with 25% of the population unable to afford that. That tells us that the classical economic theory does not work they way people think it should.
By saying that public debt is the same as private debt, Republicans have managed to convince a large segment of the public that the government is going broke. Of course they did not use that argument when the financing of the disastrous invasion and occupation if Iraq was in question. It is only now because they are suddenly beholden to those economic troglodytes, the Tea Party activists, who have some say in their re-election.
The far right demands that jobs be created while, at the same time, they are putting blocks in the way of any job creation policy. This demagoguery is testimony to their hypocrisy. It certainly makes one wonder if they really believe austerity is in the best interest of the country or are they doing this, as they have stated frequently, to push the Obama into failure? If the conservatives can keep the unemployment rate high, they just might be able to blame it on the President.
Using a constant barrage of FALSE facts and equivocations, scare tactics, and appeals to prejudices, Republicans have been able to convince a substantial sector of the public of their ‘righteousness’ – all to the detriment of good economic activity. It does not seem to matter to the conservative faction that their policies cause unemployment, that ‘trickle down economics’ does cause wealth to trickle down to the middle and lower classes, as long as the wealth continues to accumulate among the already rich and powerful.
That leads me to the conclusion that being in power is the ultimate goal of the right – not helping this country pull out of a recession. It is their mission to convince the American public that austerity and deficit reduction is necessary and proper – while at the same time greatly reducing the taxes for millionaires – even if it destroys the fabric of this country. They seemed to be accomplishing their goal until the public in Wisconsin, Michigan, Illinois, and other states, woke up to the realization that under the disguise of deficit reduction they were being stripped of what little money and rights they had left in order to feed more profits to the Robber Barons’ Machine.