Friday, 16 July 2010

HuffPo - "Spend, Baby, Spend!!"

A bizarre piece in the Huffington Post today by Christopher Hayes, who attempts to compare the recent emphasis on cutting the deficit to the build up to the Iraq War.  It is a long article and I don't really want to deal with the comparison between calls to cut the deficit and Iraq, but instead I wanted to look at his rationale for increasing spending.  You see, for Hayes, the real problem is that the Obama administration hasn't spend enough, and therefore all those people who are calling for deficit reduction (including Obama) have it all wrong.  Let's take a look at his line of argument, my emphasis in bold and comments in orange.

"If you've been paying attention this past decade [Nice start - the implication is that if you do not agree with what is coming up, you simply haven't been paying attention.], it won't surprise you to learn that the country's policy elites are in the midst of a destructive, well-nigh unhinged discussion about the future of the nation. But even by the degraded standards of the Washington establishment, the growing panic over government debt is shocking.[Notice how the "panic" and the dicussion over government debt is the thing that is shocking to Hayes, not the actual debt itself.]
First, the facts. [playing hard and loose with the word "facts" there, Chris] Nearly the entire deficit for this year [Obama's deficit then] and those projected into the near and medium terms [again, Obama's] are the result of three things: the ongoing wars in Afghanistan and Iraq, [correct] the Bush tax cuts [incorrect - tax cuts stimulate growth and private sector job creation - therefore increasing tax revenue and decreasing spending] and the recession. [More specifically, TARP and the Stimulus Package.  He also fails to mention the trillion dollar healthcare package.] The solution to our fiscal situation is: end the wars, [Agreed, but it isn't that simple] allow the tax cuts to expire [wait for it...] and restore robust growth. [So, in one sentence, our writer contradicts himself. He wants to increase taxes to businesses and corporations, and at the same time restore growth! But tax hikes stamp out growth! If you want to restore robust growth, extend the tax cuts!] Our long-term structural deficits will require us to control healthcare inflation the way countries with single-payer systems do. [Excuse me? Perhaps Mr Hayes isn't aware that here in my country of Great Britain, we have healthcare costs that are almost the same percentage of GDP as America's, and we have had single payer since the 1940's! Trust me, there are many supporters of the NHS in Britain, but none of them will put forward as an argument for it, "Well, it's cheap!" because it isn't!]
But right now we face a joblessness crisis that threatens to pitch us into a long, ugly period of low growth, the kind of lost decade that will cause tremendous misery, degrade the nation's human capital, undermine an entire cohort of young workers for years and blow a hole in the government's bank sheet. [A crisis that was supposed to have ended last year, but has in fact got worse thanks to the Tax and Spend policies of the Obama administration.] The best chance we have to stave off this scenario is more government spending to nurse the economy back to health. [But America has been doing that ever since Obama took office, spending is at a stunning high! And it hasn't worked!] The economy may be alive, but that doesn't mean it's healthy. [Yes, the American economy is very sick. It has a decimated private sector and a spiralling deficit! Spending makes both of those things worse] There's a reason you keep taking antibiotics even after you start to feel better.
And yet: the drumbeat of deficit hysterics thumping in self-righteous panic grows louder by the day. [Good!] Judging by its schedule and online video, this year's Aspen Ideas Festival was an open-air orgy of anti-deficit moaning. The festival is a good window into elite preoccupations,[Hang on...I thought according to the HuffPo, low spending advocates were Hillbilly tea partying morons? It was Obama and co that were the glorious educated ones! Now that more and more economists are screaming about the deficit, its now an "elite" thing to notice that the US is drowning in debt?] and that its opening forum featured ominous warnings of future bankruptcy from Niall Ferguson, Mort Zuckerman and David Gergen does not bode well. Nor does the fact that there was a panel called "America's Looming Fiscal Emergency: How to Balance the Books." This attitude isn't confined to pundits. The heads of Obama's fiscal commission have called projected deficits a "cancer." [What does this tell you Chris? You have 'elites' on the right and left warning about the debt, you have the right wingers warning about the debt, and you have the left-wing Obama administration warning about the debt! Maybe there is a danger involving the debt?"]"

Articles like this always amaze me, they aren't a surprise, but they do amaze me.  One would think that when spending gets to this level, it is a question not of whether or not to deal with the debt and the deficit, but how.  Even the Obama administration (an administration that certainly loves throwing around a trillion dollars here and there) won't dare spend any more.  Yet here is the Huffington Puffington telling us the only way out is to spend even more!

What is amazing is that the author recognises that we need to get growth in the private sector, yet is advocating spending that has to be covered, at least in part, by higher taxes from the private sector!  How will that help growth Mr Hayes?

The Private sector is in a bunker at the moment - it has holed itself up not moving, waiting for the worst to pass so it can come out again.  You fire another stimulus into the mix, and businesses will know that tax hikes are on the way, and will therefore stay exactly where they are - in the bunker, not employing and not growing.

No comments:

Post a Comment