We hear this daily……small businesses do not know what to do, the deficit will drown us, spending is out of control….I am sure you have heard all this before, possibly just yesterday and you will hear it all over and over and over….to the point that fear and paranoia will take hold and mistakes will be made….

Let’s look at a few things that so many people are missing in all this chest thumping and demands…..from an article by Paul Rosenberg…..

(1) The deficit is already shrinking rapidly. Writing for the uber-socialist rag, investors.com (“powered by Investors Business Daily”), in November, Jed Graham noted:

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilisation from World War II.

In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.

(Of course, the history on this is quite clear: The 1937/38 recession was caused by FDR’s misguided policy shift to prematurely cutting back on government spending. FDR learned, reversed course, and recovery accelerated again.)

(2) Rather than being “out of control”, government spending growth is already historically slow. Under President Obama, government spending has grown less than 1.5 percent per year, compared to more than 2 percent under Nixon/Ford, Reagan and Bush II – all three two-year GOP presidential terms in the last 50 years.


(3) The US short-term deficit is overwhelmingly due to the Great Recession. The structural deficit – that part not due to the recession – is low enough that we can grow our way out of it: Once we’ve recovered from the recession, which is still our top priority from an economic perspective  This was all explained recently at yet another “bastion of socialism”, Bloomberg View’s The Ticker blog. Long-term health care costs are a different matter – but they’re not due to Medicare per se, they’re due to the wildly inefficient nature of the US health care system, which spends far more per capita than other countries with better health outcomes. Obamacare has improved the efficiency, extending the life of Medicare, but much more remains to be done.

(4) Because interest rates are so low, government can now borrow at negative rates (adjusted for inflation), meaning that it’s actually very sensible to borrow more now to increase the speed that we get back to a full employment economy. It’s utterly misleading to compare a money-printing national economy to a household, but if we must, it’s like taking out a zero-percent loan to buy a home, and stop paying rent. In the right circumstances, more of the right kind of debt is exactly what you need to get out of debt. The 30-year rates are somewhat higher, but economist Brad DeLong has explained how government borrowing at those rates still amounts to that rarest of things for an economist – a free lunch.

The economy could be a lot better but it also is not in the crapper as too many people would have you believe……..the key is to look at ALL economic data not just the stuff that feeds your belief….I know that will be difficult but at least give it a try…..

About these ads