Deficits You Can Hate or Love

There has been an almost unending stream of propaganda and false news about the horrendous deficits the US and now the EC are facing. Britons just tossed out its Labour government partly because of the hype about its deficit. The EC just went through a process for bailing out Greece (and potentially other nations) because of its large deficit. Right-wing media thumps out a drumbeat about the deficit in the US, and may win control of Congress in November, if people don't realize all the holes in their argument.

They argue that families can't borrow their way out of trouble, so the nation can't either. But families do borrow: when they take out loans to finish college or undergo training, for example. Both cases will enhance their ability to pay back the loan. On the other hand, to borrow in order to maintain a lifestyle beyond their income is unsustainable, whether it's to buy a house they can't afford, or to go out to dinner five days a week.

The same is true of governments. Greece's debt was unsustainable, because it was supporting a lifestyle, was not enriching the nation, and was not being paid for by the people with money: the wealthy, who avoid taxes.

The deficits in the US, insofar as they are paying for jobs protected, or jobs created, are investments in the future, and enable the recipients, and others downstream to pay back the money with interest as taxes they would not otherwise have been able to pay. Deficit spending to fund alternative energy, or highway construction and repair, are also investments in the future. They do not impoverish the nation: they enrich it.

On the other hand, deficits spent on wars that do not involve national survival, but instead are for imperial expansion (Iraq, Afghanistan), are like borrowing so that you can eat out every day of the week: the nation is impoverished by them in the long run.

US debt, while large in absolute numbers, is smaller, relative to the size of the economy (GDP) than most developed nations. But the deficit and debt hide both productive investment and wasteful consumption. The two ought to be separated and the latter should be cut to the bone, the former boosted to truly stimulate the economy.

The deficit we should be most concerned about is not mentioned much: it is the trade deficit. We buy more abroad than we sell abroad, in part because large corporations export jobs. That international debt comes back as speculation, boosting the stock market artificially; it does not employ more than the few thousands on Wall Street, but it impoverishes the nation.

So, cut war spending, boost job creation and stop outsourcing jobs. Then deficits become investments and the nation will become wealthier, instead of the Empire going bankrupt.