After the release of the June job numbers, there were plenty of worthwhile charts and graphs making the rounds, but this one from Paul Krugman was especially helpful.
In case it’s a little hard to see, that red line is the unemployment rate; the blue line is the interest rate on 10-year bonds. I realize the phrase “interest rate on 10-year bonds” probably isn’t one of those phrases that gets bandied about around American dinner tables, but the more serious a problem the deficit becomes, the higher that blue line would appear.
And therein lies the point: the blue keeps going down. Indeed, it hasn’t been this low in many decades. If the deficit were a drag on the economy, and the United States were facing some sort of debt crisis, that blue line would be through the roof. But that’s not even close to what’s happening.
Instead, we have that red line to contend with, which translates to a jobs crisis.
The only topic of conversation in Washington right now is a debt-reduction deal, which intends to address that blue line. But there’s no need to address the problem that doesn’t exist. There’s a critical need to address the problem that does — the red line — but thanks to GOP gains and the Republican majority in the House — there’s no political will to do so. On the contrary, Republicans have said if Democrats don’t agree to massive debt reduction — i.e., taking more money out of the economy when it needs the opposite — the GOP will crash the economy on purpose.
We’re in the midst of a deep political psychosis. Every time you hear political officials or pundits talking about the need to address the deficit, remember this chart, and keep in mind that they think the blue line is too high.