This comes up from time to time, but probably not often enough. For all the preoccupation with the budget shortfall, and the apparent desire to turn a blind eye to the economy, we know perfectly well that the most effective way to reduce the deficit is to grow the economy. Indeed, it’s painfully obvious: when the nation’s economic conditions improve, the nation’s fiscal conditions also improve.
Though she steered clear of policy recommendations, I was nevertheless glad to see the NYT‘s Catherine Rampell touch on this today.
Not so long ago, the National Debt Clock, perched above the Avenue of the Americas, a block east of Times Square, was running backward.
It seems remarkable now, with all the End Times talk of debt ceilings and default, but it was only 11 years ago that the owners of that electronic totem, the Durst family, simply pulled the plug. The clock, a fixture since 1989, went dark after the federal government ended its 2000 fiscal year with a record $236.4 billion budget surplus.
Today, well — you know. We face the largest budget deficit the nation has ever known: $1.6 trillion, the equivalent of about 11 percent of our economy. And, whatever Washington does, many economists say the situation will grow only worse, particularly as Americans age and Medicare costs spiral higher.
But there is, in theory, a happy solution to our debt troubles. It’s called economic growth. No need to raise taxes or cut programs. Just get the economy growing the way it used to.
Good luck with that.
I do look back with some fondness at 2000. The National Debt Clock had never been programmed to run backwards, so it had to be unplugged. Did Tea Partiers celebrate? Well, no, the so-called “movement” didn’t exist, and its current members didn’t much care. Indeed, the elimination of the deficit was so low-key, about a third of the country still thought Clinton had left a deficit for Bush, reality be damned. (The deficit didn’t much matter to the public consciousness again until 2009, when the right hoped to make governing impossible for President Obama.)
It’s a forgotten detail, but going into 2000, the government was expected to run a deficit. What happened? The economy was growing so fast, and unemployment was so low, receipts far exceeded expectations. It was a striking reminder: good economy = good fiscal picture.
Of course, Republicans soon dominated after Clinton’s departure, the deficits came back, and those who claim credibility on fiscal issues stopped paying for their agenda and added several trillion dollars to the debt.
In our current decade, growth alone won’t be enough to balance the budget anytime soon. The shortfall is too large. That said, growth was responsible for reducing the deficit in 2009, and more growth would mean more jobs, more jobs would mean more revenue, and more revenue would mean a smaller deficit.
It’s why the last several months have been so dispiriting. Those who claim to be the most concerned about the deficit — who, incidentally, are largely responsible for the deficit — are also the ones demanding austerity measures that would hold the economy back, which in turn makes it tougher to address the budget shortfall they pretend to care about.
In the name of fiscal responsibility, we’re going to take money out of the economy, making growth more difficutl, and undermining the best available method of lowering the deficit.