It’s fiscally responsible to create jobs

AFSCME, one of the nation’s most politically influential labor unions, has unveiled a new ad that’s both interesting and important. The spot throws support behind the American Jobs Act, and that’s important in and of itself, but the larger context is even more significant.

Showing a series of still shots, the voice-over in the ad tells viewers, “It’s pretty simple: the more jobs we create now, the less federal debt they’ll have to carry later. Because jobs not only put food on the table, they put revenue in the treasury and money in the marketplace. More jobs equal less debt; even our kids can understand that. Tell Congress to pass the American Jobs Act — now. Not just for us, but for our children.”

Greg Sargent reports that this is part of “a significant six figure ad campaign,” which is no doubt music to the ears of White House officials.

Indeed, I imagine the West Wing is pleased for more reasons than one. At the surface, President Obama and his team are eager to rally as much support as possible around the jobs agenda, and ads like these help make the case to the public. But behind the scenes, there’s also been some lingering questions about the nature of the relationship between the White House and labor — and this ad campaign suggests unions and the president are back on the same page.

But let’s also note that AFSCME is also turning the right’s argument about fiscal responsibility on its ear. To hear Republicans tell it, austerity measures and brutal spending cuts are necessary to lower the deficit and ease the burden on future generations. This ad is making the case — accurately — that conservatives have this backwards.

Reality shows the one sure-fire way to improve the nation’s fiscal conditions is to also improve the nation’s economic conditions. As David Leonhardt explained several months ago, economic growth lowers the deficit.

We look back on the late 1990s as a rare time when the federal government ran budget surpluses. We tend to forget that those surpluses came as a surprise to almost everybody.

As late as 1998, the Congressional Budget Office was predicting a deficit for 1999. In fact, Washington ran its biggest surplus in five decades.

What happened? Above all, economic growth. And that may be a big part of the answer to our current problems.

Yes, the government became more fiscally conservative in the 1990s. Both President George H. W. Bush (who doesn’t get enough credit) and President Bill Clinton, working with Congress, raised taxes to attack the 1980s deficits.

But those tax increases were the second most important reason for the surpluses that followed. The most important was the fact that the economy grew more rapidly than expected. The faster growth pushed up incomes and caused more tax revenue to flow into the Treasury.

Given the size of the current deficit, growth almost certainly won’t be enough to balance the budget anytime soon, even if the economy grows much faster than expected, which seems unlikely. But 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.

Indeed, perhaps the most astounding aspect of Republican rhetoric on the economy lately is how contradictory it is. On the one hand, a top GOP goal is, at least in theory, deficit reduction. On the other hand, those same Republicans want more tax cuts (which makes the deficit worse), and spending cuts that would likely slow the economy (which also makes the deficit worse).

Digby added a while back, “Why Democrats haven’t been saying ‘jobs=deficit reduction’ on a loop, I don’t know. I guess they figure it’s just too complicated to explain that when people aren’t working they aren’t paying taxes so the government doesn’t have as much money.”

Nearly a year later, it looks like some on the left are getting the picture.