Dear Dan Balz: Deficits Did Not Necessitate Austerity

In an otherwise well-argued piece about the demographic and ideological difficulties faced by the Conservative Party in Britain, Washington Post columnist Dan Balz reiterated the following bit of false conventional Village wisdom:

The other obstacle turned out to be the economic problems and big budget deficits Cameron inherited from the last Labor government. Those realities necessitated austere fiscal policies that prevented more spending on some programs for the middle class, giving the party image a hard edge. The economy has improved, but as in the United States, the unequal distribution of those gains has left many feeling left out and looking for someone to blame.

No, no and no. All wrong.

First, the last Labor government wasn’t responsible for Britain’s budget deficits: the Great Recession was. Any government would have been left in uncomfortable fiscal straits after the financial sector crashed the world economy and was bailed out by taxpayers, thus privatizing the profits and socializing the risk of capitalism.

Second, as Paul Krugman and others have long pointed out, it’s not a “reality” that national governments must close their deficits, particularly during recessions. Any government with a vibrant intinsic economy and the ability to print its own money can run deficits for long periods without repercussions.

Most importantly, recessions are the absolute worst time to close deficits. Reality dictates that deficits be large during poor economies in order to boost private sector consumer demand, and then shrunk during good years in order to stabilize currencies and satisfy capital markets. This is basic, proven countercyclical economics, and to be unaware of its wisdom by now is to be unworthy of an editorial spot at a major newspaper.

Finally, on a more minor note, the impersonal nature of the phrase “unequal distribution of those gains has left many feeling left out” is jarringly inadequate. While globalization and mechanism have certainly taken their toll on the value of labor and will continue to do so, by no means has the unequal distribution of rewards been a naturally occurring phenomenon. The rewards were rigged to be distributed by the richest elites through Thatcherite/Reaganite economic policy. If nothing else, the policy of shoring up financial institutions and their executives while doing little to shore up middle class workers was a direct giveaway to the top 1%, perpetuating an asset-heavy financial system wherein stock market and housing values have been decoupled from middle-class economic reality, and that has shown itself totally unworthy of defending.

The middle class that has been abused by those policies isn’t “looking for someone to blame” any more than victims of armed robbery are. They’re looking to hold the crooks accountable at the ballot box. It’s just that the conservatives, as usual, tend to wrongly blame immigrants and the poor for the robbery.

So no, Mr. Balz. Labor didn’t cause the deficits, “reality” didn’t demand austerity or deficit closures during a recession, unequal distribution of incomes didn’t just happen on their own, and voters aren’t just lashing out for someone to blame.

David Atkins

David Atkins is a writer, activist and research professional living in Santa Barbara. He is a contributor to the Washington Monthly's Political Animal and president of The Pollux Group, a qualitative research firm.