Dean Baker on the Budget "Success"

Here's Dean Baker's take on the stupidity of the Obama "deal" and how the media is presenting it to the American people:

400,000 Newly Unemployed Workers Celebrate Budget Agreement

Has anyone told the White House press corps about the economic downturn. We have 8.9 percent of the workforce unemployed, more than 8 million people unemployed who would like full-time jobs, and millions more who have given up looking for work altogether.

The reason is simple: there is not enough demand in the economy. When we cut government spending, there is less demand in the economy. As we used to say in intro econ class: Y = C+I+G+X-M. That means that GDP is equal to the sum of consumption, investment, government spending and net exports. If we cut government spending, then we have reduced demand, unless we think there are a lot of firms who will be inspired to hire people because the government is cutting back its spending.

Moody's estimated that the original Republican plan for $61 billion in cuts would lead to a loss of 700,000 jobs. Goldman Sachs had a similar number. Since the final deal had a bit less than two-thirds of these cuts, the implication is that somewhat more than 400,000 workers will lose their jobs.

And the remarkable part of the story is that these newly unemployed workers are not even mentioned in the coverage in the NYT, the Post, or it seems anywhere else. Hey why ruin a great budget drama by talking about the people who will have their lives ruined?

Sadly, people have been pumped full of the nonsense that a country is like a household and you "can't spend more than you make". That may be true on a timescale of decades, but it isn't true on a timescale of years. It isn't even true of households. The typical household goes deeply into debt in the late 20s to buy a house and emerge from that debt burden in their late 50s. All this blather about "don't spend more than you earn" avoids a simple fact of life: debt is a tool. If you manage debt wisely you can live a better, more comfortable life. If you manage it poorly, you can live a blighted life. Obama, the Republicans, and the American people have chosen to live a more blighted life. Sad.

What makes the whole incredible "debate" ludicrous is that the very people ranting so noisily about "get the deficit down and balance the budget" are the very ones who pushed so very hard four months ago to give big tax breaks to billionaires and millionaies at a cost of adding a trillion dollars to the debt over the next 10 years. Talk about hypocrisy! Talk about idiocy!

If the logic of "deficits are bad", why didn't this restrain Reagan as he ran up historic deficits? Why didn't it restrain Bush when he not only failed to budget for two wars, he gave a monumental two big tax cuts to the rich that broke the budget? If deficits are so horrible, why didn't the US wait to build liberty ships, airplanes, tanks, etc. until the taxes could be raise... in other words, tell Hitler to hold off for a decade or two until the economy in the US could "afford" the war costs. Nonsense! You respond to an emergency by emergency acts. There is a terrible level of unemployment in the US, but the party of the plutocrats could care less about ordinary workers. That's why they are so focused on "deficits" and "tax cuts". They want to make sure that the rich get richer. To hell with the bottom 90% of the society!