How more stimulus could reduce the deficit, and vice versa
“Mentions of unemployment have been dwindling since they spiked to 154 in the month ending August 15, 2010; over the month ending Sunday, there were 63,” reports Clifford Marks. “Deficit mentions, meanwhile, surged up to 261 in the month ending December 15, 2010, when the leaders of President Obama’s deficit commission released their final report.”
This is easy enough to explain. Washington has stopped caring about the unemployed and begun caring, or pretending to care, about the deficit. That’s led the media to focus on the deficit. And, in what Greg Sargent has dubbed the “Beltway Feedback Loop,” that’s heightened public anxiety over the deficit, which has in turn convinced politicians to focus more on the deficit, which has further pushed the media in that direction, and so on.
But it isn’t just wrong. It’s counterproductive. And not just for the economy. For the deficit.
The jobs crisis is vastly more pressing than our debt problems, but it’s also, in two mostly unnoticed ways, interconnected. For one thing, a weak labor market means a high deficit. It means tax revenues come in low and social spending needs to be high. It’s very hard to begin deficit reduction in any serious way before unemployment comes down.Which means that the sooner we get unemployment under control, the sooner sustained deficit reduction can really begin.
But second, and perhaps more importantly for deficit hawks, the jobs crisis is leverage for deficit reduction. A little bit of stimulus could buy you a lot of deficit reduction. Imagine if Republicans offered Democrats a 4:1:1 deal: For every $4 of specific spending cuts over the next 12 years, they’d back $1 of tax increases and $1 of stimulus. A deficit-reduction deal that cut $3 trillion would carry $1 trillion in tax increases — so, $4 trillion in total deficit reduction — and $1 trillion in stimulus. Who’s the liberal who’d say no? And yet, that’s a big deficit reduction package. Among the biggest in our history, actually.
It’s also overwhelmingly focused on spending cuts, and the stimulus money could go toward priorities Republicans support, too: extending the payroll tax cut, say, or repairing America’s crumbling infrastructure. And best of all, at least from the deficit hawk’s perspective, that deal could pull liberals onto a deficit-reduction package that’s far more substantial than anything they’d otherwise agree to, or contains more conservative spending cuts than anything they’d otherwise accept, because for liberals, the ongoing jobs crisis is the top priority.
But that deal isn’t on the table. In fact, there’s no stimulus money or tax increases on the table at all. And that’s because, for Republicans, deficit reduction is not the top priority. It’s lower, for instance, than opposing tax increases and stimulus. If it wasn’t, we’d have a deal already — one that could address both our jobs problem and our debt problem in a big way. Instead, we’ve abandoned the unemployed and are bickering over the debt. Which is perhaps the most frustrating thing about this issue: some policy problems are very hard to solve, but this one isn’t. There’s a win-win on the table, a deal that could address both the problems and the politics, but Washington seems entirely uninterested in it.