Joe Scarborough, a former congressman (R-Fla.), hosts the MSNBC show “Morning Joe.” Jeffrey D. Sachs is director of the Earth Institute and author of “The Price of Civilization.”
Dick Cheney and Paul Krugman have declared from opposite sides of the ideological divide that deficits don’t matter, but they simply have it wrong. Reasonable liberals and conservatives can disagree on what role the federal government should play yet still believe that government should resume paying its way.
It has become part of Keynesian lore in recent years that public debt is essentially free, that we needn’t worry about its buildup and that we should devote all of our attention to short-term concerns since, as John Maynard Keynes wrote, “in the long run, we are all dead.” But that crude interpretation of Keynesian economics is deeply misguided; Keynes himself disagreed with it.
When President Obama came into office in January 2009, he inherited an economic mess, including a deficit of more than $1 trillion. Yet he soon piled up even more debt by tripling the number of U.S. troops in Afghanistan and pushing through Congress a shortsighted stimulus bill and a health-care package that did not fundamentally address the excessive costs of the health-care system. After his party took a midterm drubbing from Republicans, the Obama White House then supported the extension of the Bush-era tax cuts and other “stimulus” items, adding another trillion dollars or so of red ink to Washington’s ledger.
Not so long ago, Keynesians guaranteed that Obama’s stimulus plan would move the U.S. economy more quickly toward growth by providing full employment and lowering deficits. We both were skeptical from the start, for good reason. In May 2009, the White House forecast 4.6 percent growth in 2012, an unemployment rate of 6 percent and a budget deficit of $557 billion. The actual outcomes were much worse: growth of 2.3 percent, unemployment at 8.1 percent and a budget deficit of nearly $1.1 trillion.
Both of us opposed the stimulus package, the increased spending in Afghanistan and Washington’s fixation on short-term thinking. We said that the only result of this short-termism would be exploding deficits. And well before Obama acknowledged the point, we said that there was no such thing as “shovel-ready” projects worthy of public investment in the 21st century.
Sadly, our concerns have been borne out. Public debt was around 41 percent of the gross domestic product in 2008. Today it is around 76 percent and still rising. Yet the economy continues to languish.
Nevertheless, a few hardy Keynesians urge the president to raise deficits still further. We respectfully disagree. Doubling down on this dubious policy will move the United States only more quickly towardexcessive indebtedness and a possible economic crisis.
Keynes worried about the long-term buildup of public debt and called for balancing the budget over the course of a business cycle — allowing deficits during downturns to be offset by surpluses during good times. Unfortunately, Republicans and Democrats spent the past decade supporting reckless tax cuts, irresponsible wars and budget commitments without supporting revenue. That shortsightedness has created a crisis, soon to be exacerbated by an aging population and rising health-care costs.