Ten years ago the country was on track to pay off the entire national debt in ... ten years. But then... So President Bush left behind a $1.4 trillion budget deficit, and now under President Obama the same Republicans who created the deficits are all terribly, terribly concerned about the deficits they created.
The country just went through the "debt ceiling" fight. Republicans threatened to force the country to default on its debts, forcing Democrats to agree to a "Super Congress" tasked with taking trillions of dollars out of the economy. But the very things that caused the borrowing -- tax cuts for the rich, doubling the military budget, financial collapse and resulting lack of good-paying jobs -- are largely "off the table" in the discussion of how to fix the borrowing.
So as this Politburo meets we will be hearing all kinds of myths designed to sway us to support one or another scheme to hand even more money to a wealthy few at the top of America's pyramid.
Myths You Should Know About The Deficit And The "Supercongress"
1. America is "broke." Republicans endlessly repeat that we can't spend money hiring people to fix our infrastructure, can't spend money to keep teachers and firefighters and police from being laid off, can't even spend money to help states recover after natural disasters, because "America is broke." But haven't you read recently that corporate profits are at thehighest levels ever? That they are sitting on huge amounts of cash? That the "income inequality" gap between rich and poor in the US is the highest ever?
Michael Moore explains that America Is Not Broke
The country is awash in wealth and cash. It's just that it's not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.
Today just 400 Americans have more wealth than half of all Americans combined.
Watch this great video where Van Jones explains that America is not broke: (and sign up to join the American Dream Movement)
Watch the video. America is not "broke." Not by a long shot.
2. Entitlements are out of control. This is another one that is repeated endlessly. They say that entitlements -- the things we are entitled to because we live in a democracy and have paid for all of our lives -- are the cause of our budget woes. Not the trillion-plus spent on Iraq, not the huge tax cuts given to the wealthy and corporations, not the doubling of the "defense" budget which is more than all of the rest of the countries on earth combined, not the financial collapse caused by deregulation and refusal to enforce laws against fraud and corruption. No, they say the cause of our woes is We, the People taking care of the sick and elderly and each other.
The thing about cutting entitlements is that cutting government spending is not really cutting, it is shifting those costs to other parts of the economy. For example, if Medicare is cut, that doesn't mean the elderly's health problems somehow magically disappear, it only means that paying the bills shifts from government to other parts of the economy. And in fact it means that these costs to the economy will actually increase because the economy-of-scale and the regulation and protection offered by having government do this goes away.
3. The deficit has to be cut now. Deficit and debt alarmists -- a phenomenon that was nonexistent in the Bush deficit-creation years -- say that the country will go bankrupt and the economy will collapse if we don't immediately take action (as long as we don't raise taxes on the rich, cut military spending, tax Wall Street speculators or grow the economy by rebuilding our infrastructure). However, our country's debt is all in dollars, and the country is able to just "print" dollars to pay off the debt if it needs to, so it is literally impossible for the country to go bankrupt. But there is no long-term debt problem except from the effect of rising costs of health care with an aging population. That problem can be addressed by controlling costs, but not by cost-shifting on to other parts of the economy.
4. Cutting spending will grow the economy and create jobs. Over and over again they repeat the slogans: "Cut spending to grow the economy" and Cutting spending will create jobs and Eric Cantor: Cutting spending will grow the economy, and Economy Suffers as Congress Refuses to Cut Deficit and and and... It is difficult to understand just how laying off teachers and firefighters will create jobs, or how taking money out of the economy will grow the economy.
Conservatives argue that cutting spending will help the economy because government spending "crowds out" private spending. The idea is that since the tax cuts government spending necessarily means borrowing, making it harder for businesses to borrow. But currently interest rates are extremely low, so no "crowding out" is occurring. Another "crowding out" argument claims that businesses fear taxes will have to be raised to cover the deficits, and this "uncertainty" makes them not want to hire -- not because of lack of demand for what the companies make or do. Even others claim that the reason people are not spending money is not because their pay is down, or they are afraid of losing their jobs, or have lost their jobs, but because government spending ... something. They claim that the solution is to lay off teacher and firefighters and not repair schools and bridges and roads and airports, and then there will be more people working. Or something.
Europe has been cutting government spending -- "austerity." The result of taking money out of the economy by cutting spending has been ... well, they took money out of the economy and the economy shrank. What did they think would happen?
5. Taxes this, taxes that...
5a. Republicans follow an economic belief known as "trickle down." They say If you raise taxes on the rich, they won't "create jobs." The idea is that rich people "create jobs" so the more money that is channeled to the wealthiest few, the more jobs these "job creators' will create. The Bush-era tax cuts for the rich demonstrated the effect that giving ever more money to the wealthy actually didn't create more jobs -- in fact job growth slowed dramatically after those tax cuts. So now Republicans believe that since it didn't work we obviously need to do more of it.
5b. Cutting taxes increases economic growth. Conservatives believe that lowering taxes on the wealthy stimulates the economy. But the historical evidence doesn't show this. The country's highest periods of economic growth correspond to the times when we had the highest tax rates on high incomes. Other studies show little relationship between tax rates and economic growth. Most recently, after Clinton's
5c. America is overtaxed. Taxes are now at the lowest share of GDP in 60 years, even with the GDP lower due to recession -- income taxes on people and corporations in particular.
5d. The rich pay most of the taxes. The rich have most of the income and almost all of the wealth. The top 1% now receive more than 20% of all income. The top 20% get more than 60% of all income. (And then there is the lower tax rate for capital gains...) Also, the top 1% reaped most of the income gains in the last expansion.
5e. Taxes are theft - (this slogan is always a right-wing favorite.) Actually, tax cuts are theft.
"Shared sacrifice" is another phrase that is repeated a lot lately. They are saying that because we have this deficit that was caused by giving huge tax cuts to the wealthy, doubling military spending, giving a ton of money to bail out the big banks, and the loss of tax revenue and increase in government "safety-net" programs resulting from Wall Street's actions, therefore we all need to sacrifice to pay off the resulting debt. As long as it doesn't involve asking the wealthy to pay more taxes, cuts in military spending, taxing Wall Street speculation and capital gains, investing in infrastructure to create gains and grow the economy.
Shared sacrifice is a not sharing when the rewards are not shared. Democracy is the only economics that works. The rewards of our democracy are good jobs with good wages, equal opportunity, the chance to get a good education, workplace safety and dignity, and a society that takes care of and watches out for each other. This is what we should all share, because of the sacrifice made by those who worked so hard and for so long to build our democracy. We should understand that and fight to keep it.