I should be pleased with Joe Mathews’ latest column, attacking Carly Fiorina’s “voodoo economics” claim that tax cuts pay for themselves. But in making a good point against Fiorina’s ridiculous claims, Mathews himself makes an error in assessing the true impact of deficit spending:
For Republicans, deficits matter unless they hurt the ability to cut taxes. For Democrats, deficits matter unless they require spending cuts. Boxer and Fiorina appear to agree that it’s fine to steal from future generations to fund their priorities today.
They only disagree on the method of theft.
It’s just not the case that deficit spending involves “stealing from the future.” It is spending cuts that do that. This argument needs a strong pushback.
Spending cuts today, especially to education, health care, and transportation services, have nasty long-term effects on working people. With less education, earning power is reduced. With less health care services today, health costs rise tomorrow. With less transportation spending, people have to spend more money today to get to and from work, money they can’t save for tomorrow. And the lost jobs that result from spending cuts produce long-term unemployment that hurts individual careers as well as hurting the macroeconomic picture.
In short, spending cuts mean many people’s futures are less bright and less prosperous. Whereas deficit spending doesn’t necessarily mean that at all. Deficit spending, when it’s used to create jobs and sustain services, helps improve people’s long-term prosperity and brightens their futures. And that in turn makes it easier to pay back the debt.
It’s somewhat similar to the concept of a student loan. Many observers consider student loan debt to be “good” debt because, ideally, the borrower makes more money with the degree they borrowed to earn than they would have without the degree, even when the cost of repaying the loan is factored into the difference. Sure, you’re “stealing” from your own future earnings to put yourself through school, but in concept it works out.
(In practice it doesn’t always work out, since college costs are rising faster than wages can keep up. But then again, wages and employment rates are higher for college grads than for any other sector of the workforce.)
Younger folks like myself have instead seen our future stolen from us through tax and spending cuts made in the last 30 years. Just over the last 10 years, a lot of ground has been lost. I graduated UC Berkeley in 2000, and paid a tiny fraction of the costs a 2010 UCB graduate will have paid in fees, all to make up for state budget cuts to higher education.
Those students who can’t afford the high cost of college have had their futures stolen from them. But using deficit spending to subsidize their college education gives them a future. The same principle applies to most other forms of government spending.
The only issue with deficit spending right now is we’ve not done enough of it. Raising taxes on the wealthy, starting with letting the Bush tax cuts expire, would provide an added boost, and help stabilize the incomes and financial situation of everyone else in America, instead of giving more money to people who already have plenty of it.
One thing a lot of these corporate tools miss about deficit spending or funding healthcare , student loans and the like, is that it is an “investment”. These corporate types have no problem investing in machinery that will make production more efficient, how about people ? As you rightly point out, student loans can help one with receiving an education, which could mean higher wages and cretating a more competitive and higher tax paying work force. Stop investing and your workforce will end up flipping hamburgers at McDonald’s and there are only so many of those jobs !
Further, what these idiots don’t get is that by cutting unemployment insurance, healthcare, and not investing it will cut into the number of available consumers for their products. Don’t they get if people don’t have the money and are stuck with low paying jobs they can’t buy as much and their goes their domestic demand. (unless of course one thinks like Fiorina who looks to foreign demand since that’s where she ships the jobs to).
It’s pretty clear that Republicans don’t care about deficits at all if they get in the way of tax cuts. Tax cuts always come first for them. And deficits usually follow, as we’ve seen over many Republican administrations. Because they’re not willing to cut local pork, corporate subsidies, or military spending–whether we need it or not.
But, in addition to the rising deficits, everything else goes to hell too–as we’ve also seen. Because they don’t believe in educational spending, unless it’s for private schools and vouchers. They don’t believe in infrastructure spending, unless it’s the public-private model that helps line corporate pockets. And they don’t believe in social services, no matter how desperate the need.
Why this is not clear to more people is beyond me. But you just have to look at history.
I’m curious, when Fiorina was running HP, was the company completely debt free? Did they have no bonds outstanding to help the company operate? No lines of credit with banks? Or were they borrowing money and “stealing from future shareholders”?
And when Whitman was running EBay, were they completely debt free? Did they take out any loans to allow the company to grow? I doubt that the board of EBay at the time was complaining about “stealing from future shareholders.”
Sometimes we need deficit spending in order to have a future.