A group of a dozen people are taking a pleasure cruise on a yacht. When they reach the middle of the ocean, one by one the passengers start showing symptoms of a terrible Ebola-like illness. They are vomiting and have 106 degree fevers. It is obvious that without medical attention some of them will be in deep trouble. The captain hops on the satellite phone and calls a Medevac – and discovers that a Medevac costs upwards of $50,000. Fortunately people on yachts tend to be pretty well-to-do, so he informs his passengers that everyone will need to pony up five grand. Problem solved. But the recession has hit the investor class hard, and the group of ostensibly wealthy people are actually struggling to make ends meet. They worry about their substantial debts and tell the captain to hold off on the Medevac. Why spend all that money – more accurately, why assume even more debt on the American Express – when the yacht will probably make it to land in time to get everyone taken care of anyway? One must keep an eye on the bottom line, after all.
Ten days later the yacht floats into the harbor and all but one of the passengers is dead. But at least they didn't charge that extra $5000. That would have been dumb.
I tend to be pretty conservative with my finances and I pay off my debts as rapidly as humanly possible. I simply don't like having that obligation hanging over my head, nor do I feel good about borrowing money I don't have unless I absolutely have to. Yet even I am dumbfounded at the extent to which "the national debt" and "the deficit" continually paralyze the thought processes of the American public and our elected officials. The most complete and enduring victory of Reaganism has been the demonization of deficit spending, which is ironic given how much of it Reagan and his GOP successors managed to do. Cue Krugman and Reich to explain – yes, unbelievably we actually need this explained to us as a nation – why unemployment is more important than short-term deficit reduction. It did not take the GOP long after failing to block the stimulus legislation to start harping on "paying down the deficit," as empty suit and toupee John Thune opines in the increasingly irrelevant Editorial section of the Wall Street Journal. You know the drill. Blah blah debt. Blah blah deficit. Blah blah our children. All tired arguments, all of which were conspicuously absent from the mouths of people like Thune between 2000 and 2008.
No, deficit spending is not a good thing. Yes, in an ideal world we'd have a balanced budget and a surplus (and don't forget that prior to George W. we had both). But with 10% of Americans unemployed by the "official" tally and with real (U6) unemployment/underemployment approaching 20% it is not time to start pretending like we give a shit about deficit spending. It's time to figure out how to get more paychecks in more hands so that we don't have one in five adults in the workforce unemployed or working at KFC. Krugman was right nine months ago; the problem is that the White House and Congress wimped out with the stimulus. They spent enough to jack up the deficit but not nearly enough to be effective. If you're going to do it, do it. Now that the half-hearted stimulus has failed to effect dramatic changes, although things are starting to look up a bit, we are at a fork in the road. We can either spend enough to truly stimulate economic growth or we can run for the safety of the kind of emotion-based economic "policy" that consistently leads to failed interventions in the private sector. Since the President already allowed the clear minority to dictate the outcomes of the first stimulus debate, I'll let you take a wild guess at how things will proceed from here. The need for action continues to outpace the political will for it.