Alan Blinder: The Economic Silly Season Is Upon Us: 'Debt ceilings' and 'job killing' spending are two dumb ideas. Obsessing on the deficit while unemployment is at 9% is another:
Our country seems mired deeply in the silly season.... The silliness comes in at least four parts. The first is the debate over raising the national debt ceiling.... The increase in the debt each year is simply the difference between total expenditures and total receipts, both of which come from the annual budget. If Congress wants a smaller national debt, it must either spend less or tax more.... [N]either party can just command the national debt to stop growing. Some people see the debt ceiling as a way to force spending cuts that Congress would otherwise refuse to make. Maybe. But it's a clumsy and risky way that, among other things, could endanger the credit-worthiness of the United States government if our inability to float new debt made it impossible to raise needed cash. And for what purpose? To accomplish something that Congress has the power to do anyway?
The second element of silliness is the belief that the American public stands solidly behind rapid and large budget cuts. Sure, and they also want better weather.... The public wants smaller deficits, lower taxes and less spending in the abstract. But when it comes to specifics, it finds few spending cuts that it likes....
The necessity to choose among various spending cuts and tax increases brings me to the third element of silliness—the one that seems to afflict only Republicans. How many times have you heard Speaker of the House John Boehner (and others) refer to "job-killing government spending"? That phrase has become an official GOP mantra, on a par with "death taxes" and "death panels"—and it's just about as truthful.... [T]he government should be a smart steward of the public's money.... [But] when there is so much unused capacity and so many unemployed people hungry for work, "job-killing government spending" is oxymoronic. Virtually any type of spending, public or private, will create jobs.
The final element of silliness is... the popular notion that we need deficit reduction urgently, right now, even though the unemployment rate is still 9%.... The federal budget deficit is on an irresponsibly unsustainable path.... We need to both restrain spending and raise more revenue—and by large amounts. But not right this minute, because doing either would shrink the economy. Despite recent increases, Treasury borrowing rates remain low. There is no evidence that investors are fleeing the dollar. Our economy is still in desperate need of more demand. Each of these facts argues for waiting.... Congress is tied up in knots over some $60 billion in immediate spending cuts. That number, while draconian in the short run (only half the fiscal year is left), is chump change in the long run. And while Congress is consuming itself in partisan acrimony over the $60 billion, it is doing essentially nothing about the multitrillion dollar long-run deficit—which, as everyone should know by now, hinges on The Big Four: Social Security, medical care, defense and taxes.
As I said, it's the silly season.