We Are All Deficit Owls Now?

Both Paul Krugman (h/t Trixie) and James Galbraith (h/t Matias Vernengo) have presented positive thoughts, at least in the US context, that the deficit hawks and enemies of the social safety net may at last be on the back foot:

Krugman: “Deficit Hawks Down”

James Galbraith: Is This the End for the Deficit Drones?

I have no way of assessing their interpretation of the political realities, but both articles make for interesting and enjoyable reading.

I found this paragraph in Galbraith’s article especially interesting:

[T]here is no good reason to cut Social Security, Medicare or Medicaid. These are insurance programs. They keep the elderly, their survivors and dependents, and the disabled, out of dire poverty. We can afford this. There is also no financing problem; if there were, investors would not be buying 20-year US bonds at 3 percent. These days when some economists say that cuts are needed, they say it’s only for show – to establish “credibility.” Old-timers may remember, that’s what DC insiders once said about the war in Vietnam.

The unnamed economists in bold text sound suspiciously like deficit owls. (And good for them.)

Okay, perhaps I’m stretching, but it seems to be progress.

In connection to the sustainability of US fiscal policy, Krugman notes:

The truth is that the budget deficits of the past four years were mainly a temporary consequence of the financial crisis, which sent the economy into a tailspin — and which, therefore, led both to low tax receipts and to a rise in unemployment benefits and other government expenses. It should have been obvious that the deficit would come down as the economy recovered. But this point was hard to get across until deficit reduction started appearing in the data.

So perhaps there were more owls than we thought, even at the height of austerity mania? Perhaps not, but it’s still refreshing to see an obvious truth so often ignored or denied actually appear in a mainstream publication.

Regarding the social safety net in particular, Galbraith highlights approvingly a passage from Obama’s speech in which he said,

The commitments we make to each other — through Medicare, and Medicaid, and Social Security — these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.

I strongly agree with that sentiment, and have argued similarly in support of a ‘job or income guarantee’. For example, see Free to Live a Good Life.

Hopefully both Krugman and Galbraith are correct that the tide has turned.

5 thoughts on “We Are All Deficit Owls Now?

  1. The tide is turning but not deficit owls yet. I’m waiting for them to start talking about “Kelton’s seesaw” before we accord them the title of “deficit owl.”

  2. It’s called social security for a reason. Security is what loosens purse strings. If you fear for the future, you won’t do anything now. And that is a self-fulfilling prophesy.

    We invented insurance to remove the risks that stop things happening. Quite why people can’t evolve to see that happening at a society level is beyond me.

    The attacks on social security by trying to rename it with pejorative terms shows that many do not understand what the security bit was all about.

  3. Similar to the gun issue in the US. It’s a security issue. If people feel insecure going out in public, they will tend to cocoon rather than don Kevlar™ and pack heat. Very bad for commerce. Worse than the saving due to insecurity over the future. But both are hugely dumb.

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