No, Cutting the Deficit Will Not Help the Economy

Digby solves a mystery:

FAIR does an overview of the polls which show that the beltway obsession with the deficit is not, in fact, shared by the country.

But I did want to highlight this one piece of evidence supporting my contention that to the extent people do care about --- they just don't understand it:

And with all the media hysteria over federal spending and the deficit, the public seems to have a somewhat muddled view of why it’s even an issue. A recent Pew/National Journal survey (6/17-20/10) that found 74 percent of respondents believed that--contrary to what most economists would tell you--"budget cuts to reduce the federal deficit" would help create jobs. The same poll found similarly wide majorities seeing job creation from additional spending on public works programs, more aid to state and local governments, and cutting business and income taxes--all policies that would increase the deficit. Surveys in which the public ranks these conflicting priorities consistently give the deficit little emphasis.

I have thought from the beginning of the crisis that this was a problem. I could tell from some conversations I was having that people were under the misapprehension that the deficit caused the recession and that ending the deficit is the only way to fix the economy. Many wingnuts are making that explicit claim.

This is one of the reasons why I have been so frantic that the administration was feeding into the deficit hysteria. They don't seem to get that people don't actually care about "the deficit," they care about "the economy" and they fail to make a distinction between the two, especially since we have right wing wrecking crew that makes a point of conflating the two.

It's a problem.

So how do you fight ignorance and misunderstanding? With facts.
masaccio at Firedoglake has them:

America Speaks is holding public meetings to teach people about the deficit. I hope progressives and FDL people will attend. Here is a link to the locations. Yesterday I put up talking points on Social Security here. In comments, letsgetitdone points out correctly that we aren’t driving the agenda, and the leaders will no doubt whip up the deficit hysteria with bogus figures and theories. Here are some basic talking points.

0. This stuff is complicated. Your goal is simply to put these ideas into play, to make people think. You are fighting uphill, because very few people understand these points, and because the leaders have been lying to people about these issues for years. Try to pound these in this order.

1 Government economics aren’t like household economics. Governments print money. Households don’t and can’t. The analogy is false. Reasoning with false analogies is fraudulent. If they argue back, point out that the Fed created trillions of dollars to rescue Citigroup, and Goldman Sachs. Make a note of any response you get on this and let me know.

2. There is no deficit crisis. If there were a crisis, we would know because the cost of borrowing money would be going up. Interest rates are very low and will not go up in the near future according to the Fed. If anyone talks about credit default swaps, point out that they are unregulated, there is no real market for them, and they are easily and legally manipulated.

3. Cutting safety net programs and raising taxes on the middle class in the middle of a terrible recession is cruel and vicious, and only a thug would do it. Same goes for cutting school teachers and police.

4. Cutting spending on socially useful programs in the middle of a great recession is just stupid economics, and everyone who took Economics 101 knows that.

5. If the deficit crisis is so bad, we should increase taxes on the wealthy. They got big tax cuts while we were running huge unnecessary and useless deficits. Those tax cuts are a loan, as competent economists like Krugman and DeLong and others have said. If the deficit is so horrible, it is time to call in those loans.

6. If the deficit crisis is so bad, we should increase taxes on the rich, they are the ones who caused the deficits and caused the Great Crash. They can afford to pay the taxes. We can’t.

7. Deficits which fund useful programs like infrastructure, research and education have long-run positive effects. Deficits to give huge tax cuts to the wealthy, or pay for wars or military spending in foreign countries or corn subsidies are bad. They leave nothing for the future. Cut those programs.

8. Be on the alert for trickle-down economics. For example, if you hear leaders of the meeting say that raising taxes on the rich means they won’t invest in productive enterprises, or anything similar, insist that this is the trickle-down theory, which is nonsense.
a) Say it hasn’t trickled down on me. Getting people to laugh at stupid is a good way to shut stupid down.
b) Here is a post that discusses the issue. Here is a Wall Street Journal piece titled Trickle-down Economics Fails to Deliver as Promised, reporting on a study from Harvard’s Kennedy School of Government.
c) The New York Times reports that private equity hedge funds are sitting on $500 billion because they can’t find good investments. That means that finding capital to create productive enterprises isn’t a real problem, the problem is misallocation of resources by the rich. Here’s a link.

Hold your ground. We are right about this, and they are wrong. They are trying to hurt the country, you are trying to stop them.

Most of the current America Speaks events are scheduled for tomorrow, Saturday, June 26, but more will be scheduled soon.