No, There's No Debt Crisis, Either

Again, all this hysteria over the deficit and the debt is ginned up to force massive cuts in Social Security and Medicare as a huge step toward eliminating the Great Society and New Deal, thus throwing Americans fully on the mercy of the Wall Street sharks.  Just like we were in 1929.

Don't fall for it.

Digby

You know that deficit that's killing us? The one we're going to fix by "asking the rich to pay a little bit more" and cutting benefits for everyone else? What if the scam is even worse than we thought?

Dean Baker spills some very inconvenient beans:

[T]he big stick for the deficit hawks was their story of huge deficits in the longer term. They attributed these to the rising cost of “entitlements,” which are known to the rest of us as Social Security, Medicare, and Medicaid.

While they like to push the notion that the aging of the population threatened to impose an unbearable burden on future generations, the reality is that most of the horror story of huge deficits was driven by projections of exploding private sector health care costs. Since Medicare and Medicaid mostly pay for private sector health care, an explosion in private sector health care costs would eventually make these programs unaffordable.

SNIP

In fact, in the last year nominal spending on health care services, the sector that comprises almost two-thirds of health care costs, rose by just 1.7 percent. This is far below the rate of nominal GDP growth over this period, which was more than 4.0 percent. While at least some of this slowing in health care costs is undoubtedly due to the downturn, it is hard to believe that it is not at least partially attributable to a slower underlying rate of health care cost growth.

CBO and other budget forecasters can ignore economic reality for a period of time (they ignored the housing bubble until after its collapse wrecked the economy), but if it continues, at some point they will have to incorporate the trend of slower health care cost growth into their projections. When this happens, the really scary long-term deficit numbers will disappear.

A projection that assumes that health care costs will only rise as a result of the aging of the population, and otherwise move in step with per capita income, will lop tens of trillions of dollars off the most commonly cited long-term deficit projections. It would cost some deficit hawks, like National Public Radio, more than $100 trillion of their long-term deficit story. This would be a real disaster for the deficit hawk industry.

This is why the Campaign to Fix the Debt and the rest of the deficit hawk industry will be operating at full speed at least until a budget deal is reached over the current impasse. If CBO adjusts its long-term health care cost projections downward then their whole rationale for gutting Social Security and Medicare will disappear. Now that is really a crisis.

I've been cynical about this whole exercise and don't believe we should do much of anything other than stimulate the economy for the time being. I know that this sense of panic over the the whole thing is a contrivance to force unpopular action. But I have to admit I didn't realize that we had evidence emerging that the deficit projections were already falling short and that there's good reason to suspect that they will be far short of what these fearmongers are selling.

But solving non-existent problems while avoiding real ones seems to be the new American way.

Has anyone even mentioned the fact that we still have 7.9% unemployment? Is that the new normal?

David Atkins:

The fact that everyone in the Village Media has bought into the deficit obsession as it were a real thing rather than simply the latest iteration of a decades-long tactic designed to further enrich the wealthy shows not just herd mentality and willful blindness. It shows a craven willingness to go along with direct economic sabotage and shameless lying in the guise of politics as usual.

It's moral tragedy on a grand scale.

The whole world is begging us to take their money at negative interest rates.  That's $10 trillion dollars basically for free.  Let's grab it and use it to create 10 million jobs to rebuild our infrastructure. Do it now.

As Charlie Piece never tires of repeating, because it cannot be said often enough:

Fuck the deficit. People got no money. People got no jobs.