Cheney Was Right: Deficits Don't Matter

But it sure as hell does matter that Democrats in Washington are preparing to shred the already tattered social safety net in the name of meaningless deficits.

Digby:

This is where I think rhetoric plays a big part. Nobody's making any argument against cutting spending. The need for a big deficit reduction plan is an article of faith and the question is only if they can get Grover Norquist to sign off on raising some phony tip money from millionaires or if they can out-maneuver the Republicans on the Bush tax cuts and raise some money that way. So, if a faction of progressives were to obstruct any deficit reduction bill that incorporates the stated goal of raising taxes "a little bit" on millionaires, it would be greeted with stunned disbelief. After all, that's what has been touted as the big victory for the Democrats.

If the Party, including the President, would drop all this "balanced approach" hoohah and ran solely on the idea that we need jobs and growth and that worrying about deficit reduction right now is like selling your car to pay for your new couch while your house is burning down, some Democrats might be able to block a new Simpson-Bowles-PetePeterson-Grand Bargain extravaganza. At least people would understand that they are not doing it out of unreasoning petulance. But that's not happening so we are stuck hoping against hope that Grover Norquist still has enough juice to blow up this deal one more time. I don't know if he does.

Read the whole thing.

Actually, someone is making the argument against cutting spending. It's just not anyone establishing Democrats pay any attention to: the Congressional Progressive Caucus.

Down with Tyranny:

Congressional Progressive Caucus co-chairs Raúl Grijalva (D-AZ) and Keith Ellison (D-MN) have asked their colleagues in the caucus to sign on as cosponsors to a Resolution that expresses "the sense of Congress that any deal replacing the 'Budget Control Act of 2011' must contain serious revenue increases and no Medicare, Medicaid, and Social Security benefit cuts. Each member of the caucus got a note from Grijalva and Ellison asking them to sign up and explaining why they have to move now.

With the start of sequestration and the expiration of the Bush tax cuts coming at the end of the year, we are already beginning to hear discussion of another attempt at a “grand bargain.” Unfortunately, the debate has focused on just how far we are willing to go in making deep cuts to government spending.

These debates have already placed Medicare, Medicaid and Social Security at risk. Democrats must insert themselves into the national debate and push back against cuts to these much needed social programs, which are overwhelmingly supported by Americans. In addition, we must show there is a block of votes that will stand against a deal that doesn’t include serious revenue increases to prevent drastic cuts to programs that middle class families and those who aspire to the middle class rely on.

We invite you to join us in cosponsoring a resolution that sets out our requirements for any deal on taxes and spending replacing the Budget Control Act. This resolution firmly states that we will not accept a bargain from Congressional Republicans that balances the budget or reduces the deficit on the backs of working families. In addition, this resolution declares the necessity of reduced defense spending to focus on modern threats and increased economic growth through strong levels of job-creating federal investments.

Within a couple hours they already had 40 co-sponsors and they're calling the Resolution, the Deal For All, which will serve as a framework for progressives during the Grand Bargain negotiations. Here's the exact wording as it went to congressional offices (in July).

Read the whole thing. Then send it to your Congress critters and demand they sign on.

Oh, and why don't deficits matter? Let the Voice of Courage, Alan Grayson, explain:

I must concede that it is rather difficult to reconcile the conflicting statements of these two gentlemen, Messrs. Levin and Cheney. Evidently, they believe deficits are a terrible tragedy when a Democrat is President, and a wonderful gift when a Republican is President.

There has got to be a more objective standard than that.

Here's one: the federal deficit is a problem when long-term interest rates are high, and not much of a problem when long-term interest rates are low. The Federal Reserve dictates short-term interest rates, but long-term rates still are, pretty much, set by the market, in its usual ruthless fashion. (Which is why James Carville said that after he dies, he "want[s] to come back as the bond market. You can intimidate everybody.")

When long-term interest rates are high, a federal deficit competes against and "crowds out" private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as "fiscal policy." When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.

So, by that test, where are we? Well, as I explained last week, long-term U.S. interest rates are at their lowest in history. So what does that tell you about the deficit?

Sorry – I didn't mention that there was going to be a quiz.

When Ronald Reagan was President, long-term interest rates sometimes exceeded 15% – ten times as high as long-term interest rates today. The market was screaming at the top of its lungs that the Reagan deficit was too high. And today? Silence.

Look around the world. The ten-year note in Greece yields a little less than 30%. Pakistan, 13%. Portugal and Venezuela, 12%. In those countries, the bond market is shouting, "Cut that out!"

Not here.

Thanks to all the deficit-mongering by Mark Levin, Rush Limbaugh, Fox "News," etc., a lot of Americans are scared by the federal deficit. The advice from Democratic pollsters is to go along with this hand-wringing. But there is an alternative: Explain to the American people when a federal deficit is bad, and when it is not.

Like I just did.