Dean Baker | The Serious People Are on the War Path

[eridani]

http://www.nationofchange

The Serious People in Washington, such as the Washington Post (both the opinion and news sections), the Wall Street Campaign to Fix the Debt, and the Republican congressional leadership are in a full budget-cutting frenzy. They demand cuts to Social Security, Medicare, Medicaid and everything else that benefits middle-income and poor people because, well because the market demands it.

And we know the market demands these cuts because the Serious People told us the market demands these cuts. The fact that the cuts have the effect of redistributing income from the rest of us to the Serious People and their friends is just a coincidence.

Those of us who focus on numbers and data might see that we actually have near record-low interest rates on U.S. government debt, suggesting that the markets aren’t at all concerned about budget deficits. We can also point out the obvious truth that budget deficits are supporting the economy given the loss of more than $1 trillion in annual construction and consumption demand as a result of the collapse of the housing bubble.But the Serious People in Washington don't have the time to deal with the stinkin’ numbers. They have worked themselves into a full-fledged budget-cutting frenzy.

[MrYikes]

1. I sometimes go to the zoo just to watch this stuff.

They get so engrossed in the action, they start eating each other. It's fun to watch.

[JLII]

2. US national debt: McGuffin or not?

> Those of us who focus on numbers and data might see that we actually have near record-low interest rates on U.S. government debt, suggesting that the markets aren’t at all concerned about budget deficits. - eridani

Markets aren't concerned - yet. It seems worth noting that the US is the safest haven for wealth. Lack of alternative safe havens is the primary basis for today's low interest rates on US debt.

Budget deficits might be "supporting the economy" more efficiently had Bush or Obama simply persuaded congress to eliminate federal income taxes on the first forty- or fifty-thousand in earned income. Folks below that range tend not to be savers; that money would quickly have gone into the economy at the bottom where increased demand would likely have had the US economy further along what appears to be an eight to twelve year recovery period - but could also be an adjustment period into permanent new realities.

Instead, Bush and Obama put stimulus money in at the top, directly rewarding Wall Street malefactors as well as rewarding inefficient state and local governments, both groups contributors to the collapse. Wall Street through avarice; state and local governments by engaging immense pension funds in speculative investments (see, derivatives).