Sep
01
2009

The Deficit Distraction

Media push spending cuts over stimulus

Money/Photo: Flickr of 401(k) 2012

Money/Photo: Flickr of 401(k) 2012

Parroting the Republican Party, corporate media have recently devoted much energy to deploring the federal deficit and chastising President Barack Obama for not focusing enough on balancing the budget. Very soon, media warn, either spending must be cut or taxes will need to be raised across the board—an argument that rests on the assumption that deficit reduction is, indeed, the top economic priority. Under the headline “Obama’s Risky Debt,” Washington Post op-ed columnist Robert J. Samuelson wrote (5/18/09):

Just how much government debt does a president have to endorse before he’s labeled “irresponsible”? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.... Consider the extra debt as a proxy for political evasion. The president doesn’t want to confront Americans with choices between lower spending and higher taxes—or, given the existing deficits, perhaps both less spending and more taxes.

The assumption underlying Samuelson’s argument is countered by progressive and centrist economists who contend that during a recession, government deficit is necessary to create social spending that can replace lost demand and stimulate the economy. Mark Zandi, chief economist at Moody’s Economy.com and an adviser to both the McCain campaign and the Obama administration, wrote in an op-ed in the Philadelphia Inquirer (2/15/09):

There are concerns that the stimulus plan’s $789 billion price tag is too large. To pay for it we will have to borrow the money, adding significantly to the government’s debt load. But without a stimulus, the depression would undermine tax revenue and fuel more government spending, producing even larger deficits and debt burdens....Indeed, my most significant criticism of the current stimulus plan is that it is too small.

Nobel Prize-winning economist Joseph Stiglitz said in a speech at the Economic Policy Institute (4/12/07) that achieving important goals in areas such as healthcare and education “will require spending money....If spent well, it’s worth doing, even if it increases the deficit.” And economist Dean Baker of the Center for Economic and Policy Research pointed out in a USA Today op-ed (7/14/09) that in 1946, at the start of a multi-decade economic boom, the national debt was 120 percent of GDP (versus a projected 57 percent of GDP by the end of this fiscal year—Congressional Budget Office, 3/09).

Yet corporate media have largely marginalized these perspectives, instead focusing on balancing the budget; the most frequent solutions offered are cuts in social spending, primarily Social Security, Medicare and Medicaid. In a discussion on healthcare and the deficit, Lou Dobbs (CNN, 7/24/09) went so far as to say that “there is no way in the world that any further expense can be justified for any program.”

A few months earlier on Dobbs’ show (CNN, 1/6/09), former Comptroller General David Walker claimed that “as of September 30, 2008, the total liabilities in unfunded promises for the U.S. government for Social Security and Medicare alone exceed the total net worth of all Americans,” to which Dobbs responded: “There’s no way to put that number in context. My god, it’s...mind-boggling.”

USA Today (5/29/09), citing Walker, warned that “taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises.” What the article did not make clear is that the big numbers it tossed around—$63.8 trillion in federal obligations! $546,668 per household!—are based on what it would take to fund government social programs for eternity—a concept that is virtually meaningless.

While Social Security, a frequent target of media scare campaigns (Extra!, 1-2/05), isn’t projected to run into any trouble for almost 40 years (Beat the Press, 2/1/08), healthcare costs are a serious issue: The federal government currently shoulders about half of private healthcare costs through programs such as Medicare and Medicaid (CEPR Health Care Budget Deficit Calculator, cepr.net). While an overhaul of the costly system is clearly crucial to reducing the long-term deficit, the New York Times (6/26/09) asked if Obama can really make big changes “without adding to already huge deficits.”

When Vice President Joe Biden commented on ABC’s This Week (7/5/09) that everyone, including the White House, had “misread” the magnitude of the economic crisis, commentators such as Larry Kudlow of CNBC (7/6/09) and Sean Hannity and Greta Van Susteren of Fox News (7/6/09) jumped to say that the stimulus package, a mistake to begin with, “had failed.” Van Susteren argued, “If they’re now saying that they misread it in January, then this whole policy—this whole plan, $787 billion, is based on a house of cards...on a false reading.”

These commentators failed to mention that many prominent economists think that there has not been enough stimulus spending—even though ABC’s George Stephanopoulos had actually raised the point in his interview with Biden: “A lot of people were saying that you needed to do something bigger and bolder then, including the economist Paul Krugman.” Krugman wrote in his New York Times blog (7/5/09):

The problem, in other words, is not that the stimulus is working more slowly than expected; it was never expected to do very much this soon. The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted. That—coupled with the fact that, yes, stimulus takes time to work—is the reason for a second round, ASAP.

And Baker argued in a USA Today op-ed (7/14/09):

$300 billion a year in stimulus will not offset a $1.3 trillion drop in demand, just as we can’t lose 50 pounds by taking a walk around the block. We need more aid to state and local governments and other forms of stimulus. The anti-stimulus crowd is trying to scare the public by touting big deficit numbers and whining about the burden on our children. This is a complete misrepresentation of economics.... Unemployed parents being evicted from their home is a burden on our children. Running deficits to create jobs is not.

Economists’ voices are rarely heard in media discussions of the economy, however. In a study of Sunday talkshows and 12 cable news shows between January 25 and February 15, 2009, the liberal advocacy group Media Matters (2/24/09) found only 6 percent of guest appearances on discussions about the economic recovery legislation in Congress were made by economists. Another Media Matters report (3/6/09) found that during the same period, only three of 59 broadcasts on ABC, CBS and NBC evening news shows addressing the economic stimulus package in Congress included discussion of whether the stimulus was big enough.

Given this sort of media coverage, it’s not surprising that pollsters find increasing public concern over the deficit. The New York Times reported (6/18/09) that “Americans are alarmed by the hundreds of billions of dollars that have been doled out to boost the economy,” citing a poll (6/12-16/09) in which 52 percent of respondents said the federal government should focus on deficit reduction, up from 46 percent in April.

Two days later, Savannah Guthrie reported on MSNBC’s Morning Joe that “American voters [are] not buying” the White House’s line that most economists agree spending is necessary to get out of a recession, citing an NBC/Wall Street Journal poll that showed 58 percent of Americans want the government to focus on deficit reduction, while only 35 percent want the focus on boosting the economy. Other networks reported similar poll findings, generally failing to mention that many economists disagree with the public’s view (e.g., NBC Nightly News, 6/17/09; CBS Evening News, 6/17/09).

Incomplete reporting and Republican fear-mongering have made the deficit a political “liability” over which “the White House has become increasingly concerned” (Washington Post, 6/14/09). And when Politico’s Mike Allen appeared on MSNBC’s Morning Joe to discuss the deficit reaching $1 trillion, he seemed to endorse the Republican attacks (Media Matters, 7/14/09):

The point is, this is an awesome issue for Republicans, that by pointing to this, it’s the maybe one way they have to stop momentum for some of these other Obama programs. The president has sold healthcare and climate by saying they will fix our economy, but if Republicans are able to make the case that in fact they’re further endangering the economy—as we look at these crazy numbers—a trillion dollars with three months left in the fiscal year.

Although Obama says he “make[s] no apologies for having acted short-term to deal with our recession,” he appears to have bowed somewhat to budget-balancing pressure, claiming sleeplessness over the deficit (Washington Post, 6/23/09), and declaring his intention to create a deficit-neutral healthcare bill (New York Times, 6/26/09).