The United States has more than 25 million people unemployed, underemployed, or out of the labor force altogether because of the weak economy. Investors are willing to make long-term loans to the country at 1.5 percent interest. The idea that the budget deficit should be the country’s major concern is close to loony, but nonetheless in policy circles that seems to be the case.
This is best demonstrated by Niall Ferguson’s nutball column in the Financial Times, which we are warned is only the first of four. I would tear this thing to shreds but I want to get some sleep tonight.
I’ll just pick one choice nugget. Ferguson tells us:
“The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly thirteen times the debt as stated by the U.S. Treasury.
Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.”
Hmmmm, $200 trillion at the federal level and $38 trillion at the state and local level? Can we get a source for this? Is there a date there for when the Martians will attack Planet Earth?
In fairness, there are nutty projections that assume that per capita health care costs in the United States will be four or five times as high as in all other wealthy countries. If this proves true, over an infinite horizon we will have a very bad deficit problem. Of course, these health care costs would wreck our economy regardless of what we do with public sector health care programs. These projections would cause serious people to talk about the need to fix the health care system. But this is national economic policy that we are talking about.
But this piece suggests an easy route for dealing with the deficit. Clearly there is a big market for deficit hawks. (I assume that Mr. Ferguson was well-paid for this piece.) It certainly is not difficult to train someone to write this stuff. Suppose that we set up educational programs that will train millions of deficit hawks to write stuff for the Peter Peterson–BBC–Financial Times crew. We split the payments between our former students and the government.
This would be a great win-win-win story. Otherwise unemployed college grads could get good-paying jobs being deficit hawks. Taxpayers would get a cut of their payments, helping to bring down the deficit. And, even Peter Peterson, the BBC, and the Financial Times would gain because they would be able to find deficit hawks who would be every bit as knowledgeable as Niall Ferguson and would work for much less. (We could assure the deficit hawks that our students would not be more knowledgeable because then they probably would not write such dreck.)
There you have it: a plan for compromise and bipartisanship. Do we have a deal?
###
Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’s Beat the Press blog, where this post first appeared.




12 Comments

You have my vote for such a deal. Now, have a happy Fathers’ Day, Dean.
Recc’d.
As it becomes clearer and clearer – excruciatingly clear – that elite and wealthy of the nation only prioritize their own self-interests, at cost to everyone else, and present us with unreal or simply dishonest explanations of what guiding political and economic understanding it is that guides them, I am only left to ask: “Now what?”
You can understand with perfect crystal clarity what has gone wrong. I think all of us do, more or less. So, now what? Will we continue to endlessly sermonize each other with facts and views we all agree with? Is that the limit of the possible?
Book Salon up with Bruce Schneier’s Liars & Outliers: Enabling the Trust that Society Needs to Thrive hosted by James Fallows
Even if I bought into the incredibly stupid meme that nations need to act like “families” and balance their budgets, I would like to point out that I do NOT include the future cost of living as a liability into my families accounts even though I clearly have “future liabilities” such as eating, utilities, housing, transportation, etc. By the definition they use to compete future liabilities for nations as applied to my family, I would end up being millions in debt too (given how long I plan on living).
But even laughing at the above, why do we ignore the tremendous amounts of money (trillion, if not tens of trillions) we have spent over the last couple of years bailing out the banks and people that caused this mess, and continue this stupid charade of worrying about debts that happen decades to multiple decades in the future.
Pissing and moaning about the “entitlements” I’ve worked my whole life earning is all just a bright shiny object to distract the uninformed masses.
I lost respect for Ferguson after reading his bullshit history of the First World War. Quite the propagandist/revisionist he is.
Mitt was quoted today saying that government spending is 37% of GDP. A quick check of the intertoobs indicates Conservatives (and Cokie Roberts) use 35%-40%, while everyone else uses 20%-25%, the difference being whether or not “transfer payments” are included. This apparently is mostly self-funded programs like social security, which means that conservatives seem to think that when the bank gives you back the money you’ve deposited, that that is an “expense,” something that would make an accountant double over in laughter and get the IRS going on penalties.
Of course this is difficult to find and the MSM is a fail on it (Politifact said that Cokie’s use of 40% was “Mostly True”), so it would be MARVELOUS if you could take a post to talk about it Dean!
Dean here an idea why don’t we don’t get Wall st Executives to strip Peterson and Niall of their wealth through shady dealings and force the two of them to look for work in a jobless recovery…and finally we can tell them we are cutting the safety net for their own good and giving tax breaks to those people who ripped them off! Maybe they will change their tune about debt vs jobs!
I don’t believe that’s a hawk in the photo. Just saying:)
The assumpstions in that projection are amusing -
health care cost grow past the point they are 100% of GDP LOL
God save us from fools with Excel spreadsheets.
Indeed Federal tax collections do not revert to the 21% of GDP norm but stay at todays level of many percentage points below that.
The projection is over forever number of years (heck even Social Security does not pretend more than 75 years in their annual projection) and used an interest rate to discount that is very low, all so as to make the number higher.
Toss in variables (the know that we don’t know phrase of the GW Bush folks comes to mind) – the included – and the ignored – that make the projection a joke even by spreadsheet standards, and we something the media can run with.
I wasn’t aware of it–but wiki’ing it–YIKES! A German victory in WWI would have been a *good thing*?? That’s some “imaginative” history Ferguson has going there.
-stewartm
Every time a baby is born, that baby has “unfunded” liabilities. What parent has enough money in the banks for food, shelter and clothing. Throw in a college education and the “unfunded liability” goes way up.
What about a house mortgage. How many people don’t have the money in bank to fund the mortgage when they take it out.
Go stick your unfunded liability argument where it belongs!
My Conserv. relatives and pals argue the problem isn’t lack of demand, it’s too much Gov’t spending. By their logic you need to lower demand caused by Gov’t spending and lower taxes so that business people and the wealthy ( who they say pay ALL of the taxes) will then feel confidence ad invest and grow the economy. How you get out of the deflationary spiral you’ve just caused by cutting demand by lowering Gov’t spending they don’t specify ( you just have to have faith they tell me , it worked once here in 1922 and in Sweden the last few yrs.) If Willard gets elected and its increasingly likely he will this is what we can expect, or is it? They also say you need to massively increase DEFENSE spending at the same time, because of all the threats they see out there. So the game here is in reality they really want to increase Fed. spending like Reagan did, but only on DEFENSE / WAR. In reality they’re real program is what I call Conservative Keynesianism AKA WARSRUS ! Austerity is only for losers.