Deficits and Prosperity

We should have very serious questions about the bona fides of those people who’ve suddenly discovered the budget deficit, endowed it with a fierce urgency, and claimed that their anger knows no party. As they say, virtue never tested is no virtue at all.

We should also question their messaging. If you want to make the argument that the deficit will “defeat a great nation,” and that the solution is balancing the budget NOW, the place to do it may not be Times Square:

Click to enlarge; the poster in the upper right.

First, Times Square probably isn’t the demographic for this sort of campaign. From the gaudy lights to the piles of tourists assembled even on a cold February afternoon, it’s plain Times Square suffers from neither the recession, nor the immediate effects of our admittedly increasing national debt. And, if there’s a place that proves leveraging and government action work, even in the face of short-term deficits, it’s Times Square, brought out of the gutter in the 1980s by Mayor Koch, who brokered long-term no-tax deals with national chains to attract business to 42nd Street, in the hopes of displacing what had become a small red light district. Now you have to go as far as Eighth Avenue if you want porn — ah, progress!

Smart economics takes time, and it can’t be explained on a billboard. Despite what it says on Sarah Palin’s hand, decreasing the deficit isn’t a matter of cutting spending, and calling it a day. It is past time to talk about the deficit, but a serious discussion starts by severing the mental link between checkbook math, and finance writ large.

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One comment

  1. The deficit-screamers seem to have basic misconceptions about gov’t and deficits. The gov’t is not, and cannot, be run like personal finances or a small business (where deficits are an immediate worry), or even a global business (the business must make money to be valuable). Rather the gov’t is more akin to non-profit enterprise that most of the country uses. As such, a deficit (within reason) is not a huge concern. The deficit as it is now, of course, is a large concern, and must be dealt with in the close future.

    Unlike businesses, which invest in people and infrastructure in the upturns, gov’t must invest in the downturns. Gov’t must spend money to shore up the consumers/contributors (that’s the general public) so that the contributors can continue to provide funds to the gov’t. If folks cannot find jobs, they cannot send money to the gov’t, which means that the gov’t will not have money (even with the deficit) to send back in terms of benefits and infrastructure spending.

    It’s a situation that’s opposite from normal business behavior. Simply put, the gov’t must extend its credit for the short-term to build up the base so that later, long-term, the spending and credit can be curtailed and the deficit reduced.

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