The brutal consequences of Republican deficit hysteria

In case you've been thinking that the impending sequester is just the bitter medicine America needs to get its fiscal house in order, you might want to reconsider. This bitter medicine will knock the house off its foundation almost certainly trigger the next Great Depression.



James, would you mind defining "Republican deficit hysteria?" I understand this is a blog and the internets is disposed to hyperbole, but a BlueNC tweet with this headline caught my eye this morning and I wanted to know more about this hysteria.

Thanks for asking

The term is borrowed from the title of an excellent book written by Art Benavie, an emeritus professor of economics at UNC. The book explains the technical, economic, and social underpinnings of the deficit. It is a common sense look at America's rush to balance the budget.


seeing that I don't have a copy available immediately, how does Mr. Benavie define "hysteria?" and does he limit his defintion to only Republicans?

Further, when you say "Republican deficit hysteria" are you only referring to Republican's attempt to move towards a balanced budget amendment? Or, are you referring to the Republican's position on our national debt? If the latter, I would just ask you if you believe our current national debt isn't something to be concerned about?

Thanks for the post!

Thanks for the post!

Well, I can certainly

Well, I can certainly understand the human desire to spend without limit, but there is one voice out there from an unexpected sector who has opined that our spiraling national debt is now the greatest threat to our national security...the Chairman of the Joint Chiefs of Staff. And I can certainly see parallels between where we are now and the fiscal policies of the late Roman Empire. I'm sure the Paul Krugmans of the world will say there's no comparison between then and now, i.e., the "it's different this time" mantra, but I haven't seen much justification for that kind of thinking.

Almost certainly trigger the next Great Depression

I will add the "impending sequester" to the list of causes of the next Great Depression as I have been hearing about its coming for some 50 years or so. I keep the causes in my computer but have had to upgrade my drives several times over the years as I keep running out of storage space. So I started storing the causes of the next Great Depression on "Cloud" until someone said storing data on remote sites would cause the next Great Depression. We all know that sequestration will not cause the next Great Depression because the next Great Depression will never happen with a Democrat in the White House. Just a bump in the road if anything at all.

Let's make a bet

I'll bet you $1000 that if sequestration happens as planned and is not overridden or reversed before the end of the year - then the US economy will officially be declared in depression before the end of 2014.

Those are two big its but hey. If you're right you win $1000 on January 1, 2015.


If the Great Depression comes I will be standing in the soup line without a dime to my name and not able to pay the bet.

Well here's hoping that doesn't happen

Seriously. It would be devastating for lots of people.

Now, regarding the original post, the thesis of the book is that deficit spending is a tool, like a host of other economic tools, that can and should be used in pursuit of broader goals. For example, almost every homeowner borrows a large of amount of money when taking out a mortgage. They knowingly and willing put themselves in debt for up to 30 years or more in order to have something they perceive as worth the risk.

Deficit hysteria refers to the kneejerk reaction that deficits must be reduced through spending cuts at any cost ... a hysterical response to a set of circumstances that warrant a more deliberate response. Sequester is among the most hysterical of all possible responses.

The measured response, which moderates have advocated for a long time, involves a combination of spending cuts and tax increases (actual increases, plus closing gaping loop holes, plus treating investment income as ordinary income). Even liberals like me have proposed a combination of spending cuts and tax increases. I personally have called for lawmakers to:

1. create a new higher bracket with a higher rate to raise taxes on millionaires (+)
2. eliminate corporate income tax entirely (along with corporate personhood) (-)
3. tax investment income as ordinary income (+)
4. cut the defense budget by 20% (-)
5. cut all spending on the war on drugs (-)
6. eliminate federal spending on public education (-)
7. end the state lottery and legalizing (and taxing) private gambling (-/+)
8. end tax deductions for charitable contributions (+)
9. institute single-payer healthcare (the most effective way to costs) (-/+)
10. end tax deductions for mortgage interest (+)

+ means it raises taxes, - means it cuts spending and/or reduces taxes

Looks good to me

Can't argue with any of this. It would certainly be a start.

Most of it sounds good.

I do not like #6. If federal spending on Education is eliminated, then all of special education becomes an unfunded mandate which could well put me out of a job.

But not only would it impact little ole me, it would eliminate special services for millions of disabled students who would then be jammed back into trailers and closets with untrained teachers, few resources and little hope of having a decent life.

You might save some money up front, but you would be creating a whole new dependent class of expensive, uneducated citizens full of unrealized potential.

I am also not sure why you conflate corporate personhood with corporate income tax. They do not have to be "people" in order to be taxed.

I actively oppose gerrymandering. Do you?

Good points

If we lived in a world where states were controlled by actual human beings instead of corporate robots, states would fund and deliver services needed. I wasn't arguing against the spending, just the source.

Regarding corporate personhood ... I have found that businesses generally have more rights than people, hence the creation of LLCs. I want to do away with corporations having legal status. No rights. No privileges. No standing. No cover.

This would mean no taxes too, because corporations wouldn't be making money. Profits would accrue directly to individual shareholders who would be taxed according. Also, executives and shareholders would be held personally liable for the actions of their companies. When Duke Energy pollutes a river today and kills a million fish, nobody goes to jail. The corporation takes the heat. I want the CEO to take the heat. I want the CEO to go to jail.

Our system is fundamentally fucked up and totally gamed by business interests, with Citizens United being the new tip of an ugly iceberg.

Gotcha. Thanks for the clarification

As I understand your plan now, what is now called corporate income would be taxed as personal income and likely at the higher rate you proposed. I'll go along with that.

I actively oppose gerrymandering. Do you?