Fallout: The Financial Crisis

There’s such a thing as a smart deficit

Marketplace Staff Oct 31, 2008
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Fallout: The Financial Crisis

There’s such a thing as a smart deficit

Marketplace Staff Oct 31, 2008
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TEXT OF STORY

Kai Ryssdal: Running this country is tough enough even when things are good. But whoever is elected next week, to the White House and to Congress, is going to inherit a seriously hobbled economy and sky-high deficits. That means presidential ambitions might well have to be curtailed.

Commentator Thomas Frank says whether government deficits are good or bad kind of depends on how the money is spent.


Thomas Frank: This is one of history’s great paradoxes: Again and again we elect deficit-denouncing conservatives to office, and again and again they proceed to run up gigantic federal deficits.

Why do they do it? Well, for one thing, deficits allow them to reward their constituents; They can cut taxes for the very rich while sluicing money to politically-connected contractors.

For another thing, deficits allow the conservatives who piled them up to demand that social programs be cut, that government operations be outsourced, that Social Security be privatized.

And now we have a conservative Republican running for president who is outraged by the deficits run up by another conservative Republican. That candidate, John McCain, promises — and you guessed it — a balanced budget in his first term in office. After all, his campaign tells us that individual families don’t get to run deficits — they have to pay their bills on time, and therefore so should the federal government. So what we need to do is slam on the brakes.

McCain’s approach would be calamitous. The federal government isn’t a family; it’s allowed to run deficits when they’re called for, and believe me, they’re called for right now when we’re in recession and everything is contracting.

Maybe there’s another way of looking at the problem. Suppose we understand the current deficits that benefited the rich and the well-connected as stupid deficits that didn’t stimulate much more than the market for yachts and lobbyists. Smart deficits, on the other hand, would come from federal spending that gets the economy going again. Spending money on infrastructure, on stabilizing the housing market and on a massive energy independence program — that’s the kind of energetic and intelligent governing we so urgently need today.

Look, the alternative is to deliberately bring on some economic day of judgment. But the right answer to our problem is not to steer for an iceberg while shouting ‘every man for himself!’

Ryssdal: Thomas Frank is a columnist for the Wall Street Journal. His latest book is called “The Wrecking Crew: How Conservatives Rule.”

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