Our nation is a sinking ship, our national debt* is the hole and the only thing to do now is throw social programs overboard and hope the rest of us can swim. At least, that’s what the deficit hawks want us to believe. And many people.
To be clear, I do not dispute the fact that our country is in debt; our country was born into debt and minus the few years preceding the civil war, we have remained in debt since 1776.
What I do not believe is that balancing our budget by means of throwing vital programs overboard is the only conversation we need to be having regarding our country’s welfare and economic growth. A narrative that places balancing the budget through spending cuts at the forefront of the national conversation hinders our ability to discuss necessary spending that will serve as an investment in long-term growth, productivity and in our nation’s workers.
To understand the debt situation our nation faces, we must look at the federal debt as a percentage of GDP. The federal debt held by the public as a percentage of GDP at the end of the fiscal year 2015 was 75%. And, while this is higher than our debt has been since 1950, it is not unusual for it to be this high in years following an economic disruption.
World War II, for example, left us with debts over 50% well into the 1950s and peaked at 103% in 1945. Rather than ruining us, our nation’s spending in response to WWII actually helped propel our economy out of the Great Depression. And after the war was over, rather than cutting taxes and social welfare programs, we invested in our economy and its workers. The GI Bill, for example, was set up through government spending with a goal to allow returning (white) soldiers to get an advanced degree that would lead to well-paying work.
The GI Bill also provided affordable housing (again, for white families) and tax rates remained above 70%, which is nearly double the highest tax rate today. All of this resulted in higher purchasing power of a more robust middle class. Imagine if the GI Bill had been seen as unnecessary spending. Better yet, imagine if something like the GI Bill was made available to all Americans, and this time without racist overtones. Millions of families still benefit from the support previous generations received and if spending like this could be used to assist families today, we may actually be able to begin to deal with our nation’s widening wealth inequality.
So why are deficit hawks focusing so intensely on cutting programs such as social security? In his book Debtor’s Prison: The Politics of Austerity Versus Possibility author Robert Kuttner highlights a mixture of self-interest coupled with a strong anti-government sentiment. By keeping social security a government program, big banks miss out on huge sums of money flowing through their systems and instead the government is responsible for a relatively secure and popular program. Banks hate to lose popularity contests to the government.
Additionally, there is a fear that deficits will cause higher interest rates and increases in inflation, scaring away investors from the private sector. But what has actually been shown is that when the government increases spending, much of the increased demand for services results in a higher need for private sector production, which actually acts as an incentive rather than a deterrent.
It’s time to push back against this narrative of reducing our debt by cutting spending period. Our economy is more complex and requires investment in order to engender long-term economic stimulus. Our collective debt is not a scary phenomenon that should be avoided at all costs. Rather, we should view this debt as a necessary tool that ebbs and flows and can be utilized to grow our workforce participation and social wellbeing. Placing a further burden on America’s workers by cutting vital programs will not save a sinking ship. Investing in these workers and, subsequently, in our nation’s economic growth is enough to build a solid ship and is the only rescuing we need.
*Pro-tip: The debt is different from the deficit. The deficit is the amount of debt we accrue each year while the debt is the total amount of money we owe. This is why the deficit can be decreasing while the debt is still increasing. Many politicians use these terms interchangeably; don’t let them fool you.
Poverty Alleviation Concentrator