If you’ve been paying attention this past decade, it won’t surprise you to learn that the country’s policy elites are in the midst of a destructive, well-nigh unhinged discussion about the future of the nation. But even by the degraded standards of the Washington establishment, the growing panic over government debt is shocking.
First, the facts. Nearly the entire deficit for this year and those projected into the near and medium terms are the result of three things: the ongoing wars in Afghanistan and Iraq, the Bush tax cuts and the recession. The solution to our fiscal situation is: end the wars, allow the tax cuts to expire and restore robust growth. Our long-term structural deficits will require us to control healthcare inflation the way countries with single-payer systems do.
But right now we face a joblessness crisis that threatens to pitch us into a long, ugly period of low growth, the kind of lost decade that will cause tremendous misery, degrade the nation’s human capital, undermine an entire cohort of young workers for years and blow a hole in the government’s bank sheet. The best chance we have to stave off this scenario is more government spending to nurse the economy back to health. The economy may be alive, but that doesn’t mean it’s healthy. There’s a reason you keep taking antibiotics even after you start to feel better.
And yet: the drumbeat of deficit hysterics thumping in self-righteous panic grows louder by the day. Judging by its schedule and online video, this year’s Aspen Ideas Festival was an open-air orgy of anti-deficit moaning. The festival is a good window into elite preoccupations, and that its opening forum featured ominous warnings of future bankruptcy from Niall Ferguson, Mort Zuckerman and David Gergen does not bode well. Nor does the fact that there was a panel called "America’s Looming Fiscal Emergency: How to Balance the Books." This attitude isn’t confined to pundits. The heads of Obama’s fiscal commission have called projected deficits a "cancer."
The hysteria has reached such a pitch that Republican senators (joined by Nebraska Democrat Ben Nelson) have filibustered an extension of unemployment benefits because it was not offset by spending cuts. Keep in mind, the cost of the extension for people unlucky enough to be caught in the jaws of the worst recession in thirty years is $35 billion. The bill would increase the debt by less than 0.3 percent.
This all seems eerily familiar. The conversation—if it can be called that—about deficits recalls the national conversation about war in the run-up to the invasion of Iraq. From one day to the next, what was once accepted by the establishment as tolerable—Saddam Hussein—became intolerable, a crisis of such pressing urgency that "serious people" were required to present their ideas about how to deal with it. Once the burden of proof shifted from those who favored war to those who opposed it, the argument was lost.