Deficit Hawks Come Home to Roost
I agree with William Greider: Obama should not heed the deficit hawks [“Deficit Hawk Hysteria,” Nov. 16]. Greider’s look at the World War II deficit,120 percent of annual GDP–double today’s level–supports this. During the war there were shortages of consumer goods and rationing. But we were able to make a remarkable transition from a guns to a butter economy, absorbing the millions of GIs no longer needed for military duty. In contrast, we have 10.2 percent unemployment and stimulus spending that could turn into stagflation. Still, stimulus is what the economy needs now, and green jobs might work if there were something to cap consumer prices and spending. Perhaps precautionary saving to avoid the possibility of layoffs, with government policies encouraging savings–i.e., through the issuance of “energy independence bonds”–might work. And perhaps increased savings could be combined with higher energy prices and subsidies derived from auctioning cap-and-trade allowances.
William Greider, Paul Krugman et al. have learned their history lessons. It would be a mistake to tighten our belts, as Franklin Roosevelt learned. But we are not living in the 1940s, and the hyperconsumerism Greider advocates to move the economy out of its doldrums (whether it originates with the feds or us) is not sustainable.
Many readers were offended, even appalled, by my plea for big spending from Washington to restore the economy. These two letter writers are on board for the concept if not all the details. “Hyperconsumerism” is the opposite of what I proposed. I foresee a period of austerity in which consumption is essentially suppressed so households can save and restore their balance sheets. The economy would be driven instead by government investment in future production and the industrial transformation to a less profligate, more sustainable society. It is not World War II, but we are in an epic emergency.