Today, the debate in Washington about the debt ceiling and budget deficits has been skewed beyond recognition, endangering the viability of government as an effective instrument of popular will. The intent to cut federal spending in the face of a crisis of demand in the private economy is currently shared by mainstream political actors of both Parties, even though many distinguished economists and enlightened businesspeople see a severe economic downturn ahead if government spending is cut dramatically. Those few who have an understanding of macroeconomics have been until now effectively shut out of the discussion. Fragments of real economic concerns are embedded in largely false narratives about the economy and trotted out for the political and economic benefit of established players or added to a chaotic whirl of words that benefits no one.
Official Washington’s alarm about rising public budget deficits is entirely mistimed from the point of view of the welfare of the American people and the stability of the economy; politicians are striving to appear as the most virtuous budget cutter at a time when households are struggling under past debts and can’t afford to buy new goods and services, shrinking the overall economy. Government spending is, for the economy as a whole, the only way out at this time, even if at a later date this spending will need to be curbed. On top of deficit mania, is the use of the threat of not raising the debt ceiling by Republicans to demand even more savage cuts to the economic role of government and to the already fragile social safety net. These deficit terrorists are trying to realize their quixotic, nostalgic dream of a “limited government” society that will start to look more and more like the world of Mad Max or 19th Century America with grinding depressions every decade or two, vast social inequality, and violent social unrest.
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