Debt Scolds: Pay No Attention to the Falling Deficit!
By Jonathan Chait, New York Magazine
October 8, 2014 3:21 p.m.
The Congressional Budget Office announced today that the federal budget deficit for fiscal year 2014 came in at $495 billion, almost $200 billion below the previous figure and probably low enough for new reports to stop calling it a “trillion-dollar deficit.” Within minutes, Washington’s debt-scold community sprang into action to guard against complacency. It is true that the deficit is falling right now, they warn. But right now is not the problem. Later is the problem. “Unfortunately, Washington’s myopic focus on short-term deficits has likely slowed the recovery by cutting deficits somewhat too fast in the short term while leaving substantial imbalances in place over the long term,” laments the Committee for a Responsible Federal Budget. Maya MacGuineas likewise protests, “Our leaders are focusing on the short term when we should be looking at the medium and long term.”
(W)here were the debt scolds when the short-term deficit was high and the business and political communities were freaking out? Their belief in patience and the long view might have helped the political system avoid its disastrous turn toward austerity. Instead they fomented panic.
That analysis turned out to be completely wrong. Interest rates were not rising in 2009. Indeed, they remain extremely low even five years later.
In September of that same year, MacGuineas was insisting that deficit-financed public spending could not work because the deficit was too large.
The fiscal crisis still showed no signs of occurring. Still, two years later, Erskine Bowles cautioned that it would occur in “maybe two years, maybe a little less, maybe a little more.” As recently as last year, MacGuineas wrote, “The federal debt is the nation’s most pressing economic problem.”
Now they concede that it is not actually the most pressing problem but merely something we’ll need to get around to. This could have been brought to our attention yesterday.