America’s Infatuation with Debt: Part One

I was watching TV with a couple of my friends when we came across some evening news program. The headline on the bottom of the screen read something like, “Sequester signed into law: will this solve America’s debt problem?”

Big surprise: no one reacted but me. I turned to the room and asked “So what do you guys think of the sequester?”

That was supposed to be a joke. It’s hard to find a 20-year-old in this country who doesn’t immediately tune out once the conversation turns political. I doubted anyone knew what sequestration was, let alone cared. Still, one person responded.

“I think it cuts down on a lot of wasteful government spending,” he said. “Which is good, because we need to address the deficit problem this country faces.”

That’s a predictable response. Impulsively the notion of general spending cuts sounds attractive to anyone who really has no idea what’s being cut, or why. But I played along. I wanted to get my friend to think a little harder. So I asked him my single favorite question to ask anyone when it comes to fiscal policy: “Why is that good?”

More often than not that’s where that conversation ends. He couldn’t tell me the difference between the debt and a deficit, let alone spell out the alleged benefits of austerity during an economic slump. And still, like a broken record he insisted that excessive government expenditure—not unemployment—was the issue that needed to be addressed now, now, now.

My friend doesn’t stand alone in that presumption. A Pew Research (PRC) poll from July 2012 sampled 1563 registered voters nationwide and found that 23% agreed the “budget deficit” was the most pressing issue in last October’s election. Yet out of that same 23% less than half thought Medicare, Medicaid, military benefits, military research or border patrol should be cut. That’s awfully hypocritical considering the March 1 sequestration—forced into action by deficit hawk logic—includes cuts to all of those areas.

So where does that disconnect come from? How does it make sense that so many people support a budget, but at the same time oppose its contents?

To address that question we’ll start, of all places, at Starbucks. Last December the chain’s CEO, Howard Schultz, sent a mass e-mail to his employees urging them to write “come together” on coffee cups because, “our elected officials in Washington D.C. have been unable to come together and compromise to solve the tremendously important, time-sensitive issue to fix the national debt.” He capped the message by suggesting readers further educate themselves at the website of the organization Fix the Debt.

Mr. Schultz (a highly respected man in the business world) was referring to the combination of tax hikes and spending cuts (sequestration) known as the “fiscal cliff” which—if enacted on January 1—would have sent the economy spiraling back into recession for the first time since 2009. However, that would not have been because of a failure to cut the debt or any deficits, as Mr. Schultz implies, but the exact opposite. The government would have been trimming debt too fast.

So how is it that the CEO of a Fortune 500 company—someone who should be more than familiar with macroeconomic fundamentals—confused such a basic concept? Because like that 23% of Americans who voted in the Pew Research poll, he gets his information from the wrong people.

Fix the Debt—the website Howard Schultz recommends his employees become familiar with—lists among its core principles cuts to entitlements that Americans overwhelmingly support, such as Medicare and Social Security. But hey, at least that’s logical. If your de facto goal is to cut debt immediately, regardless of the human pain that imposes, you have to make spending cuts.

Rather, the moment when it becomes clear Fix the Debt really doesn’t care about the debt at all is when it proposes tax cuts, which would leave the government with less revenue to pay off debts. Instead they propose closing tax loopholes and deductions (the Romney plan), but fail to cite any specifics (still the Romney plan). It’s hard for me, and should be hard for anyone else to believe that an organization is serious about trimming debt when it proposes no concrete revenue increases whatsoever.

Fix the Debt is just the latest brainchild of billionaire Pete Peterson, who sponsors a hearty platter of conservative think tanks like the Committee for a Responsible Federal Budget and the Fiscal Times newspaper. He is but one of a very small, yet overwhelmingly powerful group of people whose core goals are no more profound than those espoused on Fix the Debt’s website. These are the same people who get their economic advice from the likes of Glenn Hubbard, the Heritage Foundation, and the Wall Street Journal’s editorial page.

These people have no interest more than cutting programs like Social Security and Medicare (which cater to the lower middle class) at the expense of preserving the cushy Bush tax cuts (which cater to the wealthy). They simply disguise that ambition behind deficit scolding logic, hoping they confuse people into voting against their own interests along the way. As the PRC poll has demonstrated, that strategy works remarkably well.

The March 1 sequester is but the latest round of such deception in action. It’s a series of cuts so arbitrary and stupid that they were actually designed to force Congress to compromise on a deal. That didn’t happen, and now projections by the think tank Macroadvisers predict roughly 700,000 American jobs will be sacrificed by the year’s end.

Those are predominantly middle class jobs, ranging from military personnel, to border patrol officers, to tour guides at the Holocaust Museum. They have families, bills to pay, and lives to live on an already constrained budget. Now they join the ranks of the unemployed and will suffer immeasurable financial and emotional damage.

That will all come at the expense of a few extra bucks for the guy who buys think tanks in his leisure time. If that doesn’t make you angry, you are part of the problem too.

Dave Sweet
Pierce Arrow Editorials Editor 

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