Dean Baker reminds us again that, despite the mounting evidence that the Pete-Peterson-fueled-and-funded deficit freakout and pretext for austerity is bogus, the Usual Suspects at the WaPo won’t stop banging the Austerity Drum. Per the Austerity Hawks, only death panels and putting grandmas on ice floes can save us all — or rather, save rich people from having to pay the same amounts in taxes that they paid in the 1950s and 1960s, the most prosperous times in American history, whose overall and widespread prosperity was in large part due to those high taxes on the rich:
If Samuelson had moved forward two pages in the Medicare trustees report he would have found another table that says that this ["$39.6 trillion is over the next 75 years" - ooh, scary! PW] funding gap is equal to 1.5 percent of projected GDP over this period. Odds are that most Post readers would have some sense of what 1.5 percent of GDP means. Why would Samuelson use a number that is almost meaningless to everyone who reads it when he had the percentage figure calculated right in front of him? I’ll leave that one to readers to guess.
Of course 1.5 percent of future GDP is hardly trivial, but it is not the sort of expenditure that would break the bank. It is a bit less than the increase in military spending that was associated with the wars in Iraq and Afghanistan. My guess is that people would consider this a price worth paying to preserve these programs, but the best way to find out is to accurately describe the cost so that they can decide for themselves.
Since this all interferes with Operation Ice Floe, the austerity-loving, taxes-hating one-percenters who run and write for the media most Americans are likeliest to encounter, you won’t see any of this on the morning or evening TV news in America. Just like you won’t see this latest debunking of the basic assumption behind the Reinhardt-Rogoff fantasy, the belief that what they call high debt levels slow the economy, on FOX News anytime soon:
This does not have the fun dramatic flair of an Excel spreadsheet error, but this empirical analysis from Miles Kimball and Yichuan Wang is much more devastating to Reinhardt and Rogoff than anything we’ve seen yet. What Kimball and Wang did was actually set about to try to answer the causal question of whether high debt levels cause slow growth. And what they found is that there is no such evidence.
This is important, because as Kimball writes on his blog it really does seem like there ought to be at least a little evidence of this. The same Keynesian theory that predicts that increasing your deficit during a recession can spur growth also seems to say that high debt levels will create “crowding out” when you’re not in a recession. But they ran the numbers and they don’t find it. The statistical association between a high debt to GDP level and slow GDP growth appears in their data to come entirely from the fact that slow GDP growth leads to a high ratio. You rarely get a definitive empirical study, but this is pretty striking evidence.
For more on this — including a full-size version of the graphic above — go here.
Now that the Reinhardt-Rogoff deficit scare dream team’s been debunked yet again — and this time over a fundamental assumption in their theses, not a mere spreadsheet error — there is no need to freak out over the deficit, unless it’s to ask why we’re still cutting rich folks’ taxes.