Economic A.D.D.–Our obsession with the deficit
Saturday, 10/24/2009 - 11:00 am by Anat Shenker-Osorio | 9 Comments
How words shape the way we think…and set our course for the future.
**Author’s note: Full credit and great thanks to fellow New Deal 2.0 blogger Marshall Auerback and editor Lynn Parramore for inspiring this article and supplying me some of the quotations I’ve used.
Does a deficit have any redeeming, productive purpose? Is there any reason to not just defend but desire “deficit spending”?
Dictionary.com defines the word this way:
Deficit
1. the amount by which a sum of money falls short of the required amount.
2. the amount by which expenditures or liabilities exceed income or assets.
3. a lack or shortage; deficiency.
4. a disadvantage, impairment, or handicap: The team’s major deficit is its poor pitching.
5. a loss, as in the operation of a business.
Not exactly glowing reviews. In certain respects this is expected — a deficit is a gap between what you need and what you have — and for those who’ve ridden the London Underground, you know it’s best to mind the gap.
And no one, at least that I’ve read, is arguing we go on a spending spree Supermarket Sweep-style. Concerns about government borrowing driving up interest rates, fears that our foreign creditors will close out our tab, inflationary effects of printing currency deserve our attention.
Sadly, however, no one can conduct a reasonable debate weighing the trade-offs of growing the deficit. We’re getting nothing but the shouting. Apocalyptic pronouncements, packaged in sound-bytes like “mortgaging our children’s future” and “our nation’s wealth is being drained drop by drop” muffle any serious, informed conversation and deliberate decision-making.
Trade-offs? Impossible — the deficit is all bad — haven’t you heard? Shopping addicts are robbing our children; deficits are standing in the way of the economy of our dreams. “The deficit also has become perhaps the darkest cloud hanging over financial markets just as they’re starting to recover.” Look at that, it’s a miracle; the financial markets are just about to recover. I could have sworn it was government funds, aka deficit-spending, that financed the recovery that’s now endangered by…deficit-spending. Talk about biting the hand that feeds: increasing our deficit has allowed financial markets to run. It’s mighty ungrateful to now wag our finger at the gasoline.
The deficit is talked about like an autonomous powerful force — even in seeking to defend it. Fellow progressives seek ways to “control the deficit.” We say “it does make sense to run deficits in a recession“, which is the same usage as “run a fever”, implying that change is entirely out of our control. When we read that a certain policy is “driving us into debt” or generating “runaway deficits” or that government is “spending its way into deficits”, owing money seems an accidental state, not the expected result of decision-making. This makes as much sense as “I found myself pregnant.”
When we talk about this issue, we use the word “into” and the common expression “deep in debt.” Deficit or debt is understood metaphorically as a container — something we plunge into and find it quite difficult to emerge from. We’re engulfed and therefore helpless. A modern-day Jessica McClure, trapped in the well.
When the deficit isn’t a container, it’s a disease. “But by next year, causes of the deficit will be secondary to the conversation about how to cure it.“ In case you’re thinking this language is conservative convention, consider Senator Paul Simon’s (D-IL) lament “the national deficit is like cancer. The sooner we act to restrict it the healthier our fiscal body will be and the more promising our future.” The deficit eats away at the economy, which of course here is implicitly a body. When we compare the economy to a body, unconsciously, we assume it generally requires no external intervention to complete day-to-day functions. When we liken the deficit to a disease that ravages that body it’s impossible to consider the productive benefits that deficit provides.
Yes, you read that right. Enlarging the deficit has a purpose. Like facilitating the aforementioned financial markets recovery and, if planned and executed correctly, generating more jobs as well as real health care and some improvements to the school system we fantasize is educating our kids.
There are no easy answers for how to talk about the deficit in ways that encourage us to reflect meaningfully on when it makes sense to spend, how much and for how long. But certain expressions shut down the possibility of considering the deficit as an acceptable and even desirable tool in economic policy-making. Changing our language to convey intentionality and government agency is key. While the difference may seem trivial, it’s vital that we express we are “growing the deficit” and not that the “deficit is growing.” Consider also the difference between “plunged ourselves into deficit” and “added lucrative jobs for Americans by increasing the deficit.” Any teenager can tell you, you don’t announce “I spent $100″ you say “I bought lots of books.” Let’s emphasize what our spending got us and not just the fact that we spent.
This leads me to reflect on spending, as in deficit spending, and what it implies. Spending is a word we generally use to convey quick, even impulsive, purchasing — something we didn’t think about and perhaps don’t really need. This is the wrong message to send. By way of illustration, consider the alternative phrase deficit financing. This implies deliberate expenditures conducted for a reason — see the definition for proof: “the practice of seeking to stimulate a nation’s economy by increasing government expenditures beyond revenue sources.”
We can and should argue about the role of the deficit and it’s desirable size relative to our economy as a whole. But in order to conduct this discussion we must first rescue the deficit from its role as nefarious evil-doer that’s hijacked our future while we were busy doing other things.
Anat Shenker-Osorio is an Oakland-based communications consultant.
Nice piece, Anat. Clearly, we do have a problem with language here, which distorts the debate and eliminates the possibility for honest discussion of the budget and our national priorities. Here’s another interesting use of language: taxpayer-funded . It is used every day by commentators, politicians and all of us. It is a gold standard-fixed exchange rate concept and has no applicability to a fiat monetary system. It is now being used at a greater frequency by neo-liberal deficit-haters to personalise the deficits back to our own bank accounts.
The reality is that taxpayers do not fund anything. When we pay taxes to the government they do not get any extra capacity to spend. The transaction is accounted for and our legal liability is relinquished and we have less purchasing power but that makes no difference to the government’s capacity to purchase goods and services now or later.
Changes to tax rates are used by governments to modify aggregate demand – to allow households etc to have more or less purchasing power – but that has nothing to do with funding government spending. A sovereign government “funds” its own spending as it is the monopoly issuer of the currency. In that sense, the term “funding” is a non sequiter and should also be banned from our vocabulary when used in relation to government spending.
“Labor market reforms” which is usually code for busting unions and destroying the living standards of workers.
“Repairing the budget deficit” the term “repair the budget” has no meaning in a fiat monetary system in isolation. I repair my bike when it is not functioning. But the idea that the budget deficit is in need of repair because it is “too big” is plain neo-liberal ideology and dogma. Involuntary unemployment and poverty should be repaired – that is clear to me.
The only way I would pass judgment about a budget deficit is if it was a “bad deficit”. Then the solution is to increase the discretionary component and reduce the automatic stabilization component and create jobs and build public infrastructure. But that will usually require increasing the budget deficit.
We know that the automatic stabilizers that are built into the budget kick in (tax revenue falls and welfare spending rises) even without any discretionary changes to fiscal policy. The income adjustments will ultimately drive the public budget balance into deficit whether the government likes it or not. Take away the discretionary stimulus packages and the automatic stabilizers would have driven us into a large deficit anyway, which means that the budget is working as it should, and doesn’t need to be “repaired”.
Posted by Marshall Auerback | October 23rd, 2009 at 2:59 pm
Right on Anat! As people continue to debate the merits of economic stimulus, despite overwhelming evidence that stimulus actually works, the discourse is continually structured around a false dilemma. Let me explain. One of the primary arguments against stimulus claims that it is morally reprehensible, and financially ruinous to saddle our future generations with debt. This argument inherently implies that we are debating two options–on the one hand, stimulus and debt for future generations, or on the contrary, no stimulus–when in fact another legitimate option does in fact exist. We are not restricted to just two options–that of a future generation saddled with debt, and/or no stimulus. A third, better option exists. Stimulus can be paid for in a redistributive manner. What I mean by this is that taxes can be increased on the upper echelon of individual and corporate earners, while keeping tax levels constant or lowered for everyone else. The reasons are aplenty for acting in this manner. No one group of people benefited more from government action the last twenty years than the already wealthy.
http://southpawpolitic.blogspot.com/2009/10/bushs-deficit-part-ii-tale-of-ingenuous.html
Posted by Elliot | October 23rd, 2009 at 6:02 pm
Marshall,
You bring up so many great policy points (as expected!) as well as language dilemmas — it’s hard to know what to respond to first. The relationship between citizen and state in a democracy is, at a conceptual level, an incredibly fickle thing. So too, by extension, our notions of the money earn, money we pay as taxes and expenditures of the government. In a democracy, we the people are the government (or so I’m told) and so it should seem illogical or at least redundant to talk about my money going to them or — as you put it — “taxpayer funded.”
But, of course, we know that there’s been a very deliberate attempt to have us see ourselves as separate from our government. I think this strategy is a two-fold victory for neo-liberal ideology: (1) it makes it easier to hate government and want it shrunk and drowned in a bath-tub (2) it makes us less inclined to expect to understand the actions of and have oversight over our government.
This, I believe, is at the root of many of the particular language challenges you’ve surfaced.
Thanks again for inspiring this article!
Anat
Posted by Anat Shenker-Osorio | October 23rd, 2009 at 11:42 pm
Elliot,
I’m with you! It goes without saying, there’s a serious set of hurdles to having this become policy. Fairness is a concept that’s understood very differently by different audiences. To some of us our current inexcusable levels of inequality are what’s unfair but to others having variable tax rates is their idea of unfair.
A big challenge, surely, but one I believe we can think through and overcome (eventually.)
Thanks for reading and for writing,
Anat
Posted by Anat Shenker-Osorio | October 23rd, 2009 at 11:48 pm
Anat,
I think you are exactly right in saying that this is a problem “we can think through.” The people who view a variable tax rate as unfair tend to be wealthy, dream of becoming wealthy, or fear that a “welfare queen” will use their hard earned money to buy a Cadillac (this last subset invokes a twinge of racism to their concerns). If the right people present the idea in a clear and thorough manner to the people, we should be able to overcome, like you say.
One of the things that excited me most about Obama as a candidate was hearing him speak out his thought process in assessing potential ideas during his speeches and the debates. You can tell he had a firm grasp of all options in contemplating an outcome (something that is far from true with our last president). That thoughtfulness has continued as president; however, thus far, I have been largely disappointed with the overall lack of change. Only time will tell.
Thanks you for both writing this piece and taking the time to respond to me!
Elliot
Posted by Elliot | October 24th, 2009 at 7:19 am
Finally got to read this - love how there are always some memorable techniques in this series. Really practical and helpful. Marshall helpful comment about “repair” too.
Anat I’m sure you’re getting to this but if not “spending” then… what are the right words. It’s got to be investment or something like it, right? That seems like the word that could shift the whole frame.
The other day I blurted out “the purpose government is to determine optimal long-term investments.” Maybe not just - that’s a little simplistic. But the phrase has stuck with me anyway.
Posted by Dan Ancona | October 26th, 2009 at 1:50 am
Thankfully, my waistline is experiencing a deficit.
And I sure don’t need to repair it with surpluses in the future.
Posted by Zach P | October 26th, 2009 at 10:34 am
Dan,
Your questions have no quick answer but for now, as I suggest in this post, I’m a fan of “deficit financing.” Not only does it imply forethought, it conveys that we’re doing it for a reason. Also, though this is usually a bad thing — it’s higher register (meaning more formal speech) and that’s good, in this case.
I like your phrase — not quite ready for bumper sticker! — but definitely in the right frame.
–Anat
Posted by Anat Shenker-Osorio | October 26th, 2009 at 10:36 am
Hmm, yeah. Deficit financing. It sounds like a tool that ought to be in the toolbox. I.e. “I believe we need to use deficit financing when necessary to sustain jobs.” Yeah it’s higher register but it’d be fine for stuff like editorial board meetings for candidates, that sort of thing. Nice.
Posted by Dan Ancona | October 26th, 2009 at 5:43 pm