Your Opinion: Alarmist editorial
Sunday, February 17, 2013
Your editorial, “Obama links solutions to more spending” (Feb. 14), uses loaded words (“touted”) and superficial catch phrases (“crushing deficits” — what are they crushing?) to reach an erroneous result (“We don’t believe we can spend our way to prosperity.”).
Obama proposed spending money to rebuild our infrastructure by fixing roads and bridges, building manufacturing centers, making our electric power grid smarter and safer from hackers, and improving our education system. All of these things would contribute to a stronger, healthier economy.
With interest rates near record lows this would be a great time for the government to borrow money to spend on job-creating infrastructure projects.
Deficits would grow but they need not be “crushing.” The deficit peaked in the late 1940s at more than 25 percent of GDP and we lived through that. The recent peak was in 2009 at 10 percent of GDP and the deficit is now running around 8 percent of GDP.
The national public debt shows a similar pattern. In the late 1940s the public debt was around 115 percent of GDP. Today it is around 100 percent of GDP. This is nothing we can’t handle. If we have to pay off our debts the government can always print more money, something the Eurozone countries are unable to do.
Eventually printing money would cause damaging inflation, but not right away. Inflation today is low, and if it starts to become a problem the Fed can sop up money by selling some of the record level bonds and securities it is now holding (over $3 trillion). Selling these bonds would take money out of the economy and slow down inflation. The Fed is ready for this.
The danger today is that fiscal alarmists will push us into austerity programs that truly will hurt the economy and jobs, just as happened recently in Britain and other European countries.
For the alarmists the national debt is the new communism, the new phantom that is so fearsome it clouds clear thinking. Remember how if we didn’t stop communism in Vietnam the dominoes would fall all the way to California? Remember how a fear of Saddam Hussein’s supposed weapons of mass destruction got us into an unnecessary war?
We shouldn’t let an exaggerated fear of the national debt serve as today’s phantom and scare us into damaging spending cuts when what we need are new spending projects to fix our infrastructure, create jobs and reignite our economy.