Paul Krugman’s NYT column today on the federal deficit should be required reading. We are still mired in a slow, high-unemployment recovery from the meltdown of 2008, but the world’s governments have helped prevent another Great Depression by spending on enormous rescue efforts. However inequitable, those efforts are basically all that stood between the public and the precipice of total economic chaos as the financial system in the United States unraveled last year.
Yes, we should have spent our money more wisely— on taking more equity in the financial giants that caused the chaos. We would eventually have gotten most of that back. We should undoubtedly have spent far less on shortsighted tax rebates that didn’t help anyone significantly— and didn’t pump jobs back into the economy. And finally, we might have been blessed with a quicker end to the Paulson Administration and succeeded it without a Rubin Redux team that keeps many of the financial system’s problem children still intact and in the money.
But despite all its problems, it is still a recovery we are entering, not the free fall we were experiencing during the winter of 2008-9. The Obama Administration and to some extent, the Paulson Administration (at least the Bernanke part of it) deserves some credit for that. We’ve been saved from the worst. Instead of celebrating the government’s bold intervention, however, we keep hearing a whining chorus on the Right that warns us that the federal deficit from that intervention is the bigger problem. Yes, bigger than total economic chaos!
Those who are worried about current deficits should read Mr. Krugman’s assessment of the levels of debt we now carry at the federal level. They are not historically dangerous, but require a long-term vision. They should lead rational people to address those areas of our economy that need streamlining— like the growth of percentage of our GDP we spend on healthcare and its administration. Reforming this system, over time, will contribute to a long-term change for the better in our economy. We need to take a deep breath and begin to rebuild, not panic with the birthers, death panel hallucinators, and the reactionaries who helped bring us the catastrophe of 2008.
Yet we as a nation still have little stomach to face down these reactionaries and turn the page on them. There is still great danger that we will return to the comfortable belief that markets will always find the most efficient solutions, even in the face of the most horrific evidence that markets can become completely irrational. As a nation, this is a moment that requires maturity and a willingness to grow.
(Bill cross-posts at Buck Naked Politics)