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David Gaul
Shelby County Democratic Party Co-Chair


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David Gaul
Donna Clothier
Kathleen Cue

AND A BALANCED BUDGET ACHIEVES WHAT?

Let's say the deficit hawks in Washington got their way.  Let's say they slashed the budget every which way they could and achieved a balanced budget.  What would they have actually achieved? How would our economy be better? 

Would unemployment go down?  No.  Draconian cuts to the budget would have necessitated massive layoffs in the public sector.  Unemployment would actually rise. 

Would the stock market soar?  Well, presently the stock market is near an all-time high even with the current deficit.  If the market suddenly took off and reach a dizzying height, I think the fear that we were creating a new stock market bubble would grow.  Furthermore, rampant growth in the stock market can become an intoxicating thing on Wall Street.  Greed.  Profit.  Wealth.  Malfeasance.  Bust.  It would be nice if we could avoid that for awhile.

Would interest rates go down if the country achieved a balanced budget?  You can't get interest rates much lower than they are right now.  Interest rates have been next to nothing for years.  Government has two ways of getting out of recessions: fiscal policy and monetary policy.  Monetary policy is controlled by the Federal Reserve, and the Federal Reserve has been doing what it traditionally does to get the economy out of recession and spur growth, i.e. it has lowered interest rates and kept them low so that lending institutions can loan money out to businesses and consumers at attractive rates so that these borrowing entities can make capital purchases that can stimulate the economy.  But monetary policy alone cannot shoulder the entire burden of lifting us out of the hole that we have been in.  It must work in concert with fiscal policy, wherein government by direct cash infusion can fire the engines of the economy.

If the budget were suddenly balanced by draconian cuts to the budget, would that spur consumer demand?  Would the average consumer out on the street leap for joy and shout, "Hooray!  The federal budget is balanced!  I'm gonna buy a car!  I'm gonna build a house!  I'm gonna buy a toaster!  I'm gonna spend money hand over fist!"  Is that a realistic reaction to the federal budget being balanced?  Seriously, does anyone in his or her personal life make their budget decisions based on the federal budget?

These questions are all relevant because we still have nearly 8% unemployment.  We are still well within the gravity field of the Great Recession.  Fourth quarter GDP growth was a paltry 0.1%.  The sequestration could nudge GDP growth into the negative range this year because it's austerity.  It's anti-stimulus.  It's horrible fiscal policy.  Our deficits have been decreasing since 2009.  This year the deficit is projected to fall to 6% of GDP.  But if GDP is shrinking and if unemployment remains stuck at 8%, what does it matter?  How is it laudable?  How is it a comfort to people trying hard to get by?

So, it would be helpful if Washington punditry would start holding the feet of deficit hawks to the fire by asking them what a balanced budget achieves when unemployment stands at 8% and GDP growth has stagnated?  There's a time and a place for austerity discussions.  We're not there.  When unemployment is below 5% and GDP growth has become self-sustaining, then we should be talking about austerity.  It probably wouldn't be necessary at that point, however, because the best deficit-reduction program is full employment.  The problem would take care of itself.

What Republicans are flirting with now is dangerous.  The dysfunction of government is entirely a result of their machinations.  That dysfunction can damage our credit rating.  It happened once in 2011, and cost us a great deal of money and added to our deficit.  If they continue doing these same things, investors in America may lose confidence in America solely because of the incompetence of one political party. 

We are not Greece.  We are not some poor country with few natural resources and an agricultural economy that lives by the size of its olive crop.  We are an enormous country.  Our economy is huge, the largest in the world.  But Republicans think we can run the greatest country that history has ever known on the cheap.  They think that our country can strive boldly into the future by adopting policies whereby the contract always goes to the lowest bidder, whereby we keep the machine going by finding some spare parts at the salvage yard. 

We are capable of so much more.  Great countries achieve great things.  Great countries do great things.  It is time we get back to the business of doing geat things.  Conservatism by the very nature of the word is an anathema to achieving such goals.




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