Before the Occupy movement kicked the conventional narrative back into reality, we spent most of 2011 talking about the imaginary immediate threat of the dreaded deficit. That’s not to say we should never address eliminating it, but as I’ve said about a million times, the time to cut spending is not when the economy is the dumper. We need to jumpstart the economy after the crash and it’s clear we can’t depend on the private sector to help. They only want to help themselves.
The only way to get our consumer driven economy growing again is to pump money into it. Give the people jobs. Give them money to spend and it will be fruitful and multiply to the point where the economy can stand on its own again. Certainly the markets agree:
The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995 in a sign that President Barack Obama may have little difficulty financing a fourth consecutive year of $1 trillion budget deficits.
The Treasury Department attracted $3.04 for each dollar of the $2.135 trillion in notes and bonds sold, the most since the government began releasing the data in 1992 during the George H. W. Bush administration. The U.S. drew an all-time high bid-to- cover ratio of 9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero percent interest.
This isn’t happening because our economy is so strong right now. It’s because all the other countries that have already embraced policies of severe austerity cuts are floundering. Since Republicans have mostly failed so far to put our country on this same road to fiscal folly, investors see us as the safest place to park their funds. In other words, the deficit doesn’t matter right now, because we can afford to run it up for a little longer since we can borrow money for free. As Ezra explains:
If we were going by the numbers, the path forward would be clear: Borrow now, when we can get money for free, when we have millions of unemployed Americans to put back to work, and when the economy is in desperate need of more demand. But don’t stop there. At the same time, pass a large and credible deficit-reduction plan that covers, says, 2014-2023, and cuts federal borrowing as the global economy recovers and interest rates rise. in other words, make investments now, when it’s cheap, but begin working on an exit strategy for a few years from now, when borrowing becomes expensive again.
Only a fool would turn down free money. Our infrastructure is crumbling. This can’t be ignored forever. Just as delaying routine maintenance on your car or home leads to much more expensive repairs and potential catastrophic injuries later, it simply makes sense to invest in the future now.