Tuesday, April 27, 2010

Achenbach for fun, Baker for the facts

Really, the debt is not a big problem

Joel Achenbach, author of a lot of "Why Things Are" and, sometimes, "Why Things Aren't" books, is generally great fun. Informative and humorous, he can tell funny, riveting stories about things that are generally neither fun or riveting. A recent example, "The Wow Factor: Reading between the pixels of the Hubble's latest images," which ran last December in the Washington Post, reads quick and easy and shares just enough science to make casual readers dangerous at dinner parties.

The Post frequently uses Achenbach to cover complex topical stories that need more than a little explaining, but his most recent story, "Will the debt break Washington?" tramples all over familiar ground, leaving behind little steaming piles of opinion valuable, perhaps, to farmers.

For primary source, Achenbach uses Bill Gross, founder of a large investment company, to pound what appears to be his main point, namely the national debt is "awful" and "hideous" and, in the worst case, either a Ponzi scheme or doomsday for future generations. None of this is actually true, but more to the point, none of it is helpful. If successfully reducing the debt becomes the highest immediate priority for Washington then several things happen along the way, including immediate and major tax increases, dramatic cuts in social programs, likely throwing the economy back into recession. If the hysteria around this issue should continue to grow, it seems plausible that banks and brokerage houses could even get their holy grail, the privatization of at least a portion of Social Security.

Achenbach also relies heavily on William Gale, an economist at the Brookings Institution, his source for the notion that large deficits now shift the cost of problem-solving onto future generations. But ultimately, Achenbach relies on himself. The new health care bill, which Achenbach admits will pay for itself, actually makes things worse "because its spending cuts and new taxes could have been used to reduce the deficit ... instead of being an offset for an entitlement expansion." In view of the prevailing notion that Congress routinely creates new programs without paying for them, the point is bizarre. After all, a program that pays for itself is, according to Brookings, most Republicans, and a host of pundits, a thing of beauty and the very definition of fiscal responsibility. In this case, the program that paid for itself also extends health coverage to another 25 million Americans, which ought to be celebrated as a tiny bit of social justice rather than disparaged as mere "entitlement."

Achenbach gives a little ground in his debt-is-coming, sky-is-falling assessment. "The latest news from the Treasury is hopeful: Tax revenues are slightly higher than anticipated so far this year. The TARP program to bail out financial firms has proved far less costly than expected. Investors from around the world still eagerly bid on Treasury notes at auction," he writes. And Achenbach does quote the far from panicky Peter Orszag, director of the Office of Management and Budget.

Orszag tells him that he believes the Obama administration can balance the budget, excluding interest payments, by 2015. Orszag concedes that reducing the debt will require political action in the future, presumably some combination of tax increases and spending cuts, but his comments do not support Achenbach's next point, which establishes parallels between Greece, Iceland and the United States. In the upshot, should the largest economy in the world go the way of a tiny tax haven and one of Europe's weakest economies then, yes, I suppose Achenbach will have been proven right.

But how different his piece would have been had he asked Dean Baker, co-director of the Center for Economic and Policy Research (CEPR) for his opinion. Fortunately, we can go directly to Dean for a progressive economist's view of the story Achenbach tells. Here's Dean's opinion, in its entirety from his "Beat the Press" blog:
"More Debt Fearmongering at the Washington Post

This piece includes the information that the national debt "totaled $8,370,635,856,604.98 as of a few days ago." Boys and girls are you impressed by that big number? Are you scared yet? This is Fox on 15th here -- they'll keep trying.

This sentence continues by telling readers that this number is not "even counting the trillions owed by the government to Social Security and other pilfered trust funds." How did the author determine that the trust funds were "pilfered." The government didn't do what he wanted it to with the money? Wow, that gives a reporter the right to say the money was "pilfered." Apparently it does at the Post.

The article does not include the views of any experts who do not view the debt as a serious problem. It presents an inaccurate assertion (in the context presented) from Brookings economist Bill Gale that the debt: "This [running up the debt] is all an exercise in current generations shifting burdens on future generations." Actually, the debt being run up at present is helping future generations by keeping their parents employed, improving the infrastructure and providing them with a better education. There is little or no real burden associated with this debt since much of the debt being issued is held by the Fed. The interest on these bonds is therefore paid to the Fed, which in turn refunds the money to the government.

Last week, the NYT reported that the Fed paid more than $47 billion in interest to the government. So, where is the burden on our children? If we do get the economy back to normal levels of output the deficit will be at a manageable level. Over the long-term, if we don't fix the health care system, we will face serious budget problems, but this is an argument about the need to fix our health care system, not about the deficit."

I probably could have confined my response to Achenbach to quoting Dean's opinion alone, but where's the fun in that? Joel Achenbach's got opinions, I got opinions, too.

1 comment:

  1. Gotta disagree with you Jeff. I'm a simplifier, not a politician. I look for trends and common sense. Getting further in debt, year after year is concerning. The thought that we're so far down the road to accepting debt is scary. Look at the lack of concern for the debt people carry personally now. It only gets worse. Our consumption has to be curbed. At a personal level, a community level, and a societal level. We are not responsible fiscally or environmentally.
    If ignorance of personal debt were more in control in our society, I wouldn't be concerned with playing with our national debt. But seeing how little concern the average Joe has for his own debt in this country, I'm afraid to let a crowd of them get the lot of us into more debt as a society.
    Please don't belittle national debt. Not until we live in a society that can handle the responsibilities and ramifications.