Further fiscal folly

[CHIMO]

The people insisting on cuts to social security and Medicare have revved themselves up and are now in high gear. They see their final victory on the horizon, with the possibility of a bipartisan deal involving substantial cuts to both programmes. They argue that the large deficits facing the country make it imperative that we address the long-term budget problem – meaning, the cost of these programmes – immediately.

Before anyone prepares to surrender, it is worth remembering, once again, how we got into the current situation. Before the downturn, the budget deficits were relatively modest. Even with the cost of fighting two wars, the Bush tax cuts and a poorly designed Medicare drug benefit the deficit was just over 1% of GDP in 2007, the last year before the downturn. This was arguably bigger than desired, but a deficit of this size certainly posed no imminent danger to the economy.

Then, the economy ran off the track. The reason was the collapse of an $8tn housing bubble. This bubble was easy to see for people who knew basic economics and third-grade arithmetic. It was also easy to see that the collapse of this bubble would derail the economy and lead to serious downturn. That is why some of us were warning about the bubble as early as 2002.

But where were the current group of anti-deficit crusaders back in 2002-2006, when it might still have been possible to do something to stem the growth of the housing bubble before it reached such dangerous levels? Well, they were crusading against the budget deficit, of course.

http://www.guardian.co.uk/commentisfree/cifamerica/2011/feb/22/economics-economy

[Curmudgeoness]

1. Excellent article. I am constantly amazed that

people who should know better (media, government) keep listening to the same people who were blindsided by the collapse of the housing market and the ecomony in general. And to make matters worse, these experts who knew nothing were the same people who ridiculed the ones who saw this coming as nay-sayers and killjoys. And they are still ignoring them.

I guess we all just want good news, even if it is a lie.

[PoliticAverse]

2. People have a tendency to listen to people that tell them what they want to hear...

instead of what they need to hear.

[bemildred]

3. Being an obedient propagandist pays well, very well. nt