By William Spriggs
Wednesday,
February 19, 2014.
Republicans in the House of Representatives
recently caved and allowed a simple vote on raising the debt limit of the
United States. Their hand-wringing about the debt is disingenuous, but more
importantly, it is part of a campaign to confuse America's workers about the
real deficit, which must be addressed urgently-the deficit in jobs, which
according to the non-partisan Congressional Budget Office (CBO) cost the
economy about $730 billion in lost production.
The CBO has projected that the federal budget will
have a deficit of $514 billion. It projects next year it will continue to
decline to $478 billion. These are large numbers, but in economics it is always
useful to put numbers in a broader context. In the case of deficits, it is
useful to compare that to the size of the economy. Just as a $200 bet in a
March Madness office pool looks different if you are Microsoft founder Bill
Gates or an undergraduate intern in the office. As a share of the Gross
Domestic Product (GDP)-the value of all of the goods and services produced in
the United States, the deficit this year will be about 3.0 percent of GDP,
falling to 2.6 percent next year. Between 1974 and 2009, the average deficit
was 2.7 percent, so these numbers are not out of the ordinary.
Since taking office, President Barack Obama has
overseen annual drops in the budget deficit from 9.8 percent of GDP. He
also has overseen steady declines in federal outlays from 24.4 percent of
GDP to 20.5 percent this year-the largest four year decline in federal outlays
in more than 35 years.
The political stunts around the national debt-the
cumulative deficits over the years-have understandably confused many Americans.
They hear the national debt is going up and interpret that to mean deficits and
federal spending are also growing. Some are so confused, they do not understand
that under President Bill Clinton the national debt fell from 47.8 percent of
GDP in 1993 to 31.4 percent when he left office in 2001. Republicans in
Congress, with President Bush, then pushed budgets from surplus to deficit and
increased the national debt. It is disingenuous for the GOP to act as if they
were conservative on debt issues.
Because the national debt is the sum of all past
deficits, for it to fall, the government once again would have to run
surpluses-take in more revenue than it spends. With the labor market still
nearly 1 million payroll positions short of January's 2008 labor demand, it
would hurt the economy if the government took money out of the economy by
taking in more in taxes than the government put back into the economy by
spending.
Some people are convinced that smart economics has to
be counterintuitive. They are convinced that lowering government spending that
would have hired workers to build roads, teach our children, repair sewer
systems and build bridges and levees will free up people, supplies and
resources that the private sector would hire and buy in more effective ways.
When more than 10.2 million Americans report they are out looking for jobs they
can't find, it does not make sense that the government would be diverting
workers from private-sector jobs to get our children's classrooms back to
normal size or repair the many potholes in our roads. In December, there were
2.59 unemployed people looking for work for each job opening. Economics is more
like common sense, if we want to get unemployment down, it means we must have
more job openings than the private sector is currently producing. And those job
openings can only come if the public sector demands more, not less.
During the last quarter of 2013, when the Republican
House forced a shutdown of the government over the debt, the fall in government
purchases at a rate of 4.9 percent hurt the growth of the economy. The drop in
government contracting and buying lowered the growth rate of GDP by nearly one
point from what would have been 4.1 percent to 3.2 percent.
Maybe, House Republicans have learned their lesson.
The American people thought Republicans were fighting against America's economy
by shutting down the government to make political gains. Hopefully, the
American people will use this week's economic news to see why the debate in
Washington must change.
Follow Spriggs on Twitter: @WSpriggs.