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NPR Presents More Misleading Commentary on the Deficit

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Monday, 22 November 2010 05:18

The lead story on Morning Edition presented Joe Minarik, from the Committee of Economic Development, as a neutral budget expert to talk about the deficit. Minarik assured listeners of the need to both cut spending and raise taxes. Mr. Minarik never bothered to point out that the long-term deficit problem is entirely a health care cost problem. If per person health care costs in the United States were comparable to costs in any other wealthy country (all of which enjoy longer life expectancies) the long-term projections would show huge budget surpluses, not deficits. 

The piece also implies that the deficits being run at present pose a serious problem, with the host asking Mr. Minarik whether some of the current $1.4 trillion deficit can be seen as a "good" deficit since it involves an investment for the future.

In fact, all of the current deficit can be seen as a "good" deficit since it is increasing output and employment. If the government was currently spending less or taxing more it would be putting less money into the economy. This would lead to less demand and fewer jobs. In other words, we would be throwing our children's parents out of work. It is difficult to see how this helps them.

It would also have been useful to find a budget expert who knew that when a debt is accumulated makes a difference in terms of its burden. A debt that is run up as a result of deficits when the economy is far below its potential need pose no burden whatsoever. The central bank can simply hold the bonds issued to finance the debt. This means that the interest is paid to the central bank which in turn pays it right back to the Treasury.

If debt is run up due to a weak economy, then an economy can sustain much larger levels of debt. For example, Japan now has a debt to GDP ratio of almost 230 percent. Yet, it can still borrow long-term in financial markets at just a 1.0 percent interest rate. This indicates that debt levels that are far higher than anything currently projected for the United States can be easily sustained. A real budget expert would know this.

Comments (12)Add Comment
The Definition of Deficit
written by Ron Alley, November 22, 2010 8:05
To most of us, the word "deficit" means that payments exceed income. We can't focus on one side of the "payments = income" side of the balanced budget equation. Here is Warren Buffet's comment on the income side of the equation.

"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further," Buffett told ABC News in an interview set to air later this week. "But I think that people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it."

"The rich are always going to say that, you know, just give us more money and we'll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on," Buffett said in the clip from ABC News' "This Week with Christiane Amanpour."

...
written by Ben, November 22, 2010 9:13
And who supports this supposedly neutral budget expert's organization:

"CED Supporters
CED is grateful to its supporters for their generous contributions and grants which enable us to pursue a dynamic agenda focused on today’s most significant economic and social issues. The list below represents CED’s major supporters.

$50,000 and over
Bausch & Lomb Inc.
Caterpillar Inc.
General Electric Company
General Motors Corporation
IBM Corporation
McKinsey & Company, Inc.
Merrill Lynch & Co., Inc.
Peter G. Peterson
Pfizer Inc
PricewaterhouseCoopers LLP
State Farm Insurance Companies
Toyota Motor North America, Inc.
Yes indeedy, if we were all healthier, costs would be lower
written by pete, November 22, 2010 10:27
Demographics seem to slip by the wayside, comparing the health care costs of our obese society to Western Europe or Japan. And we feed the obesity too, e.g., the recent expose of our nutty government actually subsidizing pizza. In large part our obese and costly population is a government creation. Now, with more areas where govt. will affect our lives, what should we expect. Even more captured agencies, more screwy policies....likely HIGHER health care costs as SEIU (re: health care workers) and Big Insurance fight for capture of the D.C. machinery which will dictate policy. Of course, the CBO doesn't factor in political economics into its forecasts....sigh.

Nobody noticed that unions, a very small percentage of the population, fought hard for Pelosi/Bacchus care. Obviously not that they need it, for they clearly have prime health care compared to non-union. But, by forcing health care costs onto healthy young non-union workers, say age 25 to 45 who have essentially zero health care needs other than catastrophic, it dramatically lowers the relative price of union labor. Only reason for SEIU health care support is more $$ for (unionized) health care workers...i.e. higher costs. Not lower...sorry to burst the bubble Dean.
NPR's Lousy Economic Coverage
written by leo, November 22, 2010 11:13
In fact, NPR's coverage of the deficit problem was pretty lousy the entire weekend.

They constantly underplayed the role played by a bad economy and future health care costs.

It's as if the GOPer pressure following the dismissal of Juan Williams had gotten to them.
Don't Miss the Romer Interview
written by kharris, November 22, 2010 12:39
DB, you are never going to keep up with all the errors regarding the economy on NPR. Sunday on All Things Considered, Christina Romer was interviewed. She stood up for deficit spending during periods of slow growth, and the discussion turned to 1937. NPR's interviewer asserted that the US economy contracted in 1937 because of Fed tightening and tax hikes, as a way to prod Romer into discussing the White House proposal to allow Bush-era tax cuts to expire for income above $200k/$250k. The interviewer either didn't know or chose not to mention that there were very large spending cuts in 1937, and that very large spending cuts are underway now.

The NPR economic narrative these days is the anti-Social Security, tax-cuts-are-holy narrative, through and through
Healthcare is a RESOURCE problem.
written by Benedict@Large, November 22, 2010 3:37
You folks keep identifying healthcare as a (the) budget problem, but this is incorrect. It is actually a resource problem. We have all the money (infinite) we can print, but all that we can print cannot buy our desired level of healthcare because there simply isn't enough of it.

Instead of hyperventilating about whether we're going bankrupt (we can't) now or a decade (or five) in the future, we need a new 10-year "moonshot" mission to double (!!!) the amount of healthcare available in the US. We can afford it, we have the talent to do it, and if we don't do it, we'll be packing a lot of people into urns and caskets long before they ever really had to be.
Ah finally someone from the SEIU shows up!
written by pete, November 22, 2010 3:57
I am sympathetic...health care demand is infinite, exactly as you state, give me health care or give me death. The real issue is getting it efficiently. And simplest argument is to compare that part of health care which is efficient, like Lasix surgery, plastic surgery, dental, and look at the costs there. Not rising much there, eh? Hmmm. What't the difference? Customers who participate in the decisions, and the payments, consume rationally. Look at the Whole Foods plan. Higher deductible, lower premium, efficient consumption. Sigh, its just too easy.
...
written by Calgacus, November 22, 2010 8:05
Healthcare in the USA is basically a medical problem. Efficient, effective public health programs like Medicare or the pre Baby Bush VA, the hardworking doctors and nurses out there are infested by a giant parasite - the for-profit health sector.

The solution is very easy. Kill the parasite. Centralized big government single payer, the most efficient choice, as in the UK. Have those who work in this utterly useless, destructive "industry" do honest work for a change. Healthcare executives would be prime candidates for unskilled WPA style Job Guarantee work. With the resources freed up from feeding the parasites, we could give everyone the healthcare that the top 1% receives now. Right now, the well to do in the US get worse health care than the poor in the UK.

Obesity as a major public health problem is a joke. One way you can tell it is a made up problem is because one hears so much about it. The effect of obesity on life expectancy is nil. For as many things as it hurts (e.g. diabetes) there are things it helps (long hospital stays, car accidents). It's a wash.
its all a big fat lie?
written by frankenduf, November 23, 2010 9:06
yo calqacus- u missed the point- even if obesity's effect on mortality is nil (it's not)- this is a bad thing for health care costs- if someone contracts diabetes from gaining too much weight, it will be more expensive to treat them over their lifetime, so the longer they live, the greater the cost- cheaper to not gain too much weight- that way you can live long with less of a bill
Another example...
written by John Smith, November 23, 2010 10:44
For example, an uncle of mine had Stage 3 lung cancer but made a full recovery by eating yogurt. This indicates that it doesn't matter how bad your cancer gets just as long as you can still get yogurt.

Funny how we're not like Japan when we consider whether or not QE will work (it didn't in Japan), yet we are like Japan when we contemplate the prospect of sustainable, enormous deficits. Hmmm...
...
written by Calgacus, November 23, 2010 11:10
Frankenduf, you are wrong. There are plenty of studies, usually by doctors, that say that obesity affects mortality. Invariably followed by refuting analyses by statisticians that say they played the same old stupid statistical games. Obesity - especially as defined by the ridiculous pseudoscientific BMI - as a major public health problem (like salt causing high blood pressure) is pseudoscience. Of course in particular cases it can be a problem. But people forget the many cases where being fat helps.
You can't reducate someone who isn't educated to begin with.
written by diesel, November 23, 2010 6:06
I'm not going to get between you two on the diabetes/obesity thing, but I can definitly get behind Calqacus' notion of giving healthcare executives an opportunity to improve their resumes by acquiring some skill at spadework.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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