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Home Publications Blogs Beat the Press The Post Again Uses Xenophobic Fears to Push Its Deficit Agenda

The Post Again Uses Xenophobic Fears to Push Its Deficit Agenda

Saturday, 31 July 2010 08:38

The Washington Post simply cannot let go on its deficit obsession. The day after a new GDP report indicates that the unemployment rate will remain near double-digit levels long into the future, the Post's lead editorial warns people that something really bad could happen ten years out if we don't deal with the deficit. As is their way, the Post never discusses the situation honestly. It begins by telling readers that:

"increasingly, 'the public' [in "publicly held debt] means foreign governments and investors."

Why does it matter that foreigners hold government debt? Why would anyone care? There is an issue about foreign ownership of U.S. assets, which means that future income on these assets will flow abroad rather than to people in the United States, but this is as much or more of an issue of foreigners holding private assets like U.S. stocks and bonds. Furthermore, foreigner's acquisition of U.S. assets is tied to the trade deficit and the value of the dollar. If the Post is upset about foreigners holding too many U.S. assets than it should be editorializing for a reduction in the value of the dollar. Hasn't anyone on its editorial board taken econ 101?

The Post fails to mention the two factors that are driving its deficit/debt horror story. First is the debt that is being accumulated simply due to the downturn. I guess since they don't seem to have access to government data at the Post's editorial board they don't know about the high level of unemployment and the severe recession driving up deficits. The prospect of these deficits creating a high interest burden for future generations can be largely eliminated if the Federal Reserve Board just bought and held the bonds used to finance this deficit.

If that seems implausible, there is a good example of exactly this being done on a small island nation called "Japan." Over the last 15 years, Japan's central bank has bought up an amount of government debt that is almost equal to Japan's GDP. As a result, Japan's interest burden is less than 2.0 percent of GDP (@ $290 billion a year in the U.S.) even though its ratio of debt to GDP is close to 220 percent. In spite of this massive intervention by the central bank, Japan continues to be plagued by deflation, not inflation.

The other factor driving the deficit projections is the projected explosion of U.S. health care costs. If the U.S. faced the same per person health care costs as people in other wealthy countries we would be looking at surpluses, not deficits. However, the Post -- as a bastion of deficit chicken hawkism -- doesn't like to talk about health care reforms that would threaten the interests of the pharmaceutical industry, insurance industry and other powerful groups. They just want to cut programs like Social Security and Medicare that benefit ordinary workers.
Comments (5)Add Comment
written by izzatzo, July 31, 2010 11:01
Recent upgrades to emergency medical budgets have included oversized heavy duty devices for the morbidly obese.

Economists noted these upgrades were effectively financed by foreign lenders of debt to the US, a moral hazard known as "Oversized Portions: Off the Plate, Out of Mind", which is driving up the deficit, and if the Fed would finance these deficits instead, the patriotic incentive to eat less and exercise more would overcome the problem.
Strengthen Social Security Coalition Puts Both Parties on Notice
written by Scott ffolliott, July 31, 2010 11:40
Strengthen Social Security Coalition Puts Both Parties on Notice
written by ellen1910, July 31, 2010 12:24
. . . debt that is being accumulated simply due to the downturn.

"Debt" is not the effect of deficits; it's the result of issuing debt instruments. So if you, WaPo, don't like the increase in debt, tell the Treasury to --

Stop issuing so many TBills, TNotes, and TBonds. As Bernanke has said, there's no shortage of computer keyboards at the Fed, and they're all that's needed to pay the government's bills.
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About Beat the Press

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.