November 29, 2015
The Washington Post, which has in the past expressed outrage over items like auto workers getting paid $28 an hour and people receiving disability benefits, is again pursuing its drive for higher unemployment. The context is an editorial denouncing former Secretary of State Hillary Clinton’s “pander” to middle class voters.
The specific issue is Clinton’s promise to increase government spending in various areas while ruling out a tax increase on families earning less than $250,000 a year. The Post tells readers that this promise will be impossible to keep:
“To the contrary, if the U.S. government is to do all those things and still reduce its long-term debt to a more manageable share of the total economy, middle- and upper-middle-class Americans are going to have to contribute more, not less.”
While the Post does have a good point on a pledge that sets promises to protect people earning more than 97 percent of the public from any tax increases (the $250,000 threshold), the idea that the current level of the debt is unmanageable has as much basis in reality as creationism. The interest rate on 10-year U.S. Treasury bonds is just 2.2 percent. This is three full percentage points below the rates we saw in the late 1990s when the government was running budget surpluses. The current interest burden of the debt, net of payments from the Federal Reserve Board, is well under 1.0 percent of GDP. This compares to a burden of more than 3.0 percent of GDP in the early 1990s.
In other words, the Post has zero, nothing, nada, to support its contention that the current level of the debt is somehow unmanageable. This claim deserves to be derided for the sort of flat earth economics it is.
And, it needs to be pointed out that cutting the budget (or raising taxes) in a context where the economy is below full employment means reducing demand. This means reducing employment and increasing unemployment, especially in a context where there is no plausible story that interest rates will decline enough to induce an offsetting increase in demand.
So once again we see the Post pushing a policy with the predictable effect of hurting workers. It wants lower deficits and debt which will mean higher unemployment and lower wages. And, it is upset that Hillary Clinton doesn’t seem to share its agenda.
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