Why We Unfortunately Need More Deficit Spending

Home prices soared 47.9 percent from 2000, when the median home price was $147,300, to 2007, when the median home price was $217,900. Because most people’s wealth derived from the value of their homes, the burst of the housing bubble directly led to the Great Recession. 

Hard-working, everyday people lost their jobs, and, in some cases, their life savings. This led to a decrease in spending, which led to businesses cutting workers to maintain profitability, which led to a further decrease in spending because less people were employed, which led to businesses cutting more workers to maintain profitability. 

Which led to an even larger decrease in spending.

Which led to businesses cutting even more workers to maintain profitability.

That’s what’s going on today. People are out of work and don’t have money to spend, so businesses have to cut workers to maintain profitability. 

It’s an endless cycle that must be reversed in order to get our economy going again. 

So what are the proposed fixes?

  1. Cutting Taxes
  2. Fiscal Austerity
  3. Deficit Spending

“Taxes are too high! We’re being taxed to death!”

Nonsense. Federal income taxes are the lowest they’ve been in over 50 years, and nearly half of all Americans don’t even pay them. 

“Taxes are preventing economic recovery!”

Another lie. The Heritage Foundation — whose mission is to “formulate and promote conservative public policies” — estimates that the Swedish government collects 47.9 percent of the Swedish GDP in taxes while we collect 26.9 percent of our GDP in taxes. Yet, according to the International Monetary Fund, the Swedish economy is actually growing twice as fast as ours. So taxes clearly aren’t preventing economic recovery.

“Small businesses can’t grow because of their tax burden!”

Bullshit. Small businesses, in survey after survey, say they aren’t hiring because of a lack of demand, not because of their “tax burden”. Anyone saying otherwise is simply lying. The problem is that people aren’t spending money, pure and simple.

And cutting part of the spending we have left — imposing fiscal austerity — would be disastrous. More workers would be laid off, leading to even less spending, and, ultimately, more layoffs to maintain profitability. Cutting now would only accelerate the endless cycle I described earlier. 

It’s math. Nobody can argue otherwise. Once we’re out of the recession, we need to cut — there’s no doubt about that — but now just isn’t the time.

Right now we need spending. A lot of it. And since people aren’t, the government unfortunately has to. I don’t like it, and I’d prefer that it didn’t have to come this, but we have to do it to fix the economy.

In 2009 the American Society of Civil Engineers gave our infrastructure a D and estimated that it would take a five-year, $2.2 trillion investment to fix it. Fixing roads and bridges is an apolitical topic. We can start with that.