In recent years, it is amazing that deficit hysteria could be successfully promoted in the wealthiest countries. Mind you, the public is not easily convinced that laying off public sector workers, slashing public services and privatization are all necessary. However, in the absence of drastic media reform, a few dissident voices and the public’s intuitive reluctance are not enough to counter the corporate media’s propaganda.
Here are some ways to expose deficit scams.
1. Know the cost of government borrowing.
In the UK, the Green Party’s recent rise in the polls has generated some well-deserved excitement, but its 2010 Manifesto stated that “we accept that the Government borrowing of 12% of GDP is unsustainable. Like the Government, we would aim to more than halve the deficit by 2013,…”. [1]
In 2009, the UK government’s net interest payments – the actual cost of borrowing – were about 1.5% of GDP (roughly 4% of government revenues) which is light-years away from an “unsustainable” burden that had to be drastically reduced in three years. By the end of 2009, Jamaica’s budget deficit was 6.7% e PBB-së but, as explained in this letër, it was spending 13% of GDP on interest payments (about half its non-grant revenues) because of very high interest rates.
The bursting of the UK housing bubble in 2008 removed a massive amount of demand from the UK economy. Running budget deficits is one way to replace lost demand while avoiding the creation of new asset bubbles. In the corporate media, advocating budget deficits is like advocating cocaine use, but this elite-serving taboo would be discarded if the public understood the true costs of government borrowing.
Incidentally, in a country like Venezuela, where the government gets most of its hard currency from oil exports, a good way to assess the costs of borrowing is to consider the ratio of interest payments to export earnings. The international corporate media has been hyping claims that Venezuela’s government is going to be forced to default on its bonds. Mark Weisbrot very recently pointed out in an article for Fortune magazine that the interest the Venezuelan government is due to pay each year over the next three years is about 10% of its oil revenues – and that is at the very depressed price of $55 per barrel.
2. Don’t get frightened by big numbers that are thrown around.
The Debt-to-GDP ratio is another measure that is often used to scare people into tolerating public spending cuts. As with the Deficit-to-GDP ratio, it can often tell us very little about the government’s borrowing costs. Japan’s gross debt–to-GDP ratio is presently 227%, Jamaica’s is 139% and the UK’s is 90%. Only Jamaica is plagued by exorbitant borrowing costs. As of 2013, Japan’s net interest payments were a mere 0.8% of GDP. [2] And “net interest” still includes interest paid to the central bank and therefore overestimates the cost of government borrowing.
The corporate media often does much worse than report big numbers without providing meaningful context. For example, a 2012 headline from US News & World Report read “National Debt Interest Payments Dwarf Other Government Spending”. The article, by Danielle Kurtzleben, prominently states that $220 billion per year spent on net interest is “far more than on education or food stamps” and is “expected to spiral even higher”. The claim about education spending ignores what the US state and local governments spend on education. Total public sector spending on education in the USA was 5.4% e PBB-së in 2010 which works out to about $800 billion. As for food stamps, up to 40% of the US public has been misled into believing that such programs are the most expensive. Food stamps actually account for 2% of the federal government’s budget (or 0.5% GDP) – so it’s an extremely easy program to “dwarf”.
llogaritjen “unfunded liabilities” is another common tactic used to promote deficit hysteria. It is typically deployed by the media in its ongoing campaign to screw pensioners. For example, take how much money you will spend on groceries over the next thirty years and convert that into a present-value lump sum. Do you have all the money handy right now or assets you could quickly sell off to raise it? Aren’t you terrified?
3. Remember the colossal blunders of elite-serving “experts” because the media won’t.
Dean Baker warned for years about the massive US housing bubble that would plunge the country into major crisis, but most professional economists didn’t. The big credit rating agencies proved worse than useless. The US News article I mentioned above deserves some credit for briefly quoting Baker, but then it also mentions, without ridicule, warnings issued by Moody’s that it might downgrade the USA’s credit rating. Moody’s not only gave AAA ratings to thousands of worthless mortgage-backed securities during the 2000s, it also gave a thumbs up to Enron and Lehman Brothers days before each went belly up. Corporate journalists routinely ignore the atrocious track records of people who serve the rich and powerful.
4. Reject dumb analogies.
Promoters of deficit hysteria like to ask “Can you constantly spend more every year than you earned and borrow the difference?” The correct answer is that you could if you lived forever, intended to work forever, and could expand your income-earning skills and knowledge forever – like governments (unless they destroy the world through nuclear war of environmental disaster). Moreover, unless you are a counterfeiter, you also don’t have anything like a central bank in your basement.
Budget deficit scams are used to get people to tolerate polices that stuff the pockets of the super-rich at the expense of everyone else. Leftists should take the lead in exposing them.
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[1] There are segments of the environmental movement who believe that GDP growth inevitably drives environmental destruction. I’ve addressed this fallacy in a review of Naomi Klein’s “This Changes Everything”. I wonder if this had something to do with the UK Greens accepting such a key neoliberal dogma.
[2] “net interest” as percentage of GDP is the difference between values of “net lending” and “primary lending” in this tryezë
ZNetwork financohet vetëm nga bujaria e lexuesve të tij.
dhuroj