The Deficit

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Mike Allen and Jim VandeHei have a sexed-up big-picture story in today’s Politico on the Obama administration’s plans for cutting the federal deficit. The gist is that the Obama team is going to spend 2010 focusing on slashing the deficit—so much so that the President will focus his State of the Union address in January on the subject. The problem is that most economists agree that when the economy is in recession it needs more spending, not less. So cutting the deficit could be counterproductive, especially if it further depresses the economy and further reduces tax revenues. At the same time, the deficit is an illustration of a very serious problem, as Doug Elmendorf, the director of the Congressional Budget Office, explained this week:

The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services.

The difficulty for the Obama administration lies in the contradiction between the need for deficit spending to stimulate the economy and the unsustainability of deficit spending. The national debt is already at a historically high level as a percentage of GDP, leaving Obama with less room for countercyclical deficit spending than he would otherwise have. It’s a bad time to borrow, but it’s also a bad time not to borrow. The profligacy of 2001-2008 has put the Obama team in a really tough place.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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