BIG deficits, big problem?

Americans are obsessed with spending. We spend on everything, quite literally, everything. In a previous post I mentioned America's unfortunate credit card culture, the idea that we can buy now and pay later. It gets us into trouble and leads us away from sensible decisions like spending now and saving later (see: law, healthcare).

Even though we love to spend, we hate it when the government spends. Actually that's not entirely true. We are okay when the government spends on wars, and we're okay when the government gives money back to us, but we don't want things we need like healthcare or economic stimuli.

I use the plural because there is some thinking that another stimulus would be helpful. I'm no economic expert so I'm going to do my best to skirt that topic. I would like to talk about the other alternative - austerity, or budget slashing, or let's spend less because we're in a recession.

We all know debt is bad, although credit card culture has taught many people to look the other way when they incur debt. The government, however, is not allowed to incur debt. Or at least, the popular brand of current logic suggests that. The problem with America's "debt crisis" is that it isn't actually a crisis and there is zero (0, nil) evidence that austerity will fix the economy. In fact, concrete evidence (see: Ireland, Republic of) shows us that austerity makes things way worse. If you're unfamiliar, Ireland faced huge economic problems, slashed spending and now faces...wait for it...even worse economic problems. Stagnation has set it. Investment is gone, and worse, so is confidence, which leads to investment.

The austerity people tell us that budget slashing will increase confidence, and they may have a point. But confidence in what, or who? Confidence that the government can accomplish something? Investors are not worried that the American government is going to default. China buys America's debt everyday. Business people - investors - are worried that people are going to stop buying their products, and no amount of austerity from the government is going to change that. Extending unemployment benefits might because it means people have money to spend, but austerity won't assuage those fears.

Debt is a scary word and it is getting thrown around a lot. The American government does need to slash spending, but not at the expense of the American economy and the American people. Perhaps we don't need to spend more, but now is certainly not the time to start fretting about spending less. Fix the economy and the deficit goes away (see: Clinton, Bill).