Home > crisis, The Economy > The Budget Deficit Chicken Hawks

The Budget Deficit Chicken Hawks

from Dean Baker

Most people are familiar with the concept of “chicken hawks.” Chicken hawks are the politicians who are anxious to send other people to risk their lives in war, but somehow managed to avoid service when they had the opportunity to fight themselves. Former Vice-President Dick Cheney and former President George W. Bush are the leading members of the chicken hawk society.

It turns out that we have a similar story with budget policy, where there appears to be a large contingent of budget deficit chicken hawks. The deficit hawks have been filling the news lately. These are the folks who are yelling that something terrible will happen if we don’t reduce the deficit. Most of them seem to have missed the fact that something terrible is now happening. We have almost 15 million people unemployed and 9 million underemployed, with several million facing the loss of their home in the next few years.

People of all ages are seeing their lives wrecked by a economic disaster that was entirely preventable, if the folks running economic policy were not too incompetent to notice an $8 trillion housing bubble. In fact, one of the reasons that this bubble did not get noticed was that even before the bubble burst – creating large deficits – the deficit hawks were running around yelling about the deficits. These deficit hawks were able to get far more attention for their whining than the people who were warning about the dangers posed by the housing bubble. 

Now that we have seen the collapse, rather than supporting action to get the economy back on its feet, the deficit hawks are again yelling about the long-term deficit. But, what is really striking is that many of the people who whine loudest about the deficit are the most reluctant to take steps to reduce the deficit – at least when it involves powerful interest groups.

So, in the last week, we were treated to the sight of two senators who are leading Democratic deficit hawks, Kent Conrad from North Dakota and Ben Nelson from Nebraska, both come out for the extension of the portion of President Bush’s tax cuts that went to upper-income people. These two senators, who have been in a near panic about the debt that we are handing on to our children, came out firmly for more debt for our children if the alternative was higher tax payments by the wealthy.

Unfortunately, this chicken hawk approach to deficit reduction is more the rule than the exception. The surge in the deficit in the last three years was overwhelmingly due to the economic collapse. It might be reasonable therefore to look to Wall Street to pick up much of the tab for future shortfalls. My calculations indicate that a tax on financial speculation could raise in the neighborhood of 1.0 percent of GDP or $150 billion a year.

Yet, almost none of the deficit hawks will go near a financial speculation tax. In fact, when America Speaks, a group funded by Wall Street investment banker and leading deficit hawk Peter Peterson, put on a series of town halls on the deficit, their booklet told participants that a speculation tax could only raise 0.1 percent of GDP, one third of what the United Kingdom gets from taxing stock trades alone.

It is not only Wall Street that is protected by the deficit chicken hawks. The insurance and pharmaceutical industries can also count on the deficit chicken hawks. As all budget analysts know, the country’s long-term budget problem is due to our broken health care system. We pay more than twice as much per person as the average in other wealthy countries.

But the deficit hawks are scared to talk about fixing the health care system. This would hurt the insurance industry, the pharmaceutical industry and other powerful interest groups. When America Speaks came to health care, they said reform was off-limits. They only wanted participants to talk about cutting Medicare and Medicaid. The elderly and the poor don’t have powerful lobbies like the industry groups.

Basically, the deficit chicken hawks want deficit reduction, but they only want it to be at the expense of the elderly and the poor, hence their attacks on Social Security and Medicare. Of course the public is not anxious to go along with gutting the programs on which they and their parents depend, which is why the deficit chicken hawks prefer to do their work through commissions that hold secret meetings.

The deficit chicken hawks also don’t have much commitment to honesty. When America Speaks reported its results to the public and President Obama’s deficit commission, it noted that one cut to Social Security, raising the retirement age, got majority support from participants. However, it turns out that this result was based on a software error. When the error was corrected, support fell to 39 percent.

Remarkably, America Speaks did not have the integrity to publicly acknowledge and correct this mistake. It just quietly changed the number on its website. This is the sort of behavior we should expect from deficit chicken hawks who want to attack the programs on which so many ordinary working people depend, while protecting the interests of the rich and powerful.     

 

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of False Profits: Recovering from the Bubble Economy. He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues.

See article on original website

 

  1. John B.
    August 2, 2010 at 2:25 pm

    Two words: carried interest. This is a euphemism for profits by hedge funds — obscene profits that are taxed at the capital gains rate, even though they are not capital gains. Democrats in Congress have tried and failed to end this absurdity. Republicans trotted out their usual arguments about stifling entrepreneurism and discouraging creativity, and those things were deemed more important than the hundreds of billions of dollars that would accrue to the Treasury if this tax were raised. This is political cowardice, plain and simple. It will be our undoing.

  2. August 2, 2010 at 2:38 pm

    Two questions for Dean Baker:

    1 The deficit hawks stir up fears about increasing the national debt.But deficits need not increase debt, since instead of borrowing money, the government can fund deficits with Treasury-issued interest-free Greenbacks, as Thomas Edison insisted. Is issuing Greenbacks more inflationary than issuing debt, or less?.(Doesn’t borrowing increase the money supply more via the multiplier effect, whereas issuing Greenbacks does not invoke it?)

    2.Like almost everyome else, you seem to assume that the “cause” of the crash was the housing price bubble. You say nothing about total debt, public and private, now about $50 trillion in the US, or about $600,000 per family of four. Is there no limit on this debt, or can it keep increasing forever? (Could the.real cause of the crash be that there IS a limit, and we have hit it?)

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