- Economics March 6
President Obama's budget for the 2015 fiscal year contains lots of populist proposals like more generous tax credits for the working poor, initiatives for education from preschool through college, for roads and other public works, and for research and manufacturing centers. Obama intends to pay for them with taxes, mostly on the rich, which would bring in more than $1 trillion over 10 years. But not all of that would go to government programs — much is, in fact, slated for deficit reduction.
Yet with the deficit declining at the fastest rate since World War II, I — and many others will probably agree — wonder why raising taxes is really necessary at this stage. With interest rates on government borrowing remaining near record lows, the market continues to offer the federal government very cheap money to invest in infrastructure, education, basic research, and measures to reduce economic inequality. That spending can be paid for later, when unemployment is lower, growth higher, and the economy in a stronger position to withstand tax rises.
Faster deficit reduction may be political wisdom — with a large majority of Americans considering deficit reduction a high priority — but it is not economic wisdom when millions of Americans remain out of work, and while economic growth remains relatively timid. It's especially unnecessary for a major superpower like the United States, whose currency and government debt securities are highly prized in global markets as "safe assets."
Let's not forget the reason why economic growth wasn't higher last quarter: Deficit reduction.- -
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- How to be the most productive person in your office — and still get home by 5:30 p.m.
- 43 TV shows to watch in 2014
- How our botched understanding of 'science' ruins everything
- The science of sex: 4 harsh truths about dating and mating
- 6 things the happiest families all have in common
- How to be the star of a cocktail party where you don't know anyone
- California's epic drought
- 11 scientific studies that will restore your faith in humanity
- 13 Urban Outfitters controversies
- What would a U.S.-Russia war look like?
Subscribe to the Week