The deficit: Do we need a balanced budget?

“What is so special about a balanced budget?” asked Annie Lowrey in The New York Times. That question lies at the heart of the ongoing war between Republicans and Democrats over the country’s spending decisions. Republicans believe that once government spending and borrowing are cut back, private capital will rush in and create new businesses and new jobs—invigorating the economy. Democrats, however, argue that deficit spending is needed to revive the sluggish economy, and that by taking on debt the government can preserve both public and private sector jobs, put money into people’s pockets, and stimulate consumer spending and growth. The ideological chasm separating the two parties was put in sharp relief last week, when conservative leader Rep. Paul Ryan laid out a plan to balance the budget within 10 years, mainly through severe social-spending cuts. President Obama reacted by saying that deficits were not an “immediate crisis,” adding, “My goal is not to chase a balanced budget just for the sake of balance. My goal is how do we grow the economy.”

Sorry, Mr. President, but deficits do matter, said William McKenzie in The Dallas Morning News. The Keynesian “pump primers” may contend otherwise, but when an economy is saddled with high levels of debt, government “becomes a sponge that soaks up available capital.” Our accumulated public debt is now a staggering $16.6 trillion. Fortunately, our economy hasn’t yet collapsed under the weight of Washington’s mountain of IOUs, but with baby boomers retiring and entitlement costs soaring, “a day of reckoning is coming.” Not so long ago, the president shared those fears, said David Harsanyi in Reason.com. In 2006, then-Sen. Obama described America’s rising debt—and the hundreds of billions in interest payments taxpayers must absorb each year—as “a hidden domestic enemy” and called on the Bush administration to “abide by the commonsense budgeting principle of balancing expenses and revenues.” Obama was right; too bad he’s since grown so fond of spending other people’s money.

The truth is that our deficit really isn’t that big a deal, said Paul Krugman in The New York Times. It peaked at $1.4 trillion in 2009, but the Congressional Budget Office now projects the deficit for fiscal 2013 to be $845 billion. In other words, “the deficit is falling more rapidly than it has for generations.” Meanwhile, with the economy still recovering from the 2008 Great Recession, unemployment is still too high. We won’t solve that problem by embracing premature austerity—a policy that has tipped Italy and the U.K. back into recession. The U.S. deficit is, “if anything, too small,” said Ezra Klein in Bloomberg.com. Right now, the world is loaning money at interest rates of nearly zero percent. We should take up that “generous, time-limited offer” and pass a tax cut for employers who hire new workers, and rebuild our crumbling infrastructure at “bargain basement rates.” This is the time to spend, not cut.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Sadly, our political leadership is frozen in this endless debate, said Robert Samuelson in The Washington Post. Meanwhile, it’s ignoring the reality that in a decade, Social Security and Medicare costs for aging baby boomers will force major tax increases on the young and draconian cuts on every other federal program, from defense to education to law enforcement. This year’s deficit matters a lot less than what we do about the giant deficits to come, which so far, is nothing. “Choices are being made by default.”