This centrist bill would instantly destroy the world economy

Most Democratic presidential candidates, pushed by Bernie Sanders, are proposing big new spending programs, like Medicare-for-all or a new child tax credit. The party's traditional deficit-phobia seems to be fading over time.

Moderate Democrats don't like this one bit, so Rep. Ben McAdams (Utah) with the 27-member Blue Dog caucus has a replacement proposal. It's not only bad, it's of the most blisteringly stupid ideas out of the Republican policy playbook: a balanced budget amendment to the Constitution. It doesn't bode well for the Blue Dogs' political future.

During the Obama years, Republicans routinely pushed bills advancing a balanced budget amendment. Any economist with a quarter of a brain — from conservatives to socialists — responded that a strict no-borrowing requirement would instantly create a shattering recession and crash the global economy. Federal borrowing props up demand both inside the U.S. and in all countries that export to it; a huge dose of austerity to balance the budget would result in an instant giant recession.

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Meanwhile, U.S. Treasury bonds are the foundation of the international finance system, because the dollar is the world's major reserve currency. Foreign countries need dollar assets to settle their international accounts, and U.S. debt is the safest one out there. That's (mostly) why almost every foreign country has at least some holdings of American debt. Until something comes along to replace it (perhaps the Chinese renminbi, or Keynesian "bancor"), the dollar's status as reserve currency gives America an advantage of cheaper borrowing — even with the ballooning Trump deficits, government interest payments as a share of GDP are a mere 1.59 percent, about half what they were in the 90s — but it's one which must be maintained by continuing to supply dollar assets.

It's even idiotic if you accept the moronic "governments are like a household" canard. Households don't always balance their budgets — sometimes they, you know, take out loans to buy a car, a house, or get through a rough patch.

Now, the Republican proposals were 100 percent bad faith trolling. When they got power in 2017, they instantly pushed for a gigantic tax cut for the rich that exploded the deficit — just like they did when George W. Bush became president.

And to be fair, McAdams' proposed amendment would not be so draconian as the fake Republican versions. It would contain exceptions for war, recessions, and also protect Social Security and Medicare from cuts. Given that the U.S. is in a seemingly endless war on terrorism, and war spending plus Social Security and Medicare make up about 55 percent of the federal budget, it's unclear what this would mean in practice.

Still, the results could be disastrous. Medicaid is pointedly not included among protected programs, and neither are food stamps, refundable portions of the Earned Income Tax Credit and Child Tax Credit, nor sundry other programs to help the middle class and poor. Depending on how the amendment is designed, these programs — which are popular in addition to being vitally important for many families — might get gored.

But the political background here is perhaps the most jaw-droppingly stupid part of the whole mess. This sort of austerity mania is the single biggest reason the Democrats got swept out of Congress in the 2010 midterms. Centrist Democrats and Obama himself pivoted to deficit reduction by early 2010, abandoning stimulus to create jobs while unemployment was still about 10 percent. The result was crushing defeat — especially for the Blue Dogs themselves, who lost 22 of their 46 seats.

At least this time the Blue Dogs have included an exception for recessions. But if they aren't convinced by the stone obvious arguments that austerity is bad policy, one would think that losing their seats en masse directly because of austerity might lead them to rethink things. But nope! They've learned nothing, and forgotten everything.

McAdams complains that "In my district, fiscal responsibility matters." It doesn't, actually. People care about their political goals and concrete material circumstances. People will say they're worried about the deficit, but as Greg Sargent notes at The Washington Post, President Trump has blown it sky-high and still gets 58 percent approval on the economy because unemployment is low and wages are growing. And insofar as people express concern about the deficit, it's because of generations of well-funded propaganda and endless scaremongering from the so-called nonpartisan media. Even Gallup has long been running what amount to pro-austerity push polls in which the deficit is presumed to be a major problem.

The Blue Dogs need to either learn a few of the economic lessons of the last decade, or be replaced by candidates who have.