Air America President Dismisses Deficit Spending as 'Rhetoric'

     Now that the government has assumed the role of economic planner with various bailout packages and stimulus plans, experts are predicting a federal budget deficit of $1 trillion.


     That much money may be difficult to comprehend, but former President Ronald Reagan put it in perspective with a 1981 analogy describing the federal debt: “And the best I could come up with is that if you had a stack of thousand-dollar bills in your hand only 4 inches high, you’d be a millionaire. A trillion dollars would be a stack of thousand-dollar bills 67 miles high.”


     But the huge number doesn’t worry Mark Green, the president of the liberal talk radio network Air America. Green dismissed concerns about deficit spending in an interview on MSNBC’s “Hardball Nov. 25.


     “Let’s get where we at least agree,” Green said. “One last thing, the conservative rhetoric about, ‘We don’t want to spend too much and the deficit’ is real, it’s politically real. And Sen. and President-elect Obama responded today when he said we have to eventually balance the budget.”


     Green referred to former President Franklin Delano Roosevelt’s Oct. 1, 1936 speech in Pittsburgh, where he promised to balance the budget, but later recanted on that promise in a serious way.


     “And, Franklin Roosevelt as a candidate said in Pittsburgh, ‘We’re going to cut spending by 25 percent,” Green said. “When he got into office, he realized it was the exact wrong solution. So, the rhetoric of balanced budgeting is part of America. And, when Roosevelt said to an aide, ‘Oh my God, I said I would balance the budget. How can I spend more to get out of the Depression?’ The aide famously said, ‘Deny you were in Pittsburgh.’”


     But deficits do matter and downplaying them is risky business. As MSNBC “Hardball” fill-in host David Shuster pointed out, it puts the United States in a precarious position, with other nations holding American debt,.


     “Well, at a certain point, though, I think we do get in trouble either with the Saudis or Chinese when they decide they’ve had enough,” Shuster said.


     High deficit spending by the government also causes higher interest rates – the very thing the government is fighting as it tries to unfreeze credit, as William Gale, director of economic studies at the left-of-center Brookings Institution, pointed out in an article by John Maggs for National Journal on Nov. 3.


     “Deficits cause higher interest rates because the government competes with businesses and consumers to borrow money, according to conventional economic theory,” Maggs wrote. “The science of quantifying this effect is a little slippery, but Gale's research estimated that for each percentage point of GDP that the deficit rises, long-term interest rates increase by 0.4 to 0.7 percentage points. According to this yardstick, for the decade of higher deficits that lasted until 1993, government borrowing raised interest rates as much as 1 percentage point each year. Compounded over 10 years, this borrowing crowded out a lot of growth.”