Robert Pollin
@ "Back to Full Employment":
It is clear that debate over the fiscal deficit and austerity will
dominate Lew’s confirmation hearings and at least his initial period in
office, if he ends up getting confirmed. But without pursuing any deep
explorations about who should be taxed more or less, or whether 47
percent of U.S. citizens are indeed freeloaders, I would just propose
that Lew be willing to recognize three sets of very simple, irrefutable
facts about the current U.S. fiscal condition. Here they are:
Fact #1: The U.S. government is not facing a fiscal crisis.
In any common sense meaning of the term “fiscal crisis,” we would be
referring to the government’s inability to make its forthcoming payments
to its creditors. By that common sense definition, the U.S. federal
government is in just about the best shape it has ever been. Figure 1
below tells the story.
According to the most recent data from the third quarter of 2012
(which we term “2012.3”), the federal government spent 7.7 percent of
its total expenditures on interest to its creditors. As the figure
shows, that figure is less than half of the average figure under the
full 12 years of Republican Presidents Reagan and Bush, when the
government paid, on average, 16.8 percent of the total budget to cover
interest payments. Right now, as we see, government interest payments
are at near historic lows, not highs. As Treasury Secretary-designate,
Lew needs to just state this obvious, and highly relevant point. To my
knowledge, it has been heretofore completely left out of the
insider-D.C. fiscal cliff debates, by Lew, Obama, and Geithner, to say
nothing of the Republicans.
Fact #2: Interest rates on government bonds are at historic lows.
