The Budget Thugs: What Do They Know About the Economy?

BudgetCuts

Ed Haislmaier, a senior scholar at the Heritage Foundation, made himself famous in this video where he appears to be assaulting people protesting a conference organized by Fix the Debt. While this act of bad temper may be uncharacteristic of the public behavior of this corporate-sponsored crusade to cut Social Security and Medicare, it does reflect the way in which they hope to bully their agenda through the political process.

The line from Fix the Debt, an organization that includes the CEOs of many of the country’s largest corporations, and allies like The Washington Post is that we better have cuts to Social Security and Medicare because they say so. Note that they did not try to push this line in the elections. Everyone knows that cuts to these programs are hugely unpopular across the political spectrum.

The Fix the Debt strategy was explicitly to wait until after the election. They would then go into high gear pushing their agenda of cutting Social Security and Medicare regardless of who won the elections. Remember, we need these cuts because they say so.

It is worth repeating the “they say so” part, because this is the only way we could know that cuts to Social Security and Medicare are necessary. It is possible to tell stories about countries where a meltdown in financial markets forced sharp budget cuts, but there is zero evidence of that for the United States. Investors are willing to lend the U.S. government vast amounts of money at extremely low interest rates. The only reason that we have for believing that financial markets will panic if we don’t make the Social Security and Medicare cuts that the Debt Fixers want to make is because they say so.

For this reason, it is worth considering what the Debt Fixers know or don’t know about the economy. This means bringing up a still fresh wound: why did none of these people see the housing bubble whose collapse wrecked the economy?

It is important to understand the bubble was not hard to see, nor did it require much knowledge of economics to realize that its collapse would devastate the economy.

The bubble was an unprecedented nationwide run-up in house prices. For the 100 years from 1896 to 1996, nationwide house prices had, on average, just tracked the overall rate of inflation. In the decade from 1996 to 2006, housing prices rose by more than 70 percentage points in excess of the rate of inflation.

How could anyone following the economy miss this? There are reports on housing prices released every month; did none of the Debt Fixers ever look at them during the bubble years?

The full article originally appeared at Truth-Out.

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