Saturday, November 19, 2011

David Brooks Confuses the United States with Greece

More Dean Baker on why David Brooks is an asshole who wants the middle class to pay in order to keep taxes on rich people lower.--SS

David Brooks Confuses the United States with Greece:
It is easy to get Greece and the United States confused, after all they are both in the northern hemisphere. Okay, this is a case where someone making the comparison puts their ignorance and/or dishonesty in full public view. The three reasons why we are not Greece, in reverse order or importance are:
1) Greece had chronic budget deficits, with a rising debt to GDP ratio even in the upturn. Its government has great difficulty collecting revenue as tax evasion is the major national sport. The United States actually had relatively modest deficits, prior to economic collapse in 2008. The debt to GDP ratio was actually falling. It was the economic collapse that gave us huge budget deficits.
If the economy recovers, ALL projections show that the deficit will return to relatively modest levels. In the longer term we are projected to have serious budget problems, but this is entirely due to our broken health care system. We pay more than twice as much per person as people in other wealthy countries. If we paid a comparable amount for our health care then we would be projecting budget surpluses, not deficits.
2) The United States has a huge diversified economy. If there was a run on the dollar then our goods would suddenly be hyper-competitive in the world economy. For example, if the dollar fell by 20 percent, then it would be equivalent to giving a 20 percent subsidy to all our exports and imposing a 20 percent tariff on all imports. Since the rest of the world would not tolerate this situation, they would have no choice but to support the dollar even in a worst case scenario. (In this respect, our productivity continues to grow by about 2.5 percent annually, so the economy is not going down the drain. We just need demand.)
3) We have our own currency. The ECB could buy Greek bonds and prevent the disaster it is facing. It is choosing not to. In the United States, this decision would be up to us. In a worst case scenario, we could have the Fed buy absolutely as many bonds as we want. There could be problems of inflation at some point, but we are very very far from that world.
In short, the comparison with Greece is utterly baseless. People are making this comparison to advance their agenda for cutting Social Security and Medicare. It absolutely should not be taken seriously.

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