That’s what Bill Black calls the Pete Peterson Debt/Deficit Hawk PR push to gut Social Security and Medicare. G3 stands for “Grandchild Guilt Gambit” and the logic (such as it is) goes something like this-
National Debt is climbing toward 75% of Gross Domestic Product, levels not seen since the 1950s!
Ok, so, umm…, what?
You know, for most people the 1950s were not so bad economically. In fact Republicans keep appealing to it as a kind of “Golden Age” they want to return to.
Now personally you won’t find me playing those kind of games because I also remember the bad things about the 50s including rampant public discrimination and an utterly unjustified faith in Government, both of which persist to this day, regrettably.
But for Joe Pocketbook things weren’t so bad, you graduate High School, get a job at the factory, buy a nice car and get yourself a wife and house and kids. Send them to college if they want. After 40 or 50 years you retire to someplace warm and sunny with your defined benefit pension and spend the rest of your life playing golf.
You know, the American Dream.
Of course companies couldn’t afford to give their CEOs billion dollar bonuses and they struggled along on a mere 50x what you were paid but hey, success.
Debt Derangement Syndrome: Saving Our Grandkids from Wall Street
by William Black, New Economic Perspectives
October 25, 2016
There are times when we should run a budget surplus, but they are unusual times for an economy like the U.S. with a sovereign currency that is very likely to continue to run substantial balance of trade deficits. We could achieve an economy running so “hot” that many millions of Americans who dropped out of the labor force reentered and employers were looking so aggressively for scarce workers or scarce resources such as rare minerals that prices for such workers and rare minerals rose sharply. Alternatively, demand could so outpace supply that the general price level rose sharply and produced harmful levels of inflation. Running a budget surplus could be an excellent idea shortly before either condition arose. None of those conditions is true in the U.S. today as we can see every day by observing the data for inflation, federal interest rates, and labor force participation rates.
The circumstances in which a Nation like the U.S. that has a sovereign currency, borrows solely in that currency, and allows the value of its currency to freely “float” needs to “balance” a budget or run a budget surplus are historically rare. As we have seen from the horrific errors of the 1930s under Presidents Hoover and Roosevelt, the grotesque pattern of economic malpractice in the eurozone of inflicting austerity in response to a Great Recession, and the slowing U.S. recovery once Obama and the Republicans began to inflict austerity, it is critical for everyone’s welfare, particularly our kids and grandkids, not to inflict austerity except when it is really needed.
Even extremely conservative central bankers now admit that modest inflation is desirable. The U.S. and the eurozone have failed to provide sufficient demand to achieve even the Fed and ECB’s modest inflation targets. Moderate inflation, in nations with functional governments, does not lead to hyper-inflation. Moderate inflation does not cause significant harm to an economy. We should have been so lucky to have experienced moderate inflation in the last ten years, it would have meant a superior economic environment. But the same is not true of disinflation (negative inflation rates). Even modest deflation poses a material, albeit far from inevitable, risk of pushing an economy into a long-term recession or locking it into a long period of weak growth.
Economists now broadly recognize that the problems of disinflation versus inflation are not symmetrical and it is essential to adopt macroeconomic approaches that put far greater weight on avoiding modest disinflation than modest inflation. This means we can and should err on the side of not inflicting austerity for the purpose of preventing inflation that has not even become modest.
This also means that the third major rhetorical gambit that Peterson launched is false. Peterson claims it is an “immutable” fact that delaying inflicting austerity always makes life “more painful and difficult.”
Austerity, when inflation is already too low, when many millions have dropped out of the labor markets, when there are no real resource constraints to stimulus, and interest rates are often negative is a dogmatic act of economic malpractice. The deficit was brought down too far and too fast by President Obama and the Republicans’ embrace of austerity, slowing the recovery. Peterson’s proposal to inflict still more damaging austerity on our kids and grandkids poses a serious risk of forcing our economy into recession.
Delaying running a balanced federal budget or a fiscal surplus has long proven to be desirable in U.S. history. Trying to run budget surpluses is highly associated throughout U.S. history with producing economic crises, not preventing them. Trying to run a surplus, as Presidents Hoover and Roosevelt discovered, often failed because it exacerbates the economic downturn and increases the deficit over the course of the business cycle.
Peterson is a direct ideological inheritor of the economists of the 1930 and 1940s. That generation of economists convinced presidents Hoover and Roosevelt to commit what was economic malpractice even in the 1930s, but Peterson’s failure to learn from reality puts him into a special category of malpractice.
Peterson is a Wall Street billionaire. He has admitted that his dream is to privatize Social Security. Privatization would mean Wall Street obtaining hundreds of billions of dollars in fees administering private savings schemes that would put our retirements at serious risk. His op ed calls on us to support Wall Street’s goal of unravelling the safety net by making what he euphemistically refers to as unspecified “adjustments” to reduce Social Security benefits.
Once again, where is that Hyper-Inflation, the sky high interest, the currency debasement?
Nowhere. These people are flat out lying in the face of the facts and evidence and deserve no more credibility than those who claim that clouds are orange.