Op-ed: A Deficit Hysteria

Pull up a log around the campfire and I'll tell you a scary story--not about ghosts and goblins, but about the deficit. "Our economic stability is at risk!" "The high deficits undermine our global influence!" 'The sun is setting on the U.S. empire!"
 
But just as those ghastly campfire tales had little to do with fact, neither do the alarmist reactions to short-term (and even long-term) deficit levels, writes New York Times columnist Paul Krugman. Krugman points out that many economists and investors "take a much calmer view of budget deficits" than what is being reported on television. And even the long-term deficit, which is certainly problematic, he writes, is not quite as terrifying as the media hype would have you believe.
 
So what's going on? The answer, Krugman argues, can be found in politics.
 
To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.
 
And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction. ...
 
The trouble, however, is that it’s apparently hard for many people to tell the difference between cynical posturing and serious economic argument. And that is having tragic consequences.
 
For the fact is that thanks to deficit hysteria, Washington now has its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there’s hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction — and millions of Americans will pay the price.