More on the National Debt and Deficits

0104unemploymentThere has been a lot of really interesting reporting on the national debt and deficits recently. Most notably, some thinking folks have come out to say that the public’s and, by proxy, Washington’s obsession with the deficit is unwarranted and even insane. They are right.

The chart on the left, from Mark Gongloff, shows that the deficit is linked to the national unemployment rate. Now, Mr. Gongloff claims causality here through the ability or inability of government to collect revenues when people have or don’t have work. Certainly, this is partially true. Increasing employment would help in making sure that the bills are paid.

Interestingly, conservative America is interested in no such thing, choosing to support ridiculous austerity measures (budget and program cutting) despite evidence from Japan and, more recently Europe, that it doesn’t work in developed economies. Even the IMF, hardly a bastion of Keynsian economics, has come out and fully admitted the absurdity of cutting programs (and thus jobs) in the midst of an economic downturn.

We can disparage public employment as much as we like, but it seems intuitive that increasing any type of employment in an economic downturn is preferable to letting workers lay fallow, unable to participate in the economy.

The other side of Mr. Gongloff’s chart is that governments, faced with a revenue shortfall, are forced to bolster services that the private sector cannot (will not) provide to unemployed individuals. Simply put, people don’t stop getting hungry and sick once they lose their jobs. Governments, facing a choice of letting potential workers die or get healthy and return to work, would much rather choose the latter. Research has shown that losing one’s job significantly worsens health outcomes.

Of course, worrying about deficits is a much easier bone to pick than admitting that Washington is powerless to create private sector jobs in the short term. It’s no wonder that Washington would rather encourage such short sighted thinking.

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About Pete Larson

Assistant Professor of Epidemiology at the Nagasaki University Institute for Tropical Medicine

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