The Biases of an Arugula Eater or Why Not To So Indiscriminately Cut Spending

While I usually focus on international political issues, this recent newscycle and national joke of a discussion has me particularly worried. Not a day passes when I open my Google Reader and then do not wish to throw my laptop out the window, because of some pundit who argues that national debt is somehow the cause of our unemployment problem.

Now why in particular does this offend me so much, besides its laughable premise? (I will show you how dumb this is in a second) Because the implications of an aggressive contractionary fiscal policy has clear negative effects on my personal life. This is a bias that I find only fair my readers should know. I am a college student from a middle class family. The repealing the Bush era tax cuts for the exceptionally wealthy has no negative effects for me, so I have no qualms with such a decision in budget balancing. However I, along with many others at my juncture in life, have much to lose by a hack and slash approach to budget reduction.

Right now I am working as a research assistant in a medical lab. My mentor got the money to hire me through a National Science Foundation grant. The grant to start our next major project is currently under review by the National Institutes of Health. I can afford my college education only through financial aid and relying on federal subsidized student loans, because Congress already removed the Pell Grants that used to help me. I can only afford graduate education through scholarships financed by the NIH and NSF. So yes, my future is entirely at the mercy of the hands of the Boehner/Cantor/Ryan House.

And there are millions upon millions of others who need vital government services in order to survive. Medicaid had 62 million enrollees in 2008 according to the Congressional Budget Office (you know, that infamous liberal nonpartisan accounting agency put under Nixon). That number has only increased with the continuing Great Recession. Similarly, there are 45 million in Medicare and the baby boomers are just beginning to retire. I am not suggesting that we should not reform these agencies. We should, eventually and not through gutting the entirety of the Great Society.

The worst part of this debate is that it is being played at the basest of human emotions. From Ryan's voucher for Medicare proposal, to Cantor's we must defend the rich's right to tax cuts, and Coburn's vitriol for the sciences, we are engaging in a nonsensical dialogue with a blatant disregard towards history. To take the cake is the fact that both sides, the President and the GOP House, have agreed that this discussion should be framed that National Debt ruins confidence. The academics sit in shock at the inanity and FDR and Keynes roll in their graves as Hoover slowly rises from the grave.

From our esteemed President on October 22, 1928,

"The Democratic administration cooperated with the Republican Party to demobilize many of her activities and the Republican Party from the beginning of its period of power resolutely turned its face away from these ideas and these war practices, back to our fundamental conception of the state and the rights and responsibilities of the individual. Thereby it restored confidence and hope in the American people, it freed and stimulated enterprise, it restored the Government to its position as an umpire instead of a player in the economic game. For these reasons the American people have gone forward in progress while the rest of the world is halting and some countries have even gone backwards. If anyone will study the causes which retarded recuperation of Europe, he will find much of it due to the stifling of private initiative on one hand, and overloading of the Government with business on the other."

Almost exactly a year later on Black Thursday the world saw the greatest economic catastrophe in history. And the sacred confidence of industry and enterprise was not restored by the government trying to keep the international house in fiscal order. It was not until 4 years later with a new administration that our nation would recover.

And so my friends who are still here, let me reward you with a picture of what the aftermath of the New Deal was:

(Click to Enlarge)

I feel almost dirty presenting this as evidence in the confidence fairy (credit to Krugman) discussion. Because, it shows two relatively independent variables in economics vary independently. The orange is percent unemployment from 1950-1999. The blue is the national debt in 2011 dollars using the Consumer Price Index to account for inflation. As for Tea Partiers, please note your Messiah Reagan was the first to break $3 trillion... and $4 trillion.... and $5 trillion. In fact from 1950-1980 we hardly changed our debt and by the end our unemployment skyrocketed. Once Reagan finally started heavy spending, unemployment began to drop. Just in time for his 1984 re-election. Seeing Keynesian Economics worked out from 1982-84, he continued it till the end of his term and unemployment almost dropped down to 5%.

Sadly, this kind of analysis and reasoning has no place in our discussion. Since I can't speak the doublespeak that our politicians use I fear this graph means nothing to the 24/7 media monstrosities. But for those of you who can read graphs and understand numbers, let this be something to think about. I'll let you decide what the urgency of debt reduction is in our economy.

Note: Here is a link to the Excel sheet that has all this data. The CPI data comes from the Bureau of Labor Statistics CPI Calculator, the National Debt data comes from the Treasury, and the Unemployment Data is from the Misery Index which aggregates data from the Bureau of Labor.