November 4, 2012 by David K. Sutton
What’s More Important, The Economy Or The Deficit?
I know some will say this is a false choice, but I ask, what is more important, the economy or the deficit? The economy has steadily improved since the Great Recession but it has a long way to go to get back to a more historical norm for unemployment of around five percent. Since we know the economy is not yet booming, why are we so fixated on reducing the deficit and cutting spending? Many of the same people calling for spending cuts say we cannot increase taxes because it would harm the economy, but why do they think spending cuts will have no effect on the economy? In fact, many so-called deficit hawks say the deficit itself is harming the economy, which really makes no sense at all.
Most government spending goes straight into the economy. Regardless of whether you approve of this or that spending, it’s still fueling economic growth nonetheless. If we were to cut spending by over a trillion dollars in the coming year and balance the budget, do you honestly believe that would have no impact on the economy? Nobody is proposing this, but many Republicans are proposing drastic spending cuts, especially to programs that aid the poor. The one thing you can be sure about, every dollar that goes to the poor goes back into the economy.
If the economy is doing better, the deficit and the debt becomes a smaller problem. If the economy is doing worse, the deficit and the debt are much bigger problems. Economic growth is what we need now. We need even more robust job creation in the coming years. If we can get back to a booming economy, that is when we can have a discussion about deficit reduction. This is how it works. — When the economy is doing bad or is slow, the government will likely need to deficit spend to help reverse course. When the economy is doing well or booming the government does not need severe spending cuts to balance the budget and this is due to less unemployment benefits and increased tax revenues.
So I ask again, what is more important, the economy or the deficit?