Obama Admin. Is Right About Debt, Despite What Fox News ReportsMarch 13, 2013 2:38 PM EDT ››› MIKE BURNS
Fox News distorted President Obama's comments on the federal budget to advance the myth that debt is an immediate problem facing the U.S., ignoring that experts agree that growth, not debt, is the pressing problem.
In a Tuesday interview with ABC News' George Stephanopoulos, Obama said that his main concern when it comes to the economy is growth, not a "balanced budget just for the sake of balance." Obama pointed out that "we don't have an immediate crisis in terms of debt. In fact, for the next ten years, it's gonna be in a sustainable place."
Discussing Obama's interview, Fox Business host Stuart Varney claimed that in contrast to Rep. Paul Ryan (R-WI), "who is deliberately going after deficits and the debt and wants to balance [the budget] in ten years," Obama's priority is "growth by spending more government money." He added: "The president says spending and debt, probably sustainable. But Paul Ryan says, No, it is definitely not."
Experts agree with Obama's assessment. Joel Prakken, a senior managing director at the forecasting firm Macroeconomic Advisers, explained that limiting debt over the long term could be essential to maintaining economic health, but cautioned that it is not immediately necessary, as quoted by The New York Times:
"Over a long period of time, you'd have a higher standard of living if you moved to a balanced budget and stayed there," said Joel Prakken, a senior managing director at Macroeconomic Advisers, a forecasting firm in St. Louis. "But you suffer some short-run pain, and you don't want to inflict that when the unemployment rate is already high, the economy is still recovering from the legacy of the Great Recession, and the Federal Reserve has used up most of what's in its quiver."
Nobel Prize-winning economist and New York Times columnist Paul Krugman has long argued that focus on debt is misguided, and that recent increases in debt were essential to preventing another recession. Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, has asserted that the focus on deficits and debt distracts from the more pressing problems of sustained high unemployment and a weak economy.
In a November 2012 post on his website, former Labor Secretary Robert Reich explained that focusing on pro-growth strategies -- something the Obama administration has embraced -- has the benefit of decreasing the deficit while growing the economy:
Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.
Deficit reduction leads us in the opposite direction -- away from jobs and growth.
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected -- bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.