Deficit Terrorists

Neoliberal fundamentalism, introduced in the beginning of the ‘80s, has left a terrible impression: The current financial crisis, a product of fundamentalism, has the global economy in a virtual coma, but despite this, for the leaders of the developed world it remains the bible.

Fundamentalist thinking is guided by principles that are truly believed to be valid under any circumstance. It is thinking absolutely blind to the real world. The religious faith in its models is so unyielding that if an observation about a conclusive fact happens and doesn’t fit in the model, it should simply be excluded from analysis in so far as the markets are perfect; if something goes wrong in the global economy, it is the product, as they say, of human interference against nature, against the sacred freedom of the markets.

You’ve heard it a thousand times. The market failures are resolved with more market. You perhaps may think that this is nothing but immensely childish nonsense, but it is as real as daylight that it’s the way of thinking that dominates all the brains of the world powers, guided by the neoliberal fundamentalism of our time. There is no room for an idea different than their dogmatic beliefs.

In this game of Juan Pirulero, the states indebt themselves more each time to save the markets and, right afterward, the markets punish them for having gone into debt. See if it’s tragicomic that the American government indebts itself meteorically, after which the debt resources are swallowed up by the black holes of the banks, and in the next scene Standard & Poor’s (S&P) gives a grade to the American government lowering the quality of its bonds and bills.

S&P did not downgrade the rating of the American political system. It did not downgrade the rating of the money market. It downgraded the rating of the bonds and bills of the Treasury of the United States. But in neoliberalism’s next scene a black swan appears: In the opening of markets the next day, investors left the stock market en masse to saturate the safe harbor of the downgraded bonds and bills of the American Treasury. And this occurred en masse, not just with American investors.

The deficit hawks, with a language that makes sense to the average citizen, shout like never before against the fiscal deficit of the states. Their supporters, dominated by fundamentalism — regardless of ideological support — are made submissive to do their work, of course reducing spending and privatizing public assets, although right afterward the markets crash because reduction of the deficit inevitably will harm the economic growth of the immediate future and capital, therefore taking refuge in secure assets. S&P thus makes a monumental fool of itself.

The deficit terrorists don’t stop talking about the fearsome threat of debt that we may leave for our children and grandchildren, derived from significant fiscal support for production and employment (only debt to save banks is worth it). These terrorists inhabit all of the national and international financial institutions. Despite that, in this moment, the problem of long-term deficit doesn’t exist.

While interest rates (today almost zero) are kept below the rate of economic growth, levels of debt in relation to GDP will tend to stabilize and even decline.

The horrible problem of the deficit is a fundamentalist story that, among other things, is never specified. Today, what exactly happened? Public supplanting of private economic activity? Inflation? Higher long-term interest rates? Just what exactly has happened to us? Because of the current conditions, a vigorous economic stimulus, in the United States, for example, none of this can occur with an unemployment rate higher than 10 percent, with deflation through indebtedness and with interest rates approaching zero.

But there is another perceptive vision about the deficit terrorists; Christopher Hayes wrote in the middle of last year in The Nation: “Perhaps the most egregious aspect of the selling of the Iraq War was its false pretext. It never really was about weapons of mass destruction, as Paul Wolfowitz admitted. WMDs were just ‘what everyone could agree on.’ So it is with deficits. Conservatives and their neoliberal allies don’t really care about deficits; they care about austerity — about gutting the welfare state and redistributing wealth upward. That’s the objective. Deficits are just what they can all agree on, the WMDs of this manufactured crisis. Senator John Kyl of Arizona, speaking on Fox, has come out and admitted as much. All new spending increases must be offset, he said, but ‘you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.’ So there you have it.”