Video: Deficit problem? What deficit problem?
posted at 11:25 am on August 10, 2010 by Ed Morrissey
Our colleague Greg Hengler captures AFL-CIO chief Richard Trumka attempting to blame everyone — the press, Republicans, and even himself — for worries over the expanding deficits. There is “no deficit problem,” Trumka insists, while Greg adds the helpful graphic of initial deficit projections from March 2009 into the video. Trumka insists that the only crisis is a jobs crisis (along, weirdly, with an “education crisis”), but fails to acknowledge that they’re related:
First, it’s absurd to insist that the US doesn’t face a deficit crisis. In fact, we face both a short-term deficit crisis and a long-term debt crisis, and the former is feeding the latter. Anyone who thinks that doesn’t matter needs to cast their attention towards Greece and the near-collapse of Western finances in the spring that their debt collapse almost created. Having 40% of our annual federal spending come from bond sales is a big, big problem as we race towards the 110% debt-to-GDP ratio that nearly sank Greece.
Next, the jobs crisis is being aggravated and extended by the deficit crisis. Investors know that the US has to eventually pay that money back to its lenders. That will mean either rapid inflation to devalue the debt, higher taxes, or deep cuts in regulation and federal services. Since the current leadership in the White House and Congress won’t even consider Option 3, the rational prediction is that either Option 1 or 2 will get tried, or perhaps both. Plus, the explosion of regulation in this administration has made hiring much more expensive, as Michael Fleischer explained this week in the Wall Street Journal:
Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%.
To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this “summer of recovery.” We can’t pass the additional costs onto our customers, because the market is too tight and we’d lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.
And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company’s vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.
A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government’s message is unmistakable: Creating a new job carries a punishing price.
What causes the deficit? Expanded government authority and regulation, which requires massive expansion of the bureaucracy to implement and enforce. Since Democrats took control of the budgeting process in 2007, the federal budget has increased 38%, from $2.77 trillion to over $3.8 trillion, all of it in deficit spending.
We do have a jobs crisis in the US. It’s caused by an out of control federal government that is choking the private sector in red tape and scaring off investors with its wildly irresponsible level of spending. Trumka wants to pretend that they’re not related, and he blames everyone else for not joining in his fantasy.
Update: Dustin Siggins has a related piece: The debt-paying generation has arrived. Welcome to the party, folks! Now clean up!