Dick Cheney famously said “Reagan proved deficits don’t matter.” Cheney was presumably talking about the political implications of deficits, because Reagan won reelection even though he blew up the deficit more than all of his predecessors combined (while continuing to claim to be a fiscal conservative).
But now, economist James Galbraith claims that deficits don’t matter financially, that “the danger posted by the long-term deficit … is zero”.
So which is it? Are record deficits threatening to destroy the value of our money, like they did in post World War I Germany? Or was the economic collapse in Germany that led to the rise of the Nazis caused by other problems?
Indeed, the collapse of the economy in Germany helped the Fascists rise to power. If I were susceptible to conspiracy theories, I might even believe that the sudden, completely unforeseen collapse of our economy in 2008 might have been engineered to help (fascist-like) elements of our society gain power.
And then there are the Chinese. Will our deficits make us the equivalent of serfs to our Chinese landlords, or is the fact that China is so heavily invested in America the only thing that is saving our collective asses? Does economic chaos in America help or hurt the Chinese?
Of course, that doesn’t explain the tea partiers, who don’t seem to notice the deficit when the Republicans are in power, but scream bloody murder about it when the Democrats are in power. Or are they just pawns in that conspiracy theory that I really don’t believe in (honest!).