MY WORD: Bleeding federal budget is not the cure

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By J. Howard Griffith

Dr. Benjamin Rush was the chief medical counsel to Thomas Jefferson and a signer of the Declaration of Independence. Dr. Rush is also famous for advocating a medical treatment that proved to be incredibly disastrous. He advocated bleeding the patient as a cure for a wide range of illnesses.

His treatment was in vogue in medical circles from the late 1700s until the turn of the 20th century. Although Dr. Rush worked in the field of medicine, in Washington today we have a lot of politicians who believe in economic blood-letting as a cure for the deep recession our country has experienced since 2007.

The family budget has often been compared to the Federal Budget. We often hear, “Why can Washington not operate under the same budget constraints as a family?”

Well, in truth, that is not an apt comparison for a wide variety of reasons. However, because we often hear that comparison, let's run with it for a moment.

The Austerity Hawks say that we need to cut spending and cut taxes... revenue...income. Using the family budget comparison, it works like this: So you cut family spending....Oh wait, you already have done that with your family budget. You don't go out to eat or the movies or take a vacation. Let's see, what's left. Home mortgage, food, medical care, car loan, insurance, gasoline for your car. What can you cut? These are necessities. So according to the deficit hawks, you must also cut your income. Quit your full-time job and take a part-time job at minimum wage. That should do it. Right!

The Deficit Hawks, primarily the Republicans in the House of Representatives, have created an imminent debt crisis out of thin air for political advantage. We do have a large national debt, but in relation to the GDP, it has been larger in past years. It does need to be addressed, but the middle-of-a-recession recovery is not the right time. It is a long-term problem, not a short-term crisis.

The deficit has also been spun into a major immediate crisis. Make no mistake, the federal deficit is an issue. However, it is a creation not entirely of excessive government overspending but, rather, the result of large-scale unemployment numbers over the past 4.5 years. Government spending over the past several years has been tracking downward.

The deficit numbers almost exactly track the unemployment numbers. When employment is high, the deficit is low, and when unemployment is high, the deficit numbers are high. In other words, there is a direct correlation between unemployment and high deficit numbers. Put people to work, and the problem is solved. It really is all about jobs.

The lesson here is that in a time of relative high unemployment and high deficit numbers, the cure is not bleeding the patient...that is cutting spending on schools, teachers, police, firemen and EMS workers and slicing infrastructures such as bridges, utility grids and highways. Rather, the solution is investing more money in those job-producing activities. The cure is not to cut revenue but rather to find the most progressive way of adjusting the tax code to produce more revenue.

Today many large corporations are sitting on large pots of cash. These businesses for the most part are not expanding and therefore not hiring. The reason, of course, is demand. If the demand for these products were present, these companies would be expanding, hiring, and our economy would be humming. But that's not happening.

The average family in Kentucky is still paying off their large credit-card debts, have virtually no savings, may have lost their home to foreclosure and are struggling to get by on a minimum-wage salary.

In a recession recovery the only viable solution, in the short term, to this problem is investment by federal and state governments in areas that will create jobs. Jobs produce income, and income produces demand.

Dr. Benjamin Rush was the Surgeon General of his day (1780- 1813). His cure for all aliments was to drain out copious amounts of blood from the patient. Unfortunately, his advice was heeded well after the turn of the 20th Century.

The problem was that he was completely wrong.

The analogy is apt for our economy today. In the midst of a recovering recession, it is not the right time to bleed the patient (austerity), that is cut federal spending on social welfare and infrastructure projects. It is the right time, however, for government to invest in America.

J. Howard Griffith lives in Shelbyville.