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The NYT Tries To Provoke Panic on Deficits
At 3.17 percent, the interest rate on 10-year Treasury bonds is now at about half the level that the Clintonites were celebrating back in the early 90s. The NYT sees this as evidence that "worries rise on the size of U.S. debt."
What on earth is the NYT talking about? The focus of the article is a modest increase in the interest rate on 10-year Treasury levels from the extraordinarily low levels they had hit in late 2008. The main reason for the sharp decline in Treasury yields was panic in financial markets that made investors fearful of holding anything other than government debt issued by the United States and other super-safe borrowers.
The modest rise in yields to still very low levels was a predictable and desirable outcome of a stabilizing financial market. The Congressional Budget Office projected that the 10-year Treasury rate would rise to an average of 3.4 percent in 2010 and 4.0 percent in 2011.
There is a currently a powerful contingent of people trying to spread fear about the government debt in order to advance their agenda of cutting Social Security and Medicare, most prominently investment banker Peter Peterson and the Washington Post. It is therefore especially important that the NYT report on the budget accurately in order to avoid feeding these fears.
This article also misrepresents some other aspects of the government's financial situation. For example, it asserts that because most of the rest of the world is in recession there is less money to lend to the United States: "Most of the world is in recession, and other nations have rising borrowing needs as well."
In fact, the opposite is the case. It would be harder for the United States to borrow if the rest of the world were growing rapidly and there were many competing demands for capital in both the public and private sectors.
--Dean Baker
COMMENTS (4)
This article shows the power of repeating lies over a 20 year period. These assertions and opnions no longer have to be proven. They even stand when the facts they lie in front of their face disprove them, as in this case when short term and medium term interest rates remain at record lows. They also again confuse the Government's deficit (which is mostly the result of falling tax revenue, not increase spending), which can be, and mostly is, internally financed, with the U.S. trade deficit, something that both the NY Times and Washington Post demonstrate a sublime indifference toward, which could not exist but for the flow of funds from foreigners. And as that deficit declines, we will need less foreign funds.
Posted by: ricksterherpa | May 4, 2009 1:32 PM
Well, as far as borrowing, the IMF does warn against increasing 'home bias' in lending.
Posted by: George Fiala | May 4, 2009 9:50 PM
Dean,
NYT, WaPo, ...
Can you please provide a complete list of the evil conspirators -- all the organizations and individuals who are supposedly so greedy and heartless that they are doing anything and everything they can to deceive and scare people into imposing great suffering upon millions of seniors just to enrich themselves further?
And please, folks, although I'm sure some commenters are more than willing to provide their own lists from their own very imaginative (by which, of course, I mean insightful) minds, I'd like to get Dean's full (or at least somewhat thorough) list. Ya' know, just so we can all know whose information, analysis and opinions to completely, reflexively reject a priori, without any consideration whatsoever, since they are just trying to hoodwink us and if we listen to anything they say we may fall prey to their sinister trickery.
Dean -- snark aside, you are indeed claiming there are organizations and individuals, perhaps acting in concert and in some conspiratorial fashion, to try to manufacture some illusion of a need to substantially reduce projected long-term entitlement spending (and beyond what can be accomplished in a sacrifice-free way via win-win measures such as improved healthcare efficiency without sacrificing quality or access for anyone), presumably out of some supposed evil greed. I would think that you would find it useful to provide a fairly thorough list of who is in on this supposed evil, deceptive movement/conspiracy. So please take a moment to share your list with us.
Posted by: Brooks | May 5, 2009 1:22 AM
What is sinister, or conspiratorial, about concern for the huge federal outlays we are planning? The administration's own budget uses some very aggressive, and optimistic, GDP growth assumptions. If these do not come to pass our Federal debt to GDP will reach levels not seen since the Second World War. Your, unsubstantiated, assertions put you in league with the journalists you decry. There are valid, and observed (Japan circa 1990), reasons to be concerned about the growth of the budget deficit.
Posted by: John | May 5, 2009 5:23 PM