We're not broke

http://www.washingtonmonthly.com/archives/individual/2011_03/028324.php

March 7, 2011

WE'RE NOT 'BROKE,' AND BOEHNER SHOULDN'T SAY THAT WE ARE.... It's become one of House Speaker John Boehner's (R-Ohio) favorite phrases: "We're broke." The line has become a justification for everything Republicans have wanted to do for years.

Why would the House GOP want to make brutal cuts in areas like education, medical research, infrastructure, job training, and national security, all of which would cost the economy hundreds of thousands of jobs? That's easy -- "we're broke."

There's a nagging detail, though, that generally goes overlooked: Boehner has no idea what he's talking about. When the Speaker and other Republicans who are following his rhetorical lead repeat this little talking point, they're lying.

Boehner's assessment dominates a debate over the federal budget that could lead to a government shutdown. It is a widely shared view with just one flaw: It's wrong.

"The U.S. government is not broke," said Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York. "There's no evidence that the market is treating the U.S. government like it's broke."

The U.S. today is able to borrow at historically low interest rates, paying 0.68 percent on a two-year note that it had to offer at 5.1 percent before the financial crisis began in 2007. Financial products that pay off if Uncle Sam defaults aren't attracting unusual investor demand. And tax revenue as a percentage of the economy is at a 60-year low, meaning if the government needs to raise cash and can summon the political will, it could do so. [...]

A person, company or nation would be defined as "broke" if it couldn't pay its bills, and that is not the case with the U.S. Despite an annual budget deficit expected to reach $1.6 trillion this year, the government continues to meet its financial obligations, and investors say there is little concern that will change.

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But if Boehner or his office were ever serious about defending the lie, perhaps the Speaker could explain why we're "broke" now, and not when he was adding $5 trillion to the debt during the Bush era. Is it just a coincidence that we're "broke" because we have a Democratic president who inherited a $1.3 trillion deficit from his Republican predecessor?

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