Deficit Fears

Robert Reich wonders why the great debt scare has returned and hints that conservative deficit hawks in Obama's inner circle are to blame:

Is it possible that among the President’s top economic advisors and top ranking members the Fed are people who agree more with conservative Republicans and Wall Streeters on this issue than with the President? Is it conceivable that they are quietly encouraging the Debt Scare even in traditionally liberal precincts, in order to reduce support in the Democratic base for what Obama wants to accomplish? Hmmm.

I wonder if Reich has let ideology get ahead of him. I'm no deficit hawk, and I embrace the fundamental tenets of Keynesian economics, and have no knee jerk opposition to government spending as necessarily inefficient. However, I think there are real reasons to worry about the deficit here, reasons that have nothing to do with Conservative conspiracies. As a matter of fact, there is a real issue over how this debt is going to be financed. The markets recently showed an unwillingness to keep on buying T-bills forever, the yield on the 10 year t-note took a big jump as inflation worries mounted, for good reason. In addition to a mounting deficit, significant questions over the solvency of Medicaid and Social Security remain. It's not so much that deficit spending is inherently bad, but it becomes bad and worrisome when we don't know how much that deficit spending is going to cost us and when our ability to repay the accumulating debt becomes increasingly unclear.

All this said, attempts by Republicans to make political hay out of this by painting the Obama administration as irresponsible profligate spenders, when their fiscal policies (and lack thereof), contributed so heavily to the current debt and economic situation is some of the astounding cynical political maneuvering I've ever witnessed.