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The first thing that needs to be discussed is that there is a difference between short term and long term. Short term, cutting spending will hurt the economy. Government debt is only really ever a problem when it starts crowding out private investment (that is, the government takes up all the money available to be borrowed out there). We are at a point far from that. Even with all the uncertainty of the debt ceiling fiasco 30 year treasury bill still have just about the lowest interest rates on earth.
Debt only becomes a problem if it is unsustainable long term. The reason regular people can't just keep refinancing our debts forever is because we eventually die, so we don't want to leave something like that behind. But the government has no such problem. It doesn't have to eliminate debt, just keep it low enough that interest payments in refinancing aren't too much of a burden. And right now, interest payment refinancing isn't that much of a burden. Long term it might be.
But there is a budget that can keep spending high in the recession and then balance it long term.
The reason we don't have such an ideal compromise is actually relatively simple:
- Long term deficit reduction requires touching some sacred cows, namely the military and medicare.
- Electoral cycle politics means that short term recessions caused by drastic cuts in spending greatly help the party out of the office. I guarantee some of these deficit hawks will change their tune once a republican is back in office. Of course, this isn't republican specific. Presidential elections, more than anything else, are about the economy. No matter how eloquent Reagan, Obama, Clinton, etc are, they all were elected by poor economic conditions. Republicans right now are betting on economic disarray, just like democrats will often do when republicans are in office.
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