MINI-TOOLKIT: RESISTING FEAR-MONGERING OVER THE DEFICIT INTRODUCTION The best thing the government can do in a recession is spend as much as is needed to stabilize the economy and support workers and families who are vulnerable to shocks. Critics of progressive policies often raise unfounded concerns over what bold investments in programs that support families, workers, and communities will do to economic growth and the national debt. This can take the shape of fear mongering over the total costs of a program without contextualizing the savings or the benefits,comparing deficits to household debts, or even claims that bold progressive policies will curb economic growth. All the while, conservatives are rarely asked how they will “pay for” endless wars or tax cuts for corporations and the wealthy.

Fighting false concerns about the deficit is particularly important in downturns like the current economic crisis, when deficit spending canliterally save lives and livelihoods, especially for the most vulnerable. Boosting spending helps mitigate the severity of recessions, paying off in both the short and the long run by cushioning the labor market, mitigating the human costs of unemployment, and bolstering the safety net to keep folks afloat. The government can also step in to help fill the gaps a recession creates in the demand for goods and services, which helps prevent the spiral of shrinking demand, lay-offs and business closures, and then further shrinking demand. The costs of recessions— including loss of lifetime earnings, adverse health outcomes, and loss of social cohesion—can cause long-lasting economic and social harm making all of us worse off in the years and decades after the downturn.

The bottom line is that the risks of doing too little during recessions far outweigh any costs of doing too much to help the millions of workers losing their jobs, having their hours slashed, and facing serious economic and health-related hardship. In fact, deficit-funded investment in public resources can actually lead tostronger growth and shared prosperity. Smart investments, focused on helping all people, are actually good for the economy, can stimulate growth during normal times, and are desperately necessary for a recession like we’re facing now.

Below are timely messages progressive can use to rebut falsehoods about growth and the national debt. Progressives should be careful not to repeat conservative myths when engaging the public, media, or opponents.

Note: “The upshot” of each section is short enough to post directly to Twitter.

MESSAGING The Facts: Public investments and direct aid to people and families help us recover from recessions and are critical tools to stave off economic ruin during the current public health crisis. The deficit is not a concern right now. • THE FICTION: Those who persistently ridicule bold progressive policy proposals for being unaffordable and unrealistic say that the debt from financing these programs will “kill” the economy. This faultyassumption argues that rising public debt will “crowd out” private investment, cause an increase in interest rates and spark inflation, leading to slower productivity growth and ultimately slowing down the pace of growth in our economy. • BUT HERE’S THE TRUTH: • Economists have time and time again made the case for increased deficit-spending during recessions. Fiscal stimulus in a recession can reduce the risks of economic harm by helping to boost consumer and business spending and actually help mitigate the severity of the downturn. Further, research shows that deficit spending on the right things can actually pay enormous dividends over time. • Giving in to misguided deficit fears will actually prolong and deepen recessions. For example, due to declining revenues following the Great Recession, 31 states lowered health care expenditures, 29 cut services to the elderly and disabled, and 44 reduced employee compensation. A shift at the federal and state level to austerity measures like these are a key reason there was slower growth than there otherwise would have been after the Great Recession, and that we are less prepared for the current downturn. • Ironically enough, the same group of folks warning about the “dangers” of debt have generally supported the Trump Administration’s giant tax breaks to those at the top, despite the fact that the tax cuts have exploded debt. • THE UPSHOT: Bold public investment in ALL people is a good economic policy any time and is desperately needed during downturns like the current recession to save workers, families, and ultimately the economy as a whole from economic ruin.

1 The Facts: Failure to spend and invest in our communities harms working people and families and will mean a deeper, longer recession. Debts and deficits are NOT an economic concern right now. • THE FICTION: Opponents of broad public investment will try and convince us that spending financed through debt is harmful to the economy, often using “the deficit” to try and scare people off government spending. • BUT HERE’S THE TRUTH: • Interest rates are at a historic low, and economists are more worried about deflation than inflation. Every economic signal we have is telling us clearly that the deficit is not a problem right now. Agrowing consensus and widening body of research supports this, including recent research pointing to the importance of deficit-spending in times of recessions. Effective deficit-spending can reduce the many human and social costs of unemployment for working people and familiesimproving economic outcomes in the long term. • Spending, in fact, spurs faster recovery: If government investments that followed the Great Recession’s end had tracked the spending that followed the early 1980s recession, the U.S. economy would have returned to full employment around 2013. • A look back that the past 40 years has shown concerns for the national debt leading to austerity policies that have had significant negative impacts on communities of color. This iseven worse during recessions as local and state governments cut spending on public services. • Deficit reduction plans often include significant cuts toprograms that disproportionately serve communities of color, like Medicaid and the Children’s Health Insurance Program (CHIP). • THE UPSHOT: Working people and families, who comprise our economy, are facing dual public health and economic crises—we should respond with sweeping government spending to invest in protecting them and our economy until the pandemic is under control. The Facts: Bold structural change that includes investments in ALL people grows and strengthens the economy. • THE FICTION: Conservatives are often deficit scolds when it’s convenient for them—when they want to block spending for public investment—and have used concerns about deficit spending to justify decades of disinvestment at all levels of government. • BUT HERE’S THE TRUTH: • Public spending is the key to creating a just and equitable economy that produces growing prosperity for all. The reality is that progressive policies increase economic growth—spending on policies that benefit the middle class and bolster the safety net produce higher levels of growth. • Policies like investing in affordable housing and providing universal pre-k, creating a progressive tax system, and raising wages are all ways that can help redistribute power away from those at the very top and generate demand that will sustain the future U.S. economy. • Additionally, investments in working people have a high return—that is to say that investing in the public can lead to higher productivity, living standards and innovation. For example, when firms decide to pay their employeesmore , employers report less turnover and therefore lower employee hiring and customer acquisition costs. Providing paid leave also improves worker retention, which saves employers money through reduced turnover costs. • These investments are especially critical during economic downturns as more workers lose their jobs, have their hours cut and see their wages decrease. During these times it is absolutely crucial that the federal government heavily support people who will rely critically on the safety net and other government programs that help keep working people and families afloat during times of economic hardship. Investments in people during economic downturns arestimulative and can help mitigate the severity of downturns by helping people get back on their feet and participate in the economy more quickly than they otherwise could have. • THE UPSHOT: The way forward for the economy, especially while public health necessitates many workers and consumers staying home and businesses staying closed, is through bold progressive spending that invests in all people. ADDITIONAL RESOURCES Center on Budget and Policy Priorities, “Rising Federal Debt Should Not Shortchange Responses to COVID-19 Crisis,” May 2020. Roosevelt Institute, “Deficit and Debt Shouldn’t Factor Into Coronavirus Recession Response,” March 2020. Roosevelt Institute, “‘But How Do We Pay for It?’ Why Spending Money on Ambitious New Programs Is a Feature—Not a Bug—in Today’s Economy,” October 2019. Roosevelt Institute, “Fiscal Rules for the 21st Century: How to Pay for the Public Sector,” March 2019. Paul Krugman, “On Paying for a Progressive Agenda,” February 2019. Economic Policy Institute, “The Fed shouldn’t give up on restoring labor’s share of income—and measure it correctly,” January 2019. The New Yorker, “The Reinhart and Rogoff Controversy: A Summing Up” April 2013. Cambridge Journal Of Economics, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” April 2013. May 2020 • For more information, you can reach out to Groundwork Collaborative at [email protected] 2