By DEAN BAKER
Populist.com
Hollywood used to be the place where creative people went to cook up outlandish horror plots. But Hollywood has been displaced. Now people go to Washington to spin their wild tales of looming disaster.
The national agenda has been dominated by such tales over the last two years. Most recently we have had the story of the bond market vigilantes doing to the United States what they have already done to Greece, Ireland and Portugal. This story requires suspending disbelief, but people who report on economic and political issues for major news outlets are good at ignoring reality.
The plot is that at some date in the not-distant future, if we don’t mend our free-spending ways, no one will buy US government bonds. The United States will be forced to stand before the international community as a helpless beggar and agree to whatever humiliating terms bad guys from China to Saudi Arabia and even France choose to impose.
The plot departs from reality in several ways. The large deficits at present are due to the downturn, not profligate spending. Furthermore, there has been very little growth in government spending as a share of GDP for decades (apart from counter-cyclical spending in the downturn), undermining this key part of the story.
(More here.)
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