"When the US Becomes Greece: Drivel From the Deficit Hawks"

The headlines about Greece's financial problems have provided a great backdrop to renewed attacks from the deficit hawks on Social Security and Medicare. Never mind that none of it really makes any sense. Not making sense is virtually a prerequisite for being taken seriously in Washington policy debates. This is the reason that the characters who could not see an $8 trillion housing bubble dominated debate in the years leading up to the crisis, and still do today.

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Greece also has the huge disadvantage of being tied to the euro. This matters for its crisis because currency devaluation, the most obvious mechanism for restoring international competitiveness, is not open to Greece.

By contrast, in spite of the loss of more than one-third of its manufacturing jobs since 1998, the United States remains a manufacturing powerhouse. It's manufacturing sector produced $1.4 trillion in 2007, the last year before the crisis. The United States also has a vibrant high-tech sector and has huge agricultural and tourist sectors.

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Of course, the real problem is the spin that we may get from a jump in interest rates. Suppose the yield on ten-year Treasury bonds rose a full percentage point from its current 3.7 percent level to 4.7 percent, a rate that is still below the lowest rates seen in the golden surplus years of the Clinton era. The deficit hawks would be out in force insisting that the financial markets insist that we slash Social Security and Medicare. Given their ability to control public debate, they could win with this line.

So, we have to inoculate the public from deficit-hawk mania. These are the folks who mismanaged the economy through a $10 trillion stock bubble and an $8 trillion housing bubble, causing millions to lose their jobs, homes and life's saving. While they may have impressive credentials, the evidence suggests that they have little understanding of the most fundamental economic facts.

We know that these people don't like Social Security and Medicare. We also know, that when it comes to the economy, they don't know what they are talking about.