By Dean Baker, co-director of the Center for Economic and Policy Research
The talk in Washington these days might lead people to think that the main cause of the economic downturn is the Social Security and Medicare benefits being paid to retirees. After all, we have people from both parties giving us assurances that cuts to these programs are an essential part of any budget deal. This is the sort of topsy-turvy thinking that passes as conventional wisdom in Washington.
In case it's necessary to remind people, our economy plunged due to the collapse of a Wall Street fueled housing bubble. The loss of demand from the collapse of the housing bubble both led to a jump in the unemployment rate from which we have still not fully recovered and also the large deficits of the last five years.
Prior to collapse of the bubble, the budget deficits were quite modest. In 2007 the deficit was just 1.7 percent of GDP, a level that can be sustained indefinitely. Furthermore, the Congressional BudgetRead More »from Did Social Security and Medicare Crash the Economy?