Columns / Discourse / January 30, 2013

Debating columnists: The link between fiscal and foreign policy

As expected, Senator John Kerry  (D — Mass.) sailed through his confirmation hearing before the Senate Foreign Relations Committee last Thursday. Kerry will likely be confirmed as America’s next Secretary of State by a vote of the entire Senate this Tuesday.

I’d like to focus on one detail of his hearing that has been largely unexamined in the national media: his focus on “fiscal stability” in the name of national security.

Deficit hawks have successfully reframed the tax/spending debate as a matter of national security. Kerry, in his confirmation hearing, stressed that fiscal policy and foreign policy are inextricably linked.

“I am especially cognizant of the fact that we can’t be strong in the world unless we are strong at home — and the first priority of business which will affect my credibility as a diplomat working to help other countries create order, is whether America at last puts its own fiscal house in order,” Kerry said.

I won’t dispute that, all other factors equal, a country with a strong economy will fare better in global affairs than one with a weak economy. But Kerry’s argument is a tad more nuanced. He refers specifically to our current fiscal situation, arguing that our inability to reduce the deficit makes us less secure because our standing with international investors will weaken, which will then hamper our ability to fund military and diplomatic efforts abroad.

This is the refrain you’ll hear from the Peterson Foundation and other moderate and right-leaning establishment types in Washington.

The problem is that this line of reasoning is basically wrong. That is not to say we should spend willy-nilly and pay no heed to the deficit, but the urgent calls for deficit reduction in the name of national security are absolutely bunk.
Here’s why:

1) The markets aren’t calling for deficit reduction. The notion that investors are warily eyeing U.S. debt just isn’t true. According to a Washington Post analysis, borrowing costs for the U.S. government fluctuated by about .3 percent during the past few months of “fiscal cliff” negotiations.

This is the interest rate the government has to pay on new debt. If the fear-mongerers were correct, and investors are ready to jump ship, then these rates should’ve spiked tremendously. This reveals global investors have a pretty stable outlook for the U.S. economy and will continue to buy our debt.

2) Defunding programs that support infrastructure, education, and poverty-reduction will make our global position even less stable. I don’t need to go too deep into detail here, but I think it’s easily understood with basic intuition. If we defund education programs, road/airport/rail/port/IT infrastructure investments, and programs that sustain the purchasing power of the poor, then we’ll likely face slower rates of growth and less technological innovation. These two long-run factors will do more harm to our national security then the short-run deficits we face today.

3) Interest rates are at all time lows. Making the aforementioned investments won’t cost us much at all in the long run. It’s a borrower’s market! If we keep the deficit within a reasonable bound, while making lots of investments with cheap money, we’ll likely see faster rates of growth in the future. If we wait to borrow — under a stronger economy with higher interest rates — we’ll pay more for all the investments we desperately need now.

Perhaps the final nail in the coffin for fiscal austerity is Europe. In January, the I.M.F. came to the sudden realization that austerity measures undermine growth. The economies of countries like the U.K. and Greece are contracting because of drastic cuts to government spending.

Kerry isn’t altogether wrong in tying economic policy to foreign policy.  But he does a great disservice to the American people by naively focusing on deficit-reduction. This is not a credible national-security issue. I would advise him to look at the data and stop regurgitating the same talking points spread by the GOP and many moderates and Democrats in Washington.

Tags:  foreign policy Hillary Clinton Iran John Kerry obama Obama Administration Secretary of State senate The link between fiscal and foreign policy

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Joshua Gunter
Joshua Gunter was the liberal half of "Debating Columnists" during fall 2012 and winter 2013. He graduated in winter 2013 with a degree in art history and currently works as an account researcher for the Brunswick Group in New York City. At Knox, he also served as co-editor-in-chief of Catch magazine.

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