Because scare words like “deficit”, “debt” and “red ink” are thrown around in such a political fashion, a lot of misinformation exists surrounding this very serious issue.

The most harmful piece of propaganda on the deficit has emerged from obstructionists in the United States and from conservatives in Europe. During a time of economic weakness, they say, cutting the government’s short-term deficit will boost economic growth.

This dangerous belief is patently false; in fact, the opposite is true.

First, let us define some terms that are often incorrectly used interchangeably. The deficit is the difference between government revenues and government expenditures each year. The national debt is the accumulated amount of how much the country owes, or the difference between government revenues and government expenditures since America was founded.

Second, let us distinguish between the two types of deficit. This is key.

The first type of deficit, the long-term deficit, refers to each annual shortfall over the next several decades. This is the more harmful type of deficit because of its economic and national security implications.

The long-term deficit is driven primarily by health care costs and, to a much lesser extent, Social Security. Take a look at that graph in the above link. It makes dramatically clear how it is Medicare and Medicaid, not any other part of the budget, that is bankrupting us. Without public health insurance reform, the deficit will not be conquered.

The second type of deficit is the short-term deficit. This deficit, $1.2 trillion this year, is caused by the economic havoc of the past three years. Economic conditions play a central role in deficits, as out-of-work Americans pay fewer taxes and receive more government support (e.g. food stamps and unemployment benefits).

This is the deficit that, for some bizarre reason, conservatives on both sides of the Atlantic are targeting. In Britain, the Conservative Party is cutting 500,000 government jobs over the next five years; France is raising the retirement age; Germany is increasing taxes; in the US, the Republican Pledge to America promises to slash spending in the next Congressional session over the next two years.

Deficit spending is how the United States emerged from the Great Depression. The government spent today’s equivalent of tens of trillions of dollars arming the country, putting millions back to work and virtually eliminating unemployment. After the war was over, the deficit and the national debt remained low. While government spending had increased, revenue too had increased dramatically as the economy improved.

The same is true today. If America cannot escape from the quasi-recession that we are currently trapped in, we will be stuck in our low-revenue, high-spending situation for years to come. This would only aggravate the deficit.

Therefore, economic growth through fiscal stimulus – not budget balancing – should be Congress’ highest priority.

Now, some argue that deficit-cutting is actually stimulative. This is not backed up by a shred of evidence. There has not been a single instance of budget-cutting (isolated from monetary stimulus or currency devaluation) that has resulted in economic growth in all of economic history.

Take a look at the two paragons of budget austerity in the world today: Greece and Ireland. Both have been hammered by the economic crisis and have, as a result, developed massive budget deficits. As soon as the economic crisis struck, Ireland began cutting social services and raising taxes; Greece has been doing the same, especially since April of this year.

The result?

Not only are the economies of the two countries still shrinking, but both now also have budget situations that are worse then when austerity started. Ireland alone now has a budget deficit of over 30%!

The lesson is clear: spend now. Save later. Grow the short-term deficit for as long as is necessary, and then cut the long-term deficit.

Congress should carefully observe these lessons over the few years. Economic growth is intrinsically good for the country, not to mention the fact that we badly need strong economic growth to stay ahead of China and India.

So, what happens to the unfortunate countries like Britain, Greece, and Ireland that have fallen for this harmful economic fad of austerity? Maybe they’ll get lucky, and rapidly growing countries like China and India will pull them out of their misery.

But probably not. Don’t let the United States make the same mistake.