Author of Evil Doers: Demonization and the End of Civil Debate in American Politics (NYU Press)
“Run away government spending” is an easy target now. Nonethless, It is not the cause of our problems. Government spending will not “crowd out” currently nonexistent private investors. It is essential in stimulating the demand on which the private sector and even our ability to sustain healthy debt to GNP ratios depend. Further cuts in domestic job creation, sure to result from Congress’s unwillingness to add new stimulus and its slow and miserly extension of unemployment benefits, will even be counterproductive. It will lead to more unemployment, more benefit spending or prisons, emergency healthcare, domestic violence, and further declines in government revenues―a true death spiral.
Critics also claim that the Obama stimulus did not work. Using carefully sourced data the nonpartisan CBO shows that the stimulus package created jobs and saved others that would be lost. The problem here is political. As even some business economists pointed out at the time, the initial Obama package was far too small. Dean Baker points out the Federal package amounted to less than half of the trillion- dollar hole caused by the housing bubble collapse. Government stimulus was reduced even further by cuts in state government spending. Perhaps Obama could not have achieved more, but he should have chastised Congress and made clear the country would need more and soon. Obama’s inflated claim on behalf of that modest legislation is a major reason that more Federal job creation is so politically difficult.
Paul Krugman also provocatively argues that more than immediate monetary interests drive this issue. Ideological and even identity issues are in play Krugman cites Keynes’s powerful aside on classical capitalist culture:
“The completeness of the [ the notion that government can do nothing] is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.”
The anti deficit mania has tangled roots both in immediate monetary interests and in the broader political culture. It has surprising support among some working class citizens, who stand to lose financially from its implementation. They are led by and in turn sustain the so- called Blue Dog Democrats. Nonetheless, its deep and tangled roots constitute no reason to treat it as inevitable. Why deficit mania cuts across class and how to construct a culture and economics that sustains full employment are among our most pressing political tasks.
Contemporary deficit mania has a curious, occasionally quarrelsome parentage. It includes fear of full employment, disdain for the poor and leisure, dreams of rags to riches for those who combine self-denial and luck, and a blind-- albeit selectively applied-- faith in markets.
Much polling data suggests Americans are also ambivalent about the public debt. Depending on the question, some suggest jobs are more important than the deficit. Polls and economic arguments probably won’t by themselves carry the debate.