You have to feel sorry, if only a little, for the Obama administration and congressional Democrats right now. They’ve lost any and all ability they had after the 2008 election to frame debate about the economy.
And, rhetorically speaking, Republicans have successfully conflated short- and long-term considerations: Amid persistently high unemployment, the economy is taking scarcely perceptible baby steps toward recovery. And there is a large and growing national debt. In reality, these two phenomena have little to do with one another.
The economic crisis that came into sharp relief in October 2008 was not caused by out-of-control deficits. In fact, the reverse is true. Today’s spiraling annual deficits, at least in the short term, are the result of poor economic performance and nose diving tax receipts.
Democrats have—for reasons having to do with their own lack of credibility as much as conservative media criticism—failed to persuade voters that a “Lord, give me virtue, but not yet” approach to the economy is the right answer: “Let us deficit-spend our way of this hole, and then we’ll fix our long-term debt problem. I know, I know; we already spent close to a trillion dollars. But even that wasn’t enough to plug such an enormous hole—and the stimulus was blunted by state and local cutbacks.”
That the public and policymakers here and apparently in Western Europe aren’t buying what may be the correct, if politically vexing, argument is making Paul Krugman’s head steam. He says we’re headed for a third depression (after the Great one of the 1930s and the years following the Panic of 1873), and that this one “will be primarily a failure of policy.” He writes:
Around the world—most recently at last weekend’s deeply discouraging G-20 meeting—governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
At RedState.com, Francis Cianfrocca sensibly replies that federal pump-priming via state and local governments may just prop up already-bloated payrolls, rather than stimulate demand. Cianfrocca wonders, too, if it’s realistic to expect an aging population to ever produce enough to pay back debt we rack up today—not to mention the mandatory entitlement spending that’s set to skyrocket in the near future.
In any case, neither Republicans nor Democrats are helping voters understand that today’s economic woes and tomorrow’s Big Debt are two separate problems, and that immediate recovery and long-term solvency are two separate goals. Republicans have benefited politically from this misunderstanding, and Democrats compounded it with a healthcare debate that I believe will turn out to have been a giant distraction—a Great Recession followed by a Great Postponement.
Despite the rapid and fierce resistance that met the 2009 stimulus, it stands to reason that the public would have granted Democrats more latitude to deal with deflationary pressures if they weren’t simultaneously erecting a new program that may or may not yield significant budget savings. (No one, including its advocates, can say for sure.)
As it is, Democrats stand to lose one or both of its congressional majorities, and the country is still not prepared for what is surely an unavoidable restructuring of Medicare, Medicaid, and Social Security—a restructuring that will in all likelihood require both benefit cuts and higher taxes.
Democrats will inevitably complain about a “ Republican attack machine,” “epistemic closure,” and all that.
But before they do, they’d better realize that the hard-left rump of their party is as captive to “soak-the-rich” illusion as the Tea Party is to pipe dreams about more tax cuts. See here and here to get a glimpse of liberals pooh-poohing the idea that entitlements can’t be fixed simply by hiking taxes on the rich.
When President Obama starts talking sense into his party’s base, then I’ll feel more than just a little sorry for him.