As tensions rose over the debt ceiling debate this summer, liberals began airing suspicions that Republicans were deliberately trying to sabotage the economy—see these Google search results for a sample.
Now that it’s over—for now—it’s worth asking if this is actually true.
I don’t see how it could be.
Under this scenario, one would have to believe that Republicans have never believed a word of what they’ve been preaching about economics for the last 30 years: namely, that a lower federal share of GDP (including both spending and taxation) will correspond to more innovation, entrepreneurship, productivity, and job growth. [Read more about unemployment.]
If conservatives have been pushing for spending cuts—most of them in the out years, but some of them taking effect immediately—in the hopes of guaranteeing the economy will remain on life support in 2012, one would have to believe that they are actually secret Keynesians. They would have to believe that a contractionary fiscal policy will reduce aggregate demand.
Obviously, they don’t believe this is the case.
National Review editor Rich Lowry happily declares Keynesianism dead:
Nearly three years into the Obama administration, the unemployment rate is more than 9 percent, a grassroots movement devoted to cutting government has the upper hand in the House of Representatives, and the debt of the United States could well be downgraded by Standard and Poor’s. If [Sen. Dick] Durbin thought that in these circumstances Keynes was heading anywhere other than a pine box, he hasn’t been paying attention.
If anything, liberals should be enraged that their party has signed onto a deal they know will harm the economy. [See a collection of political cartoons on the economy.]
And indeed they are.
At the moment fiscal policy is already a “drag on a fragile economy”: fiscal contraction is shrinking annual GDP growth by 1 percentage point without corresponding monetary ease. The most Obama can correctly claim is that he has not just raised this drag on a fragile economy by very much.
Liberals, you may comfort yourselves, coldly, with this knowledge: Conservatives believe they’re doing the right thing.