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Ben Nelson: When the economy's not strong there's a lot of interest in weakening the economy

Matthew Yglesias picks up on quite a quote from Ben Nelson:

Democrat Ben Nelson, a Senator from Nebraska, said the slumping economy and rising joblessness will be factors as Congress considers climate change and health care legislation. They are also driving concerns about the budget deficit, which widened to a record $1.42 trillion in the fiscal year that ended Sept. 30, he said.

“When the economy’s not strong there’s a lot of interest in controlling spending,” Nelson said.

It's obviously not very interesting for bloggers to keep quoting senators and then whining about how nobody has read Keynes. On the other hand, it should actually be a problem that senators -- and not just random senators, but key votes with enormous influence over the design of legislation -- appear to believe that the thing to do amidst a slump in demand is remove government spending from the economy, worsening everything from unemployment to child poverty.

What Nelson is literally saying is that "when the economy's not strong there's a lot of interest in weakening the economy," but this quote is carried in Bloomberg -- surely a paper familiar with economic fundamentals -- and there's no evidence that the reporter followed up, or thought this worth a quick comment. I try not to play "pin the blame on the media" too often, but if Nelson were facing a lot of fire for this sort of thing on Sunday shows and being put on lists of the "five worst senators" because he has the central economic principle of the moment backwards, he'd stopped saying this sort of thing, and maybe even stop believing it.

By Ezra Klein  |  November 6, 2009; 3:58 PM ET
 
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Comments

Ezra, what you have wrong is that the right kind of deficit spending is the non-recurring kind. Roads, bridges, tanks, and other spending that can be ended. The absolute worst kind of deficit spending is the kind in this health care plan. This spending will set up public expectations that this program will continue in perpetuity and you can never take that away. This is not Keynesian deficit spending during a recession but rather a budget busting suicide pact with our foreign creditors.

Posted by: lancediverson | November 6, 2009 4:03 PM | Report abuse

As I said in the previous comment, those truly concerned about reducing the deficit should support health reform with a robust public option.

Posted by: cjo30080 | November 6, 2009 4:08 PM | Report abuse

Oops. As I said in the previous thread,...

Posted by: cjo30080 | November 6, 2009 4:10 PM | Report abuse

What Nelson is inadvertently pointing out is that when the economy is weak, public anxiety about the economy is projected onto certain things that people feel they should "do something about." When the economy is good, these economic indicators like the budget deficit, trade deficit, and value of the dollar will cease to be a concern.

People are concerned about these things because they're unemployed. That means that people like Nelson should focus on policies that will reduce unemployment. When he solves that, then attention can be paid to things like public spending.

Posted by: constans | November 6, 2009 4:10 PM | Report abuse

I believe Nelson's point is that he has *always* been concerned with controlling spending, and that only now, when the economy is weak, do others jump on board. Or, in an Ezra Klein style paraphrase, Nelson: I'm still here, where I've always been. Now that the economy is weak, I've got company.

Posted by: ehayes1 | November 6, 2009 4:55 PM | Report abuse

It's a good idea for the government to run deficits in a recession IF it also runs surpluses in times of plenty. Unfortunately our federal government runs deficits even in the good years and large - now huge - deficits during the lean years. Spending and debt just ratchet up inexorably. To make matters worse many states are raising taxes in the teeth of the recession.

At ther very least Obama needs a credible plan to close the deficit following the recession.

Posted by: tbass1 | November 6, 2009 6:08 PM | Report abuse

Ben Nelson's not alone. There are Nobel laureates (Robert Lucas) and other prominent economists (Lee Ohanian for one) who believe we should have cut spending instead of the stimulus. These fundamental disagreements are why I find the field of economics only a bit more credible than psychiatry right now.

Posted by: bmull | November 6, 2009 7:29 PM | Report abuse

"...and there's no evidence that the reporter followed up, or thought this worth a quick comment."

Ok, let's think about this.

Why did this happen?

First, newsrooms are very understaffed and under-resourced. There's not a lot of time and manpower for study, research, research assistants, follow up, on-staff experts who could edit, on-retainer experts, etc.

There's also not a lot of money to offer the high salaries necessary to attract people with masters degrees in economics and finance from top universities to become reporters. What percentage of journalists even have a bachelors degree in economics or business? There's not a lot of research on this, but I did find a 2002 article in the Newspaper Research Journal that cited a 1987 study by the Ford Foundation and the Foundation for American Communications. It found that just 4% of business/economics reporters, not all reporters, but the ones who specialize in reporting business and economics, majored in economics. And just 6% majored in business (at: http://www.questia.com/googleScholar.qst?docId=5002483459).

It's just not profit maximizing to pay for much top quality serious investigative and research reporting.

What are some solutions, because there are ginormous economic externalities here.

One is to greatly change the profit equation by giving a large tax credit for the costs of serious investigative and research reporting. You give a tax credit of 50% or 80% and you're going to see a lot more spending on research assistants, on-staff and/or on-retainer experts, and high enough salaries to attract top economics masters graduates into reporting jobs, and you'll just see a lot more serious substantial stories. For more on this see: http://richardhserlin.blogspot.com/2009/10/lets-consider-magnitude-of-costs-of.html. It's a good post. It was in Mark Thoma's links.

Posted by: RichardHSerlin | November 6, 2009 9:55 PM | Report abuse

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