Deficit hawks for deficit spending!
Catherine Rampell reports from the front lines of economic thinking:
“I’m a deficit hawk, but … ”
That’s a line I heard a lot during recent trips to Washington and to a national economics conference in Atlanta. It was proclaimed, again and again, by economists who seemed worried about losing their budget-consciousness bona fides because they are currently urging legislators to expand stimulus efforts, or at least not to curb them.
But can you really be a deficit hawk who supports deficit spending?
Depends whom you ask, and when. Many Keynesians would say yes, at least during a downturn. And many have complained to me — both on and off the record — that the popular you-either-support-economic-recovery-or-you-support-deficit-reduction rhetoric is a false dichotomy perpetuated by the media (and advocacy organizations like the Peter G. Peterson Foundation).
More here. One of the virtues of government by representatives -- as opposed to direct democracy -- is that the representatives are supposed to know a little something about public policy. They're to take the will of the electorate and match it to the best thinking on how to govern the country. Among the most telling tests of this is deficit spending: When times are good, we should be aggressively reducing the deficit so private firms have more room to borrow and invest and grow. When times are bad, we should be increasing the deficit to stimulate demand.
But popular concerns run the opposite way: People worry about the deficit in recessions and forget about it during expansions. This makes intuitive sense, but it's bad economic policy.
In theory, Washington should be making good economic policy, even if it means going home to districts and explaining hard decisions. That's why we have Washington rather than a weekly election. Instead, it slavishly follows popular whims. In 2003, when growth was sound, Republicans in Congress passed a massive expansion of Medicare that was entirely financed on the deficit (not to mention tax cuts that were funded the same way). In 2009, amidst a crippling recession, Democrats are paying for every last dime of their health-care bill and delaying implementation so the price tag looks smaller.
A smarter approach would've been to fill the gap between passage of the bill and implementation of the bill with a deficit-financed expansion of COBRA, Medicaid, S-CHIP and Medicare. The parts of the bill that come into play later -- when we expect the economy to be back on track -- should still be deficit improving. But the whole conversation proceeded atop the wrongheaded premise that the deficit couldn't increase by a dime, even when economists of all stripes believe the short-term deficit should increase by rather more than a dime.
Cynics occasionally parrot Mencken's old line that "democracy is the theory that the common people know what they want, and deserve to get it good and hard," but our government isn't a pure democracy for exactly that reason. The representatives charged with protecting the people from Mencken's formula, however, aren't doing their jobs.
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