The recovery/deficit-reduction deal the two parties should, but won’t, strike
By Ezra Klein,
Recently, the economist David Autor introduced me to a delightful concept: “Now-more-than-everism.” Credit for the coinage goes to Larry Summers, but anyone who follows politics will recognize the basic play.
“Here’s how it works,” Autor wrote to me over e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’”
There’s a lot of now-more-than-everism going around Washington these days, and at a time when we can afford it much less than usual. The recovery is sputtering. Unemployment is back above 9 percent. Growth projections are being revised downward. But neither the Democrats nor the Republicans are pushing any policies that seem even slightly influenced by the ongoing crisis. Both parties are calling for the same policies they’d be pushing at 6 percent unemployment and 3 percent growth.
Consider the big economic speech Tim Pawlenty gave on Tuesday. Tax cuts? Check. Declaration of war on regulations? Check. Balanced budget amendment? Uh-huh. Anything that the GOP wouldn’t have considered necessary in 2006? Not a thing.
Same goes for the “jobs plan” the House GOP released a few weeks back. The menu included tax cuts, trade agreements, regulatory reform, domestic energy production, more visas for highly skilled immigrants and vague spending cuts. It omitted anything that seemed even vaguely related to the specific economic crisis the specific country they’re trying to govern is in.
The Democrats are little better right now. They believe the economy needs more stimulus, but they’ve stopped pushing for it. They know the housing market remains in crisis, but they’re not doing much about it. The smartest among them know the Federal Reserve needs to lean harder into the recovery, but, unlike the Republicans who opposed the Fed’s interventions, they’re not making a big deal out of it.
In other words, we’re faced with one party that has no ideas for the current economic moment and one party that has given up proposing ideas suited to the current economic moment.
The excuses of the two parties differ. Republicans say that deficit reduction is all that matters now. When they’re being even more honest about their priorities, they say that spending restraint is all that matters, and deficit reduction isn’t worth doing if it includes even a modest number of tax increases.
Democrats say that doing more might be good for the economy, but proposing more does nothing. Policies that get rejected by House Republicans or filibuster by Senate Republicans don’t create jobs.
But the two parties doth protest too much. The reality is that what they want isn’t mutually exclusive. In fact, the two parties could help each other achieve their goals.
The Democrats’ desire for stimulus gives the GOP leverage to both get more long-term deficit reduction and insist that spending cuts overwhelm tax increases. Democrats want more stimulus so much that they’d be willing to agree to an amount of long-term deficit reduction they’d usually oppose, and specific spending cuts they’d usually reject. In practical political terms, agreeing to more stimulus now will help Republicans get both more deficit reduction and more spending cuts later.
For the Democrats, of course, agreeing to deficit-reduction later will help make more stimulus effective now. It’ll help calm fears about federal spending, it’ll show that the government can overcome political paralysis and actually act on the nation’s problems, and it’ll be an added incentive for businesses to make the most of the tax incentives of the next few years, as once the recovery really takes hold, it’ll be clear that Washington isn’t handing out more goodies.
Imagine a 3:1:1 compromise: For every three dollars in spending cuts between 2013 and 2022, there’s one dollar in tax increases, and one dollar in stimulus between now and 2013. If Republicans tried really hard and were willing to be flexible on where the spending cuts came from, I bet they could get that to 4:1:1. And the presence of Democrats — and even liberals — lured by stimulus would do more than get the bill passed. It would mean Democrats don’t run against the cuts in 2012, as they’re likely to do to the Ryan budget now.
That’s the sort of policy deal that wouldn’t make sense in ordinary times — why give up three or four dollars in spending later for one dollar in spending now? Why accept further deficit spending at a time when deficits are already sky high? — but does make sense when we’ve got 15 million unemployed, half of whom have been unemployed for six months or more, and extremely low interest rates on federal debt. It’s the kind of thinking, in other words, that we need now more than ever.