Paul Krugman is frustrated that deficit hawks never seem to pay for incorrect predictions. The past few years have been unkind to those who swore America’s deficit spending would lead to a bond crisis. And yet the reputations of those who have been predicting exactly that haven’t suffered.
But perhaps it’s been ever thus. In “The New Deal,” Michael Hiltzik tells the story of Lewis Williams Douglas, FDR’s first budget director. Douglas was a deficit hawk during the depths of the recession. He demanded that Roosevelt cut government spending by 25 percent. He was quickly proven wrong. And yet he wasn’t laughed out of public life. He didn’t have to recant his beliefs. Here’s Hiltzik on Douglas’s post-administration career:
Departing the Roosevelt administration in August 1934, he left behind an acrid reputation as a sort of Hooverite in Democratic clothing: “He represented discredited policies without apology; he hated the New Deal and affiliated happily with the most reactionary Republicans while he was working most intimately with the President,” Tugwell observed. “Yet of all those who began their service with the President in March of 1933, Lewis had the most notable career; he was given the most honorific posts, even the Ambassadorship to the Court of St. James’s [under Truman, from 1947 to 1950]; he was regarded as the most favored party member. And in 1952 he turned up, after having accepted all these blessings, in the Republican camp, supporting Eisenhower. There is a lesson there somewhere.”
Perhaps there is. I’d phrase the lesson something like this: It’s okay to be wrong, as long as you’re wrong in a popular and intuitive way.