Ezra Klein Explains Why "America Didn't Buy It"

Sunday, January 31, 2010

In today's Washington Post, Ezra Klein makes three great points as to why "America Didn't Buy It" ("it" being the economic stimulus package and the administration's macroeconomic policies more broadly).

1. The proposed "non-security discretionary spending freeze" will accomplish essentially nothing with regard to deficit reduction. Why not? Because "The whole Social Security, Medicare and Medicaid." Because "Total spending for everything else, from agriculture to education to missile technology, is predicted to grow more slowly than the economy." Because a "spending freeze" that focuses only on non-security discretionary programs is "focusing on the part of the budget that's not a problem." Brilliant.

2. On the economic stimulus, this is an example of Econ 101, Keynesian "counter-cyclical" behavior by the government, in which "In good times, it should save and store, and in bad times, it should spend and borrow." That is, Klein points out, the "exact opposite" of what "holds true for businesses and individuals." And that's why, Klein correctly points out, it makes absolutely no sense that the federal government should "tighten its belt" right now, as "families across the country are doing." If government did that, it would mean the government was acting pro-cyclically as opposed to counter-cyclically, which would only exacerbate the recession by cutting the "G" portion of "C+I+G." That's what the "tea partiers" and many Republicans want, essentially something like what happened in 1937 -- a combination of deficit reduction and tight monetary policy. The exact opposite of what government should be doing - expansionary fiscal and monetary policy - in a recession.

3. As I wrote about yesterday, Democrats can't win by citing statistics, they need to tell persuasive and powerful stories. In this case, unfortunately, President Obama tried for almost a year to explain the stimulus to the nation, but finally "gave up" and started himself using the narrative about "belt tightening." As Klein explains, "instead of trying to convince [the American people] that deficits make good sense until job growth is back to normal, the administration is trying to appease those fears so it can get on with the rest of its agenda." That's the 180-degrees wrong story, but it's the politically easy story to tell, which is why we can expect to hear Democrats foolishly telling it. And, of course, losing the argument. What else is new? Sigh.