I mentioned it before, but David Brooks’ op-ed today is really fascinating. You get the feeling this is something he and his corporatist pals have said behind the scenes but are only just now developing in public, because they sense that something has gone horribly wrong. For years they developed this full-spectrum critique of government spending and the need for crushing austerity, and they’re just on the cusp of a near-total victory. And now these absolutists won’t accept it. It’s not just Brooks, Richard Cohen’s on the same issue today. Somebody flipped a switch, and said that everyone must go to the barricades to get Republicans to agree to the slightest revenue increases in exchange for the transformation of government that would be ushered in with this deal.
I don’t know that conservatives who don’t respect official opinion leaders anyway will really care about being called a cult or a group of moral lepers. But these are warning shots, and it depends on what comes in behind them. Perhaps the fundraising money will move away from the GOP, or some other pressure point. But there will absolutely be a full-court press from a lot of sectors to get Republicans to accept this fabulous deal they’ve been offered.
Let me be clear: I mean a fabulous deal on Republican terms. For any normal person trying to get by in the Great Recession and its aftermath, it’s an absolutely abominable deal, a prelude to turn America into Wilmington, North Carolina:
When Engine 5 pulled up to a burning house on Woodlawn Avenue early on March 19, the firefighters were told that a man might be trapped in the back left bedroom. As two firemen trained a hose toward that corner, Capt. Don Ragavage crawled through smoke and flames to search for the missing resident.
It was an inopportune moment for the water pressure to plummet. But that is what happened when Engine 5’s motor, strained to the limit by 16 years and more than 100,000 miles of hard service, abruptly sputtered and died.
Only a month earlier, the fire chief, Buddy Martinette, had lobbied the City Council to replace the cantankerous engine at a session devoted to the latest of Wilmington’s six consecutive budget gaps.
“The mechanics really don’t think it will make it,” the chief warned at the time.
“You need another mechanic,” shot back Charlie Rivenbark, the Council’s foremost fiscal curmudgeon.
Mr. Rivenbark was not smiling, and once the scattered snickers quieted, none of his colleagues took issue. The fire truck fell off the table for the fifth year in a row.
This is a long story about Wilmington, all of it worth reading, about the fiscal pressures on a town when revenues dry up, federal help dies, and cutting spending becomes an imperative. It’s what we’re seeing at the federal level, only there, the imperative should not be nearly as effective. Unlike municipalities, governments can run deficits; indeed, during a jobs crisis, they must. As Ryan Avent points out, practically every member of the Obama economic team who has left the government is out there screaming that more stimulus is needed to those still left in government, all of whom are artificially constrained. Christina Romer came out just this weekend with another variation on this theme.
Tax increases and spending cuts hurt the economy in the short run by reducing demand. Increase taxes, and Americans would have less money to spend. Reduce spending, and less government money would be pumped into the economy.
Professional forecasters estimate that a tax increase equivalent to 1 percent of the nation’s economic output usually reduces gross domestic product by about 1 percent after 18 months. A spending cut of that size, by contrast, reduces G.D.P. by about 1.5 percent — substantially more [...]
All of this argues against any form of fiscal austerity just now. Even some deficit hawks warn that immediate tax increases or spending cuts could push the economy back into recession. Far better to pass a plan that phases in spending cuts or tax increases over time.
But if federal policy makers do decide to reduce the deficit immediately, reducing spending alone would probably be the most damaging to the recovery. Raising taxes for the wealthy would be least likely to reduce overall demand and raise unemployment.
This is remedial stuff, and it all suggests that we need more spending, not less. But this view gets airbrushed out of any debates, it’s left out of the realm of the possible options. To the extent that stimulus gets mentioned at all, it’s in the form of payroll tax cuts, which is OK, but the converse of Christina Romer’s argument; tax cuts do a far less effective job in stimulus than spending increases.
It’s completely perverse that the best hope for government not to catastrophically ruin the lives of millions of Americans is for the radical conservatives to refuse the extremely favorable deal they’ve gotten for themselves, leading to total gridlock. That’s literally the best option right now – at least if the Constitutional option can be taken alongside that.