OPINION:
Nothing scares liberals so much as a problem they can’t blame on George W. Bush. This is why the economy so frightens them now. Even after large federal spending increases, the left’s panacea for everything, a double-dip recession still threatens. Apologists like Paul Krugman already are planning their line of defense.
To hear the left tell it, almost two years after leaving office, Mr. Bush is still responsible for everything. At least everything that goes wrong. To them, Mr. Bush is more powerful out of office than he was in it. Of course, it is hard to change old ways: They have been blaming him for a decade now.
If a second downturn should short-circuit the economy’s nascent recovery, this would present a supreme public relations challenge. While they will easily be able to convince themselves, it would be impossible to convince the general public that Mr. Bush was at fault.
Of all the increasing signs of economic weakness, none is more galling to the left than the persistently high unemployment rate. If there was one thing that more government spending would seem capable of doing, it would be giving someone a job. While it may not be able to give people an incentive to invest or innovate, it should be able to pay them to do something.
That unemployment stands at 9.5 percent, despite stimulus spending and deficits, has liberals nervously starting to realize they need a new culprit before another recession breaks.
These liberal “pre-cessionists,” like economist Paul Krugman, are on a pre-emptory scapegoat search for who can take the blame for the failure of their spending policy.
They are not looking further than Mr. Bush, only more broadly. This time, their villains are fiscal conservatives of both parties. These conservatives have the audacity to question what increased deficits have purchased thus far.
Mr. Krugman writes: “Condemning deficits and refusing to help a still struggling economy has become the new fashion. … Many economists, myself included, regard this turn to austerity a huge mistake. It raises memories of 1937, when FDR’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession.”
To the rest of us, conservatives’ questions are well worth asking. More government spending has not raised federal revenues. It has not decreased unemployment. And while the economy has grown the last three quarters, in real terms it still has not recovered its pre-recession level.
Where spending’s impact is clear is federal deficits. Over the last two years, the deficit has averaged just less than 10 percent of the nation’s economy - both non-World War II records. During those years, the federal debt has increased 50 percent relative to the size of the economy.
Such a cost must raise questions of spending’s return. If spending were such an effective stimulant, why are liberals still calling for more, while bemoaning a faltering economy?
The same question could be applied to Mr. Krugman’s warning about 1938 budget-balancing efforts causing a second economic downturn. Mr. Krugman’s question really should be: How economically effective was the New Deal if the U.S. economy had still not recovered nine years after the Depression began? The 1938 budget austerity Mr. Krugman laments was small - a reduction equal to only 0.8 percent of 1937’s GDP.
It also belies the sincerity of Mr. Krugman’s claim about the importance of long-term fiscal responsibility. The U.S. economy had been growing in real terms for four years when 1938 began. If a reduction in federal spending were still impossible, after four years of real economic growth (the lowest rate being 5.1 percent in 1937), when would it be possible?
The picture that emerges in Mr. Krugman’s New Deal example is not one of economic recovery in any real sense, but economic dependency on government intervention. And if Mr. Krugman is using the New Deal as validation for spending stimulus, it calls into question its value in current circumstances, too.
Liberals such as Mr. Krugman are trying to construct a “tails-I-win, heads-you-lose” economic argument. They want us to believe, if the economy doesn’t falter, it was because of federal spending; if it does, it’s because fiscal conservatives wouldn’t allow more spending.
Yet the evidence they offer for their conclusion is more persuasive for their opponents’ argument. Conservatives’ fear appears well-founded: whether a spending-induced economy is really a recovery at all, and by what measure we will know when to stop. In the end, the liberal pre-cessionists’ argument is more understandable as politics than as economics.
J.T. Young served in the Department of Treasury and the Office of Management and Budget from 2001 to 2004, and is now a registered lobbyist.
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