Bucking Rubinomics

BUCKING RUBINOMICS…. Last week, Paul Krugman offered the incoming Democratic majority some advice: do not place deficit reduction at the top of the priority list.

As Krugman explained, former Treasury Secretary Robert Rubin helped convince the party in the 1990s that deficit reduction was key to fiscal and budgetary policy. At the time, in the midst of what Krugman accurately describes as “an era of peace, prosperity and favorable demographics,” the approach was sound and successful. But we’re facing different challenges now, and “Rubinomics” may not fit the circumstances. After encouraging Dems not to make the deficit worse, Krugman suggested, [G]iven a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending.”

To be sure, this is a fairly controversial prescription, even (especially) among most Dems, but it’s worth noting that the approach has at least one high-profile ally: John Edwards.

Ezra Klein, on the road covering the brand new Edwards presidential campaign, transcribed an important exchange Edwards had during a Q&A in Iowa. A voter noted that the deficit is often overlooked and asked the former senator what his approach to the issue would be. After noting Bush’s deplorable record on the issue, Edwards acknowledged “a tension between our desire to eliminate the deficit and create a stronger economic foundation and eliminate some of the debt our children will inherit.” Edwards then took a side.

“I think that, if we’re honest, you cannot it, it’s just common sense in the math, have universal health care, and invest in energy, and make a serious effort to eliminate poverty, to strengthen the middle class, and do some of the work that I think America needs to be leading on around the world, and at the same time, eliminate the deficit. Those things are incompatible. And anybody who claims — politicians who say ‘I’m going to give you a big tax cut, and give you health care, put more money into education, and oh by the way, we’re going to balance the budget in the process,’ it’s just make-believe, it isn’t the truth.

“So I think there’s gonna be hard judgments that have to be made — my commitment is to have universal health care, to do things that have to be done about this energy situation and global warming, because I think they’re enormous threats, not only to the people of America but to the future of the world, for America to lead on some of these big moral issues that face the world, and I think America has to do something about poverty, I just do. Those are higher priorities to me than the elimination of the deficit. I don’t want to make the deficit worse and I would like to reduce the deficit, but in the short-term, if we don’t take a step to deal with these other issues, it in my judgment, undermines the ability of America to remain strong in the 21st century.”

Ezra described this as “a genuinely important admission, and one that very, very few Democrats are willing to make.” I think that’s absolutely true, particularly after the voter probably asked the question with a far different answer in mind.

First, Edwards deserves credit for an honest, informative answer. Second, and perhaps more importantly, watch for this issue to be a key policy debate during the primaries.