Alex Castellanos, a prominent Republican media consultant and former advisor to the RNC, has a fairly boilerplate piece on the right’s economic agenda this week, making a predictable case that deficit reduction should be prioritized above all.
But there was one argument, in particular, that’s worth highlighting.
[W]e can’t borrow forever. There is no perpetual motion, in physics, economics or governing. At some point, as our debt grows, China charges us higher interest rates. Those rates expand our debt and make it even more expensive to service. This vicious circle winds tighter and the long-term pain of continuing to live beyond our means becomes life threatening. Eventually, like Greece, we run out of borrowed money.
Deficit reduction now, despite the contraction it must compel, is a much smaller price to pay.
When it comes to economic policy, Castellanos’ case is wrong in just about every conceivable way. Indeed, his concerns reflect a reality that bears no resemblance to our own, since the United States is able to borrow money cheaply and easily, and should do just that to help create more demand in the domestic economy. For that matter, the Greece comparisons are gibberish.
But pay particular attention to that last line from the excerpt: focusing on deficit reduction “must” lead to economic “contraction.”
Now, for Castellanos and many of his allies, they envision the contraction as temporary. It’s not clear how long they expect this transition period to last — two years? five years? more? — but Castellanos & Co. believe we’ll take money out of the economy now, things will get worse as we focus on addressing the fiscal recklessness of the Bush era, and then we’ll eventually come out the other side in good shape.
I tend to think this is dangerously absurd, but putting that aside, Castellanos and I fully agree on the underlying point: the Republicans’ economic agenda intends to make matters worse, on purpose, right now. With a weak economy and high unemployment, conservatives believe economic “contraction” is a worthwhile, short-term goal.
Americans who endorse this Republican approach are arguing, in effect, that policymakers should deliberately undermine economic growth and job creation, in the hopes that conditions will eventually improve after the right’s agenda has worked its magic.
That’s the choice for voters: do you want to compel contraction in the short term or not?