Growth vs. deficit

GROWTH VS. DEFICIT…. An NBC News/Wall Street Journal poll (pdf) was released the other day, and it included an important question that’s gone largely overlooked.

Respondents were asked, “Which of the following two statements comes closer to your point of view? a) The president and the Congress should worry more about boosting the economy even though it may mean larger budget deficits now and in the future; or b) The president and the Congress should worry more about keeping the budget deficit down, even though it may mean it will take longer for the economy to recover.”

Given the precarious state of the economy and widespread concerns about unemployment, common sense suggests the former would have overwhelming support. It didn’t — 62% want policymakers to focus on deficit reduction, even at the sake of economic growth, while 31% prefer an emphasis on boosting the economy. That’s a two-to-one margin.

Once in a while, public opinion is wildly wrong, and this is one of those times. Matt Yglesias explained yesterday:

A lot of politicians and political operatives in DC are very impressed by polling that shows people concerned about the budget deficit. I think it would be really politically insane for people to take that too literally. If Congress makes the deficit even bigger in a way that helps spur recovery, then come election day people will notice the recovery and be happy. If, by contrast, the labor market is still a disaster then people will be pissed off. It’s true that they might say they’re pissed off at the deficit, but the underlying source of anger is the objective bad conditions.

Once in a while, policymakers have to be responsible enough to ignore polls and do the right thing. If these results are accurate, people care more about the deficit than the economy. But that’s crazy. Imagine politicians telling a person who’s lost her job and benefits, and who’s struggling to stay afloat, “Yeah, but at least I’ve helped lower the deficit by a fraction of a percent in relation to the GDP!”

Shifting the emphasis from economic growth to deficit reduction — the Hoover approach to growth in a crisis — is a recipe for disaster. If the poll is right, the majority is wrong. As Noam Scheiber noted, “[T]he source of the anger isn’t the deficit; it’s the labor market. The deficit only adds insult to injury, and it does you no good to deal with the insult without treating the injury. Conversely, if you’re able to fix the labor market, then I suspect people with think the deficit is basically worth it.”