SUMMERS’ GOOD ADVICE TO HAND-WRINGING DEMS…. President Obama urged lawmakers to approve nearly $50 billion in emergency aid to state and local governments, which would in turn help the economy and prevent “massive layoffs of teachers, police and firefighters.” Congressional Dems, browbeaten with rhetoric about lowering the deficits Republicans created, are reluctant. “I think there is spending fatigue,” House Majority Leader Steny H. Hoyer (D-Md.) said.
Here’s hoping those same hand-wringing lawmakers more concerned with deficit rhetoric than economic growth take a look at today’s column from the Washington Post‘s E.J. Dionne Jr., who chatted last week with Larry Summers, the president’s top economic adviser.
If you don’t think growth needs to come first [ahead of deficit reduction], consider these numbers from Summers: We could cut the debt as a share of GDP by half a percent with $75 billion in either spending cuts or tax increases. But we would achieve exactly the same result with an extra three-quarters of a percent of GDP growth. “Spurring growth, if we can achieve it,” Summers said at Hopkins, “is by far the best way to improve our fiscal position.”
That’s why it is mystifying that a Democratic Congress is having so much trouble passing the most elementary forms of economic stimulus. Assisting the states with extra Medicaid money and helping them avoid massive teacher layoffs could save or add at least 300,000 jobs. It’s Democratic reluctance that required Obama to write a letter to congressional leaders on Saturday urging Congress to act quickly to avoid the layoffs and support the still-fragile economic recovery.
Do Democrats honestly think that nickel-and-diming on stimulus now will have a substantial impact on the long-term deficit or be of greater help to them in November than more robust growth?
This seems so painfully obvious, it’s frustrating to even hear the debate. Some Dems seriously seem to believe they’ll benefit politically if they vote against measures that would save and create jobs this year.
If I had to guess, I’d say a lot of these Dems realize that economic and job growth will make a positive difference in reducing the deficit, but they assume — probably correctly — that the explanation of the economic policy takes more than six seconds, while hysterical GOP talking points don’t. As a result, they’re scared to do the right thing.
“But,” Dionne concluded, “it happens to be the right policy. Does that matter anymore?”
Is that a rhetorical question?
On a related note, Summers also told Dionne, “For a policy centered around economic growth to be credible in the short term we must show a commitment on returning to a fiscal sustainable path over the medium- and long-term.” In other words, let’s stimulate the economy now, while also taking good-faith steps towards deficit reduction in the future.
Ezra Klein argues that this kind of thinking should produce an obvious deal: “Trade short-term stimulus for long-term deficit reduction.”
This is, in fact, a particularly good time for deficit hawks to make this deal. So far as carrots go, stimulus has the dual advantages of being both needed and, in the scheme of things, fairly cheap. If that can be your bargaining chip with at least a few liberals, it’s much preferable to the deals you’ll have to make in a conference focused exclusively long-term deficit reduction.
But few seem very interested in making these deals. I count this as the second major missed opportunity for conservative deficit hawks in the Obama presidency. The first was health care, which ended up being admirably fiscally responsible, but which could’ve been even more so if one or two or three or five Republicans had been willing to trade their votes for deficit-reducing, cost-controlling concessions. Similarly, if a Republican or two released a proposal pairing $300 billion in immediate, serious stimulus with $600 billion in even semi-balanced cuts timed to take effect between 2013 and 2020, they could either get what they’re asking for or put the Democrats in a very difficult position.
And yet, nothing.
At this point, I’m honestly not sure if there’s even a shred of seriousness to Republican policymaking anymore.