‘NO INTRINSIC CONTRADICTION’…. Doug Elmendorf, director of the Congressional Budget Office, is an economist conservatives like to cite, especially when he argues in support of budget cuts. Indeed, Elmendorf has a rather bleak view of the nation’s fiscal future, which also helps reinforce the right’s arguments about deficit reduction.
With that background in mind, Jonathan Cohn flags some interesting remarks the CBO chief made to the bipartisan fiscal commission. While the prevailing attitude among many policymakers — including practically every Republican in D.C. — is that it’s more important to cut spending now than improve the economy, Elmendorf reminded commission members of an important point:
“There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”
Elmendorf later said that focusing on deficits and debt now, when the economy is still fragile, “would probably slow the economic recovery.”
This is so obvious, it’s astounding that Congress chooses not to see it. Elmendorf isn’t saying he wants to ignore the long-term budget shortfall — on the contrary, he takes it extremely seriously — he’s saying it makes sense to focus on the deficit when the economy is strong, not when it’s weak. For now, it need not be considered fiscally irresponsible to “provide additional fiscal stimulus today,” when the economy needs it.
As Cohn explained, “If even Elmendorf doesn’t see a problem with temporary deficit spending — emphasis on the ‘temporary’ — the rest of us shouldn’t, either.”
Conservatives believe this is backwards, and are in a position to prevent Congress from improving the nation’s economic conditions. The consequences will likely be severe for the nation — though the electorate will probably reward the party and its candidates who get it wrong.