ZAKARIA TALKS UP A ‘GRAND BARGAIN’…. Fareed Zakaria, in general, is on firmer ground when he speaks on foreign policy, but on his CNN program yesterday, he took some time to talk about economic stimulus spending. He touched on an idea that comes up from time to time.
Zakaria spoke first to Paul Krugman about the economy, then Niall Ferguson, with each guest taking the opposite side of the equation. At the conclusion, the host took a side: “I think that the case for government spending in the short term is pretty strong.”
“The private sector is simply not hiring yet,” Zakaria explained. “Consumers are also being very cautious. You can’t motivate either of them any further with the traditional tools that used to be used, lowering interest rates, because interest rates are already close to zero. If the government were to slash spending in this atmosphere, it would probably send the economy into a tailspin.”
Zakaria added, however, that he considers debt/deficit dangers to be “real,” which led him to suggest “a kind of grand bargain.” We’ve heard some of this talk before — Zakaria recommends a “targeted” stimulus, but couple it “with an announcement from the president of a 10-year plan to tackle the budget deficit.” Some of the elements of Zakaria’s vision have more merit than others — he mentioned reductions in entitlement spending, cuts in agriculture subsidies, and a gas tax, among other things — but the idea is straightforward: trade short-term investment to boost the economy for longer-term deficit reduction.
Obviously, the details of such a bargain would make all the differences, but in general, I suspect President Obama would gladly make such a deal with congressional Republicans. Indeed, he’d probably accept such a grand bargain in a heartbeat. Spending increases now for spending decreases in the near-future? Done and done.
Which is why it’s almost certainly not going to happen. Congressional Republicans not only oppose boosting the economy in the short term (for a variety of reasons), they would likely see a major deal like this one as the kind of thing voters would approve of — and making voters happy is the last thing GOP lawmakers want to do right now. The goal is to generate as much blind rage towards the status quo as possible — a bipartisan deal to improve the short-term economy and long-term deficit is the exact opposite of the Republican game-plan.