It’s as if the House Majority Leader is trying to convince credible observers not to take him seriously.
Rep. Eric Cantor used the GOP’s weekly address to push his party’s “Cut and Grow” strategy.
Rep. Eric Cantor (R-Va.) continued the rollout of the House GOP economic growth package Saturday, using the party’s weekly address to press the case that Republicans will get government out of the way of job creators.
“For too long, Washington has relied on gimmicks or government-knows-best solutions,” said Cantor, the House majority leader. “No more. Now, more than ever, our nation needs small businesses and entrepreneurs to get people back to work.”
There’s no shortage of problems with Cantor’s address, but let’s focus on just two of the more glaring issues.
The first is the irony of hearing Cantor, of all people, denounce reliance on gimmicks. Cantor and his caucus have after all, recently embraced a “Balanced Budget Amendment,” the creative-but-dumb “Government Shutdown Prevention Act,” and the “Commitment to American Prosperity” Act, all of which are shameless budget gimmicks. Indeed, Cantor personally has appeared obsessed at times with gimmicks, spearheading little stunts like the “America Speaking Out” and “You Cut” ploys.
“For too long, Washington has relied on gimmicks”? Actually, for too long, Eric Cantor has relied on gimmicks.
But more important is Cantor’s belief that a “Cut and Grow” grow strategy actually makes sense.
It’s hard to overstate how misguided this is. As Jon Chait joked the other day in a message to Republicans, “Herbert Hoover called. He wants his fiscal policy back.”
That’s a good line, but it’s important for Americans to understand — it is, after all, our economy on the line — how deeply ridiculous Cantor’s approach really is.
As Jared Bernstein explained this week, “You can make this a lot more complicated, but when you’re as far below capacity as we are — when so many people are unemployed, e.g. — it’s really quite simple arithmetic. Government spending feeds right into GDP growth and cuts subtract from it.”
Now, when you’re at full capacity, it’s different. At that point you’re pouring water into a glass that’s already full so you’re just wasting water. And you’re going to need some paper towels to clean it up. […]
But with GDP growth just around trend (positive but not all that strong) factories with capacity to spare, and 20+ million un- or underemployed, there’s space in the glass. In fact, if you look at the GDP or employment accounts, it’s clear that state spending contractions are a real drag on growth and jobs right now. […]
If I ran the country and had my druthers and wasn’t constrained by today’s budget politics (yes, that’s a lot of ‘ifs’), I’d do another round state fiscal relief.
The story the “cut-now-and-grow” lobby wants to tell depends not on arithmetic, but on what Krugman calls the confidence fairy (she’s good) and the crowding-out troll (he’s bad). In a tight budget environment like today’s, politicians love the fairy because she provides free stimulus. And since she’s a fantasy, you can attribute anything you want to her: “confidence in the markets depends on [your favorite budget cut here]!!”
Then there’s the notion that high public spending levels are crowding out private borrowing. Again, not a plausible story with excess capacity, the Fed funds rate at zero, and companies sitting on cash that they could invest with if they saw good reasons to do so.
The Republican pitch is important, because of the degree to which it’s ridiculous. The GOP would have Americans believe the economy will be much stronger just as soon as they take money out of the economy. Less public investment — in infrastructure, in education, in energy, etc. — will mean fewer jobs and less innovation, which Republicans predict will lead to an economy boom.
Sure, they say, there will be a transition period, when the economy gets worse, but over time this Hoover-like policy will work wonders. And sure, they say, this has never worked when tried, but the GOP doesn’t see empirical failure as a reason to avoid repeated attempts.
It’s a fantasy, it’s dangerous, and it’s wrong.