The Congressional Budget Office released a report last week with a tidbit that was largely overlooked, probably because it didn’t suit anyone’s political purposes. The CBO said significant spending cuts would undermine the economy and put the recovery in jeopardy. At the same time, the CBO found that significant tax increases would also likely slow down already-weak growth.
With that in mind, I was glad to see Eugene Robinson make the case today for doing absolutely nothing.
The Hippocratic injunction [“first, do no harm”] should be something befuddled economists and warring politicians can agree on. With the nation struggling to recover from a devastating recession, unemployment stuck at crisis levels, financial markets spooked by the possibility of European defaults and consumers disinclined to consume, it makes no earthly sense to suck money out of the economy.
Democrats are right that this is a terrible moment for spending cuts. Republicans are right that this is an awful moment for tax increases. The only reasonable thing to do is kick the can down the road — but in a purposeful, intelligent way.
As a practical matter, this means Republicans must swallow an increase in the debt ceiling, and Democrats must accept painful spending curbs that kick in when the economy is off its sickbed. It means conservatives have to be patient in bringing expenditures down and progressives have to be patient in returning tax rates — even for the wealthy — to what many of us consider appropriate levels.
In the broadest possible sense, policymakers can (1) improve the economy by spending more and boosting demand; (2) do nothing; or (3) take money out of the economy and focus on the deficit and debt. According to the rules of 2011, the only thing we’re allowed to talk about is the third option, when the only thing I desperately want to do is the first.
But given a choice between making things worse and kicking the can down the road, this is a no-brainer. Republicans don’t want to raise taxes and Democrats don’t want to cut spending? Both think the other’s idea would hurt the economy? Fine. Don’t do either. (Doing nothing more or less takes care of the budget shortfall anyway.)
“What about the deficit?” conservatives cry. Well, what about it? With low inflation and low interest rates, there is no debt crisis. We can borrow plenty of money and do so on the cheap. When the economy’s better, we can work on making this better. Indeed, that’s how the process is supposed to go anyway — when the economy is poor, take on debts to soften the blow; when the economy is strong, pay off the debts.
On a visceral level, putting off challenges seems somehow irresponsible. But here’s the thing to keep in mind: making the economy worse at a key juncture is far more irresponsible.