Some societies don’t see a disaster coming, so they don’t take steps to avoid it. Some societies see the disaster on the horizon, but don’t know how to prevent it. And some societies see the looming disaster and are well aware of the solution, but simply lack the will to act.
I argued yesterday that economic recessions caused entirely by political negligence and ignorance are rare, and yet, that’s exactly what the United States appears to be facing. Kevin Drum is thinking along the same lines.
Watching the world slide slowly back into recession without a fight, even though we know perfectly well how to prevent it, is just depressing beyond words. Our descendents will view the grasping politicians and cowardly bankers responsible for this about as uncomprehendingly as we now view the world leaders who cavalierly allowed World War I to unfold even though they could have stopped it at any time.
[T]hings are looking really terrible, And crucially, they’re looking terrible in the wrong way, at least if you wanted to believe that political and policy debate over the past year and a half made any sense at all. We’ve been utterly preoccupied with deficits, deficits, deficits; there was supposedly a crisis looming, but a crisis that would take the form of an attack by the bond vigilantes.
And here we are, with markets now deeply worried not by deficits but by stalling growth, fearing not fiscal profligacy but fiscal austerity, and with interest rates at historic lows.
Instead of turning into Greece, we’ve turned into Japan, except much worse. And policy is replaying 1937.
Krugman added that those “got this so wrong have not and probably won’t admit to their awesome wrongness,” and will instead “dig in.” That’s true, though I’d add that they’ll also likely be rewarded by voters for their incompetence.
What’s especially mind-numbing is that the appropriate, effective solution isn’t exactly elusive. As Ezra Klein noted this morning, “What should happen next is not that hard.”
Congress should pass legislation greatly increasing support for the economy now and reducing the deficit by about $4 trillion over the next 10 years ($3 trillion once you include the discretionary cuts in the debt deal). It’s not rocket science, and it shouldn’t be partisan. Ask ex-Reagan adviser Martin Feldstein, or ex-Bush Treasury Secretary Henry Paulson — or read Jackie Calmes asking them — and you’ll hear the same thing. This is just standard economic theory. But Republicans in Washington are not going to apply it.
Maybe they don’t want the economy to get better; maybe they’re too blinded by ideology and partisan rage to think straight. But a bipartisan solution to the economy is so painfully obvious, it’s a devastating indictment of American politics that it won’t even be considered.