Mike Kueber's Blog

January 25, 2013

Crying wolf, but not crying uncle yet

President Obama’s inaugural address has been widely acknowledged as a full-throated defense of liberalism, and nary a pip has been made in the mainstream press questioning the ethics of someone who runs one way and then attempts to govern another way.  Remember how Mitt Romney was castigated in the media for running to the right in the Republican primaries and then attempting to shift to the center for the presidential election?  Is that as bad as running for president as a moderate and now promising to govern as a liberal?

Columnist Paul Krugman of the NY Times certainly is not concerned about Obama’s leftward tilt.  In his column today, Krugman gushingly praised Obama’s inaugural address for (a) its support of gay rights and big government and (b) most importantly, its rejection of deficit spending as a problem.

Krugman has been one of the strongest advocates for a Keynesian solution to America’s economic doldrums – i.e., a huge government stimulus.  He has been consistent in arguing that the stimulus of 2008 was too little too late, and relentless in arguing for more deficit spending.  By contrast, conservatives respond that America’s stagnant economy is a result of the tax & spend government and are loathe to consider any additional deficit spending. 

Like most liberals today, Krugman is brimming with hubris and feels safe to declare victory over the deficit hawks, or what he calls deficit scolds.  According to Krugman, the scolds in America have lost their clout because of four reasons:

  1. They cried wolf too many times.  That’s what they say about all bubbles until they eventually burst.
  2. Deficit and public spending are declining as a share of GDP.  That is not surprising since the emergency spending has tapered off and the revenues have naturally increased as America came out of its recession.  But the deficit and public spending remain at levels that are relatively high.   
  3. A policy of fiscal austerity during a recession has proven to be bad policy.  Conservatives are not talking about immediate fiscal austerity; rather, they want a glide path to a balanced budget.
  4. Deficit scolds were exploiting the economic crisis to advance their political agenda – i.e., a smaller government.  Talk about the kettle calling the pot black.  Liberal Rahm Emmanuel famously admitted that Obama took advantage of the economic crisis to advance the liberal political agenda – i.e., bigger government.

I am currently reading a book by conservative economist John B. Taylor, “First Principles,” and in the book Taylor agrees with Krugman’s position that deficits and debts are not the most important economic issues confronting America.  Instead, he suggests that a robust economic future requires – (a) predictable policy framework, (b) rule of law, (c) strong incentives, (d) reliance on markets, and (e) clearly limited role of government.

I’m going to entertain the possibility that Krugman and Taylor (and Dick Cheney) are right about deficits not mattering, economically speaking.  That doesn’t, however, address the moral issue of borrowing money to support the level of government that we want and then bequeathing that debt to our children.  Yes, it is sometimes dangerous to compare how you conduct yourself to how you expect government to conduct itself, but until someone explains to me otherwise, I’m going to think the right thing is to leave our kids a surplus, not Chinese debt.

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