{"id":4607,"date":"2012-06-18T09:17:14","date_gmt":"2012-06-18T13:17:14","guid":{"rendered":"http:\/\/www.multiplier-effect.org\/?p=4607"},"modified":"2012-06-18T09:18:48","modified_gmt":"2012-06-18T13:18:48","slug":"what-this-election-isnt-about","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/what-this-election-isnt-about\/","title":{"rendered":"What This Election Isn’t About"},"content":{"rendered":"

This received little attention, but President Obama recently sat down for an interview with Mark Halperin of Time<\/em> magazine.\u00a0 The interview didn’t generate anything you might call “newsworthy,” littered as it was with tired exchanges like this one:<\/p>\n

Q: <\/strong>“Why not in the first year, if you\u2019re [re-]elected \u2014 why not in 2013, go all the way and propose the kind of budget with spending restraints that you\u2019d like to see after four years in office?\u00a0 Why not do it more quickly?”<\/p>\n

A<\/strong>: “Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%.\u00a0 That is by definition throwing us into recession or depression.\u00a0 So I\u2019m not going to do that, of course.\u201d<\/p>\n

No, of course not.\u00a0 There isn’t anything surprising about this response, with the President mechanically delivering the Keynesian line.\u00a0 But it does reinforce something about this election:\u00a0 that it’s\u00a0shaping up to be a battle between contrasting visions, Keynesian vs. Austerian, and a referendum on the President’s implementation of his preferred Keynesian approach.\u00a0 That’s what will make this election so satisfying for anyone interested in economic policy and what makes it a rare occasion for the public to deliver their verdict on the last few years’ worth of Keynesian management, and to decide if they want to move in a different direction.<\/p>\n

Except that’s all false.\u00a0 That’s not what this election is about\u2014not at all.<\/p>\n

The exchange quoted above is actually taken from an interview of Republican presidential nominee Mitt Romney.\u00a0 It’s Romney who is explaining in a matter-of-fact, offhand way that reducing the deficit in the short term would be disastrous for the economy.\u00a0 It’s Romney embracing the Keynesian argument.<\/p>\n

This election may be about optimal tax rates for the wealthy and the long-term size of government (or more accurately, the size of government programs serving the poor), but it is not, as Romney\u2019s unguarded moment demonstrates, about\u00a0competing visions of short-term macroeconomic management.\u00a0 Instead, it’s a battle of pretend visions\u2014of economic policy, of the way the political system works, and of fiscal reality.<\/em><\/strong><\/p>\n

ARRA, the first stimulus plan (second, if you count the one passed in 2008), was effectively cancelled out by a contraction in state and local budgets.\u00a0 Even when you look at federal expenditures alone over Obama\u2019s first term, this administration has overseen some of the lowest growth in government spending since Eisenhower<\/a>.\u00a0 And all told, if you include all levels of government, as Floyd Norris reports<\/a>:\u00a0 \u201cfor the first time in 40 years, the government sector of the American economy has shrunk<\/strong> during the first three years of a presidential administration.\u201d<\/p>\n

A lot of people are worried about the “fiscal cliff” we\u2019re facing in 2013 (the expiration of a number of tax cuts and temporary spending increases along with the debt limit deal\u2019s sequestration cuts), and they should be:\u00a0 the Levy Institute\u2019s Strategic Analysis shows<\/a> how the \u201ccurrent law\u201d baseline for the federal budget will wallop US GDP next year.\u00a0 But you hear less about the fact that we’ve already entered the 1937 phase of our rehashed historical drama.\u00a0 Over the past year, we\u2019ve already experienced the largest contraction<\/a> in real per capita government spending since the end of the Korean War.\u00a0 Welcome to the fiscal mudslide.<\/p>\n

And if you look at direct job creation (which Pavlina Tcherneva argues<\/a> is closer to the original Keynesian spirit than fiscal pump-priming), reality is even more out of step with what \u201ceveryone knows.\u201d What we actually have is not just a lukewarm version of Keynesian policy, but an austere, record-setting reduction<\/em><\/a> of the public workforce.<\/p>\n

Obama press secretary Jay Carney picked up the story of the government\u2019s relative frugality and hailed<\/a> the President for exhibiting “fiscal responsibility.”\u00a0 But this is an intentionally confused interpretation of both optimal economic policy and the realities of the political system.\u00a0 First off, an austere fiscal policy at this economic moment, as the administration (and Mitt Romney) knows, is wasteful and deeply irresponsible.\u00a0 Take a look at the recent collapse<\/a> of public investment shown in Figure 7 of the Strategic Analysis, and while you do, keep in mind that the federal government is currently able borrow at rates of interest that have reached record lows\u2014so low that the government can borrow for 10 years at negative<\/em> real rates.<\/p>\n

Second, in defense of the President against his press secretary’s unintended slur, recent trends in federal spending do not represent the preferences of this administration.\u00a0 Recall the American Jobs Act (chiefly infrastructure investment and aid to states to stem the losses of public jobs), as well as numerous other attempts at passing further stimulus.\u00a0 For the last couple of years, economic policy has been an expression of what congressional Republicans will allow.\u00a0 And so far, they have been unwilling to support further stimulus, leaving us with a fiscal policy stance that their presidential nominee thinks would be suicidal (if he were President).<\/p>\n

So to sum up: \u00a0the President’s team is openly embracing what is actually an austerian fiscal policy forced on them by GOP obstruction in Congress, while the Republican nominee’s team continues to argue that the President\u2019s Keynesian approach to fiscal management (which hasn\u2019t been implemented) has failed\u2014an approach, by the way, that their nominee actually supports (or would support, if he were President).\u00a0 Can’t wait for the debates.<\/p>\n

There is a simple model of the way democratic legitimacy works:\u00a0 the party that wins an election gets to implement their policies and then submits their performance to the judgment of the electorate.\u00a0 If the electorate approves, the policies continue; if not, the government is replaced and moves in a different direction.\u00a0 Now, that’s admittedly a naive way of describing the way most elections work, but not so naive as to be worthless.\u00a0 Voters in the UK will at some point be allowed to decide whether they approve of Prime Minister Cameron’s austerity policies, or whether they’d like to move in a different direction.\u00a0 How, exactly, would you describe the choice faced by the US electorate come November?<\/p>\n","protected":false},"excerpt":{"rendered":"

This received little attention, but President Obama recently sat down for an interview with Mark Halperin of Time magazine.\u00a0 The interview didn’t generate anything you might call “newsworthy,” littered as it was with tired exchanges like this one: Q: “Why not in the first year, if you\u2019re [re-]elected \u2014 why not in 2013, go all […]<\/p>\n","protected":false},"author":202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[13,141,1131,334,335,161,332,333,12],"class_list":["post-4607","post","type-post","status-publish","format-standard","hentry","category-fiscal-policy","tag-arra","tag-austerity","tag-fiscal-policy","tag-government-employment","tag-government-spending","tag-job-creation","tag-obama","tag-romney","tag-stimulus"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/4607","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/202"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=4607"}],"version-history":[{"count":59,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/4607\/revisions"}],"predecessor-version":[{"id":5104,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/4607\/revisions\/5104"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=4607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=4607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=4607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}