Sept. 17, 2011 – 4:39 p.m.
Political Economy: Having It Both Ways
By John Cranford, CQ Columnist
The American public will be forgiven for not having a coherent view of the nation’s economic troubles or of the proper policy choices to solve them. Neither the community of American business economists nor the people who set policy in Washington can reach a consensus on the subject.
And if the folks who are supposed to understand this stuff can’t agree, how can the rest of us not be left with our heads spinning?
What’s most troubling, though, is the degree to which policy makers continue to send confounding signals to their constituents and to the rest of the world.
Just consider the votes taken the past two weeks in both chambers to deny President Obama the authority to raise the limit on Treasury borrowing, after Congress agreed six weeks earlier to hand it to him. An astounding 164 House Republicans — plus two Democrats — voted Sept. 14 to disapprove a debt ceiling increase after having voted Aug. 1 to permit it. In the Senate, 24 Republicans cast similarly conflicting votes.
Really? Did something change in the intervening weeks? No, this was just a paramount example of the political game that lawmakers play when they want things both ways.
Everyone knew the first vote was critical to preserving the United States’ economic standing in the world, and the second was meaningless — “symbolic” is how some describe it — because Obama would veto the bill if it reached his desk, and his veto would be sustained.
Among those voting in favor of the debt limit increase before they voted against it were House Majority Leader
A press corps inured to this sort of behavior just nodded knowingly, and disregarded the “free vote” that lawmakers cast and trumpeted to the voters as a failed effort to prevent the president from further profligacy. But the ennui of observers is no more useful than the political game playing that the cynics dismiss as routine. How can ordinary Americans know where to stand when their leaders are bobbing and weaving like this?
Moreover, don’t these lawmakers have the courage of their convictions? Anyone who truly thought the debt limit increase was bad policy could have consistently opposed it. That’s what 82 Republicans and three Democrats from both chambers did.
Meanwhile, Back in the GDP
And still, as lawmakers posture with their eyes on the 2012 election, the economy continues to stagnate.
It’s worth noting that a survey conducted in August by the National Association for Business Economics found that 49 percent of its members believed that the best course of action would be for Congress to curtail federal borrowing, while 37 percent believed additional economic stimulus was needed.
NABE is a generally conservative lot, and it’s unsurprising that a large number of business economists favor more restrictive fiscal policy. But that makes the rather large number that preferred a more expansive response to the weak recovery stand out all the more. And it underscores why Washington cannot easily reach a consensus on what to do.
Political Economy: Having It Both Ways
On that point, repeated claims that the 2009 stimulus law “failed” profoundly misstate the truth. In a detailed analysis of the macroeconomic effects of the stimulus, the Congressional Budget Office makes a compelling case that if it not been enacted the economy would still be in a deep hole. In fact, CBO’s worst-case estimate shows that absent the stimulus, the economy might still be contracting and would have been doing so for four straight years.
The United States last experienced such a prolonged collapse in the first years of the Great Depression. Instead, while growth this year is tepid, the economy has been expanding since the middle of 2009 and is more likely to continue to do so than not.
But you wouldn’t know that to listen to the rhetoric on Capitol Hill, which is more akin to playground taunts than true debate.
It’s clear from all the available evidence that the biggest single problem with the economy right now is a lack of demand as households continue to reduce their debts and governments cut back. Companies say that — and not excessive regulation, for instance — is why they remain reluctant to hire.
Finding ways to boost aggregate demand is where lawmakers ought to be concentrating their efforts, not looking for ways to convince voters that they are ideologically pure. But that would require both parties to slaughter some of their sacred cows and to seek consensus — something neither is likely to do.
So, instead, they’ll leave the public dazed and confused, and the economy will muddle along. Or so we have to hope.