Rushing back into the cave
by David Atkins (“thereisnospoon”)
Reading traditional media pundits (with a few Krugman-like exceptions) is usually an exercise in frustrated disgust. Most of the time, columns not filled with rightwing misinformation are alternatively filled with vacuous conventional wisdom masquerading as insight.
But perhaps most frustrating are the columns make it most of the way toward the obvious conclusion, but back down at the last moment as they rush to turn aside from the blindingly obvious and grab for dear life onto the raft of comfortable village talking points.
Exhibit A for today comes in the form of Robert Samuelson at the Washington Post. Samuelson starts off astutely and concisely:
Recall that the private sector is the main employment engine. Businesses create jobs when two conditions are met. First, extra demand for their products justifies more workers. Second, the extra demand can be satisfied profitably. There are qualifications to these generalizations (start-ups, for instance), but these are the basics.
By contrast, government is less a job creator than a job changer. It supports jobs (soldiers, teachers, scientists) by taxing, borrowing and regulating. If government taxed, borrowed or regulated less, that money would stay with households and businesses, which would spend it on something else and, thereby, create other jobs. Politics determines how much private income we devote to public services.
To this observation, there’s one glaring exception. In a slump, government can create jobs by borrowing when the private economy isn’t spending. But the effect is temporary and isn’t automatic.
Fair enough. A balanced take on the economic facts, and succinct explanation of Keynesianism.
After agreeing that the so-called “stimulus” bill did indeed create and/or save millions of jobs, Samuelson then asks the key question: why didn’t the stimulus jump-start the private sector economic engine as it was supposed to do? And here again, Samuelson agrees with the Keynesian analysis of pundits like Krugman:
This weakness has many possible explanations. One is the severity of the housing collapse. Potential buyers are waiting until prices reach bottom. Another is Americans’ eroded financial position. Since 2007, households have lost $7 trillion in wealth, mostly from lower home and stock prices. To restore that wealth, many Americans are saving more, spending less and repaying debt.
Exactly, say advocates of more stimulus. Condition One for private-sector job creation isn’t met: Demand is insufficient. Slowdowns in the United States and Europe confirm this. Governments need to “borrow and spend” to bolster demand, writes Martin Wolf, the Financial Times’ economic commentator. Deficit reduction should be long-term.
Perfect. So the core issues are well defined. The American consumer lacks the spending the power to drive the private sector economic engine. More stimulus is needed. From here, an intelligent analyst might have moved to the long-term causes of that slump in demand. Samuelson could easily have pointed out the massive rise in income inequality, and the lack of wage growth in the middle class. He could have pointed out that this inherent economic weakness was being papered over by illusory asset growth in real estate and other investment vehicles. He could have made it clear that the key to prosperity in the near and long-term future is the stabilization and wage growth of the American middle class.
But Samuelson did none of those things. Instead, he went on to claim that the American consumer and corporate sector is too risk averse after the financial crisis, and that government policies should try to reinflate those asset bubbles–the same ones that were the proximate cause of the financial crash in the first place:
The answer, I think, is psychology. Small changes in precautionary behavior by anxious consumers and companies offset stimulus. Suppose, for example, consumers raised their savings rate by three percentage points; that would neutralize three-quarters of Obama’s program.
The surprise and brutality of the financial crisis left a powerful legacy of risk aversion. Companies — like consumers — have become defensive. They accumulate a cash hoard against unknown threats. Our political leaders have also compounded the caution and fear; indeed, government policies sometimes cause unwanted behavior.
And by government policy, Samuelson means things like the Affordable Care Act’s mandating employer health insurance coverage, which raises the cost of employment. Any word from Samuelson on how single-payer healthcare might alter that dynamic? No. Any word from Samuelson that, single-payer aside, if the ACA works as intended it should reduce healthcare costs across the board, ultimately reducing the cost of employment? No.
And the biggest problem, according to Samuelson? Partisan bickering:
Switch to Capitol Hill. It’s more of the same. Republicans and Democrats exult in vitriolic attacks on each other. Their pleasure from mutual vilification comes at the public cost of lower confidence. By contributing to this, the disarray over long-term deficits also undermines employment.
Our jobs debate should acknowledge these realities. No policy will succeed unless it results in self-sustained hiring by private firms. This means giving job creation precedence over other goals. It means conducting the debate so that the nation’s spirits — and hence, private spending — are not further depressed by partisan rancor. It suggests taking proposals from both parties, because neither can be sure its approach will work.
It ought to be about building confidence, not scoring political points.
I would enjoy hearing from Mr. Samuelson how “taking proposals from both parties” failed to take place on, say, deficit reduction, seeing as how most of the proposals enacted were conservative. Or how implementing more directly anti-Keynesian ideas would assist the situation. Does Samuelson believe the ACA should be repealed? If so, what should take its place? Shall we throw Americans with pre-existing conditions to the free market wolves so that the hungry Confidence Fairy might feast on their bones? How would that help the economy, exactly?
And, of course, there’s the “both sides do it” canard, even though it demonstrably clear that the GOP has gone over the partisan deep end even as Democrats try desperately to compromise with them.
It’s as if Samuelson walked to the edge of Plato’s cave and, blinded upon his first glimpse of the light, rushed back to the quiet comfort of his shadow-obsessed friends.
In many ways, cowards like Samuelson are more infuriating than any Ross Douthat or David Brooks.
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