During the debt-ceiling debates of 2011, I pointed out that Washington’s gears were gummed up not strictly by incompetence or intransigence, but also by sincere disagreements on economic policy.
Conservatives thought taxes and spending were too high. Congressional Democrats thought the rich were not taxed enough. And President Obama, at first, thought we just needed to borrow more money — a “clean” increase in the debt ceiling. I wrote:
President Obama’s original desire was a “clean” increase in the debt ceiling — that is, one without any spending cuts attached. While this is the same policy Obama attacked in 2006 as buck passing and “shifting the burden of bad choices today onto the backs of our children and grandchildren,” it also fairly reflects a coherent and widely held economic theory. Keynesian orthodoxy holds that during times of economic recession or stagnation, government ought to borrow more and spend more.
Government spending, according to this line of thinking, is the best stimulus, because folks buying government bonds are risk averse. In other words, money is pulled off the sidelines and injected into the economy.
When I made this argument on MSNBC, my liberal interlocutor, Sam Seder, said he wished someone was making the real Keynesian argument, but no one was. Sure enough, Obama soon took the tax-the-rich-and-trim-spending-to-fix-the-deficit tack.
Keynesian blogger Joe Weisenthal of The Business Insider bashes Obama for this shift, which has proven permanent:
Obama can’t stop talking about the deficit.
The problem is, he’s always talking about cutting it, and never talking about what he should be proud of, which is that adding to our national debt has allowed the private sector to cut its debt (without the floor completely falling out of the bottom), while also enabling the entire economy to shrink its debt as a whole.
Sometimes, when Republicans scream that cutting military spending hurts the economy, I lament that all politicians are Keynesian under the surface. It’s nice, then, to see evidence that at least they’re all afraid to admit it.