-- Posted by Neil H. Buchanan
“Right now, jobs matter more than deficits. And even if the deficit is your top concern, imagine what will happen to it if hundreds of thousands more Americans lose their jobs.” A strong, succinct defense of deficit spending from an Obama economic advisor, or a leader in Congress, or the President himself? No. According to this New York Times news article, the speaker was Gerald W. McEntee, president of the American Federation of State, County and Municipal Employees. The most direct, unadulterated, and honest defender of deficit spending during the weakest economy in over 70 years is a union head, and the head of the public employees' union, to boot. Democrats have been pandering to anti-union sentiment (even while expecting unions' continued support -- and getting it) even longer than they have been pandering to deficit hysteria. It is hardly a surprise that Mr. McEntee's defense was not front-page news.
The news article itself discussed the political pressures facing Democrats, describing them as being simply terrified of voting in favor of anti-recession legislation because they know that Republicans will hammer them with complaints about running up the deficit. As one freshman Democrat described a proposal to extend benefits for the long-term unemployed, to subsidize health insurance for the unemployed, and to create a summer jobs program: "We have put together a wonderful bill, and every piece in it can be justified as good public policy. But it is not paid for. Until somebody shows me a path for this being paid for, I am a no."
We are now, therefore, in a situation where many Democrats quite understandably believe that they will lose the next election if they respond to a terrible economic situation with the only policies that could actually end that recession. They foolishly created "pay-as-you-go" rules that require that all new spending be "paid for" in the same legislation; and even though they included exceptions, any possible use of those exceptions is now being overridden by white-knuckled political panic. States are about to lay off tens or hundreds of thousands of public workers, but the federal government will either do nothing or -- at best -- do too little, because Democrats cannot speak the truth: deficit spending to fight the weak economy continues to be absolutely essential. When the double-dip recession comes, of course, it is the Democrats who -- as the party in power -- will be blamed. And they will have nothing to say, other than: "But we thought you didn't like deficits!"
As I have said many times before (most recently here), there is a clear villain in all this. Bill Clinton made a fateful choice after the 1994 mid-term election debacle, agreeing that the budget should be balanced. This was not an inevitable choice, and it was a clear break from his party's previous position that -- notwithstanding the Blue Dog fiscal conservatives in his party -- defended the use of deficits in appropriate situations (and refused to endorse the meaningless notion of annual budget balance as the holy grail of fiscal policy).
Clinton, in other words, put us where we are today. (It is not as if many Democrats did not egg him on, but it was absolutely not necessary for him to make that terrible decision.) When the dot-com bubble inflated tax revenues in the late 1990's, and the budget ran a surplus late in his presidency, Clinton's advisers proclaimed the brilliance of his strategy. "Clinton brought down the deficit, and the economy prospered!"
Democrats now, of course, want everyone to remember that Bush II ran up huge deficits, which he did. Even so, that does not help the Democrats. Telling everyone that deficits are bad, but that today's deficits are really someone else's deficits, still tells everyone that deficits are bad. There is no space left for anyone -- except a union president whose members' financial self-interest is directly affected by deficit spending -- to speak the truth. The only politically acceptable way to increase spending is to simultaneously raise taxes or reduce other spending -- during a recession. To their credit, the party's leaders did include a tax increase on the rich (which is the least likely kind of tax increase to exacerbate a recession) in the bill, but the party -- again, happily led by Bill Clinton -- long ago gave up on the idea of seriously progressive tax policy. (Yes, Clinton's first big tax bill raised taxes on the rich, but he later apologized for that, saying that increasing taxes progressively was a mistake.)
In short, the Democrats are in a box of their own making, and all the Republicans have to do is to say what they are inclined to say in any case: government bad, spending bad, Democrats spend big, deficits ruinous. No matter what Democrats do or say, they have already lost the game by agreeing to insane ground rules. It did not have to be this way. Now that they have nowhere to turn, they should accept the fact that they have to undo their years of pandering. That will not be easy. Their current situation, however, is hardly a walk in the park. In any case, this cannot continue.