-- Posted by Neil H. Buchanan
In my Verdict column yesterday, I returned to the familiar territory of debunking conservative talking points about the federal budget deficit. This week's column, therefore, complements my analysis in last week's Verdict column, where I focused on whether there is any content at all to the "principles" that Republicans claim guide them in their crusade against modern government. Last week's column was about the lack of content in Republicans' attempts at substantive arguments about deficits, while this week's column was mostly about the absurdity of the political talking points that Republicans have been endlessly repeating.
My favorite such talking point -- and, because the Republicans have such tightly controlled "message discipline," you can find any number of members of Congress, think tanks, party organizations, and so on repeating these points -- is that "we can't borrow money that we don't have." As I point out in yesterday's column, that statement is patently silly: What other kind of money would anyone ever borrow? But at least that argument is more entertaining than the usual run of dishonest, empty nonsense about how "we owe the American people balanced budgets," or how "there is definitely going to be a debt crisis."
The facts remain that there is no good reason to focus on the deficit at all, that there is certainly no good reason to try to completely eliminate the deficit (ever), and that there is absolutely no good reason to try to balance the budget every year. (Why not every month, or every week, or every minute?) All of the arguments against deficits end up being arguments against something else (taxes, size of government, or something). So arguing against anti-deficit arguments ends up being a frustrating exercise in trying to flush out one's opponents real concerns. (As I said in my blog posts last week, it would be helpful to know if there are any real principles that actually guide people like John Boehner.)
From my standpoint, therefore, it is often quite difficult to find something actually to argue against, when deficits become the political focus. There is no there there, in the anti-deficit arguments, because there is really not supposed to be. It is all about beating the drum, to repeat the conventional wisdom, and to reinforce unexamined gut instincts about borrowing being bad. That no one really believes that, upon even a moment's reflection, does not matter at all to this political exercise.
In the course of tracking down quotes from Republicans regarding deficits, however, I found a nugget from an economist who advises many Republican candidates. Douglas Holtz-Eakin is a standard-issue economist, trained in one of the top economics departments in the world, whose career arc led to the directorship of the Congressional Budget Office in the Bush II years. There, he ran a scrupulously honest shop, issuing reports that did not support Republican talking points. (For example, he disappointed Republicans by confirming that tax rate cuts do not pay for themselves.) Unfortunately, he has long since destroyed whatever credibility he had managed to build up.
Holtz-Eakin was quoted in a recent NYT news article, defending the notion of balanced budgets as follows: " 'It is important to reduce the debt, and balancing gets you there
faster,' ... 'That’s paramount.' He said a balanced budget is a goal everyone could understand. 'It gives
Congress a way to say no,' he said. 'Transparency and political buy-in
are important, and people understand balanced budgets. It has a lot of
This is nonsense. Beyond what I discussed in my Verdict column (where I noted that there is nothing about "political buy-in" that requires balanced budgets, unless one wants to argue circularly that deficits are important politically because deficits are important politically), we could "transparently" commit to running deficits of exactly $500 billion (or, for that matter, $358.7 billion) per year, or to running deficits of 2% of GDP per year, or a surplus of 5% per year. There is nothing about a zero annual deficit that is more transparent than any other openly proclaimed goal.
It is also notable that Holtz-Eakin engages in a similar kind of bait-and-switch that Justice Scalia tried to pull off ealier this week (as Professor Dorf described here). Holtz-Eakin says that it is "paramount" to "reduce the debt," and "balancing gets you there faster." Of course, if you care about the level of debt, a balanced budget not only does not get you there faster, it does not get you there at all. In order to reduce overall national debt, it would be necessary to (foolishly) run annual surpluses.
So, what is Holtz-Eakin really saying? If we actually were to run annually balanced budgets, and if (notwithstanding the contractionary effects that such extreme austerity would cause) the economy were to continue to grow, the ratio of debt to GDP would fall over time. But that, of course, is not what "people understand" when you talk about balanced budgets. He is, therefore, perfectly willing to use a statistical subtlety when it suits him. In order to dumb it down for political purposes, he conflates debt and deficits, and then says that there are "a lot of virtues" for reinforcing people's misconceptions about deficits, in order to achieve what he thinks is really important (reducing the debt-to-GDP ratio).
He is, therefore, being deliberately non-transparent to suit his purposes. If he were to argue out loud that he is not really against debt, but merely wants to reduce the debt-to-GDP ratio at a faster rate than, say, Paul Krugman would reduce it over the long run, then he would have to defend the slope of his curve against the slope of Krugman's curve (and his preferred end point -- which will be a positive number -- against Krugman's). By saying that it is virtuous to tell half-truths, he undermines his own claims to transparency.
What is more broadly interesting about those comments, however, is the phenomenon of seeing an orthodox economist "commit politics." That is, our training not only ignores political concepts, but our professional norms cause us (if we are not trained in other fields as well) to scoff at the very idea that understanding politics is important. When some economists then find themselves in the political arena, they end up saying whatever comes to mind, and then justify their comments as being necessary to be "politically realistic."
This is not, moreover, limited to economists who support right-wing candidates. Alan Blinder, a Princeton economist who was appointed by Bill Clinton to be Vice Chair of the Federal Reserve, is an absolutely top-flight macroeconomist, whose work is very much in the modern Keynesian mode that I generally find convincing (although I do have some strong reservations). Even before his stint at the Fed, Blinder found himself trying to offer political explanations for balancing budgets. In a book chapter from 1991 that I have often cited in my work (not available on-line, but the book information is available here), Blinder ran through six arguments against deficits, the first five of which were based on technical economic/financial/accounting concepts.
After showing that the standard understanding of deficits was nonsense, on all five of those technical arguments, Blinder then stepped outside of his training and argued that the best reason to reduce the deficit was to stop politicians from talking about the deficit. In other words, even after having just shown that there were no good arguments to balance the budget, he opined that the political system would respond better if deficits could be taken off the table as a talking point.
Of course, Blinder wrote those words in the late 80's or early 90's, during the Bush I administration. Even then, however, his political assertions struck me as naive, at best. I am not sure whether the word "enabling" had yet entered the popular lexicon, but the concept certainly applied to Blinder's sincere assertions. And the subsequent decades have, indeed, shown that giving ground on the deficit -- supposedly because it is too difficult for politicians and citizens to understand the truth -- has done nothing to make deficits disappear from the conversation. Today, Blinder finds himself fighting to stop the political momentum against further austerity.
The point, therefore, is that we have a classic situation in which economists want to be "politically relevant," which leads them to make it up as they go along. I happen to agree with Blinder's politics, and disagree with Holtz-Eakin's, but what is fascinating is that they are both stuck floundering in political arguments that are either ex ante questionable (Blinder) or blatantly dishonest (Holtz-Eakin). Either way, it remains true that we have never even tried to have an honest political discussion about deficits and debt. Maybe someone should try.