Wishful Thinking Masquerading as Serious Economic Warnings

by Neil H. Buchanan

If anyone had asked me earlier during this crisis, maybe a month ago, when I would predict that the mainstream press would begin to push anti-debt-and-deficit scare stories, my answer certainly would not have gone like this: "Never.  This changes everything, and my long-hoped-for world in which people finally understand that the fiscal scolds were wrong is the major silver lining to our current dark clouds."  Not a chance.

Even so, I also would not have said: "It'll start happening even before we've seriously begun borrowing and spending the money that we'll need."  Sadly, I need to remind myself never to underestimate just how hardwired austerity madness is in the minds of the mainstream press, and never to forget that those supposedly liberal journalists simply cannot pass up an opportunity to tell everyone how horrible federal borrowing is.

This would be crazy under any circumstances, but that it is already happening boggles the mind.  It shows, however, just how stubbornly the Very Serious People hold to their neoliberal views about deficits and debt, no matter how spectacularly wrong they have been, over and over again.  This impenetrable obtuseness is especially dangerous now.

This past Sunday, the two top major newspapers in the United States decided to run major stories about the terrible things that await America in the not-too-distant future as a result of recent increases in borrowing and spending, which are a response to the unfolding economic collapse. The New York Times ran "No Fight Over Red Ink Now, but Virus Spending Will Force Tough Choices," by Carl Hulse.  The sub-headline of that piece is standard orthodox crap (in the passive voice, of course): "The surge of deficit spending to 'never-before-seen levels' is viewed as necessary, but dangerous for the future."

I will return briefly to Hulse's piece later in this column, but the real star of this spectacle de merde (Google Translate's rendering of "shit show") is Washington Post writer David J. Lynch, whose "Record government and corporate debt risks ‘tipping point’ after pandemic passes" is a veritable tour de force of baseless alarmism.

Both Hulse and Lynch present their pieces as reportage, quoting from the usual suspects among politicians and a few isolated economists to present in a supposedly neutral way yet another morality play about government spending.  Both pieces are opinion writing in its most dishonest form, allowing the writers to make arguments against government action while pretending merely to report what others are saying.

To be clear, we can always expect the forces of orthodoxy to default to their indefensible views, even when the facts are most obviously not in their favor.  We thus have Labor Secretary Eugene Scalia publicly worrying that unemployment benefits are going to encourage people to live on the dole rather than wanting a job, even as 22 million-plus people have lost their jobs in a single month.  Yes, the big worry now is supposedly that all of these people will be seduced by the good life of no work and subsistence income into becoming permanent wards of the nanny state.

For people who claim that economics is about hardheaded realism and rigorous mathematical reality, conservatives simply cannot stop viewing unemployment (and nearly everything else) as a matter of personal moral weakness.  Even people who, up until a month ago, had been working hard for relatively little pay and meager (if any) benefits are automatically suspect when the economy collapses.  These people were, apparently, mere slackers-in-waiting who will grab the first government handout they can find and head for the nearest hammock.

Similarly, Republicans -- who claim to be federalists and friends of the states against the federal government, even though that was always situational and opportunistic -- now oppose federal infusions of cash to states and cities on the ground that those sub-national governments had made bad decisions in the past, so it would merely reward irresponsible behavior to bail them out now.  This is an especially weird version of the "What's the matter with Kansas?" phenomenon, in which conservatives harm themselves and everyone else in an effort to punish immoral behavior.

So it is hardly surprising that the debt fearmongering never goes away.  Even so, as I wrote in my latest Verdict column, it is shockingly irresponsible for The Times and especially The Post to give such prominent placement in their Sunday editions to the anti-debt argument right now.  How irresponsible?

Lynch, in his sermon in The Post, quotes an economist saying: "We should be very worried. . . . We are definitely at a tipping point."  But if we are to take that metaphor seriously, and if we are at that tipping point, then what is the implication?  Lynch does not bother to tell us how close we are to falling into the abyss, and even though the headline of the piece says that we merely are at risk of hitting a tipping point "after [the] pandemic passes," that is not what the economist actually said.  He preceded his tipping point line, after all, by saying: "We are talking about a level of debt that would certainly be unprecedented in modern history or in history, period."

The conditional statement "would certainly be unprecedented" is tied to the anti-recessionary and pro-public-health spending that we are on track to undertake.  In other words, unless we stop ourselves from borrowing that much money, we will inevitably be at that tipping point, and all will be lost.

In fact, because this statement is so vague, and because Lynch reports it so uncritically without any followup, we do not even know whether we might already be at the tipping point.  In other words, we either are precariously balanced on a knife's edge right now, or we will be if we borrow and spend what we will need to before this is all over.  Either way, the policy conclusion can only be that we have to stop fighting against the economic collapse.  We either must stop increasing the debt right away, or we must stop increasing the debt by as much as we are probably going to need to increase it over the next few years.

And what would that change in strategy -- from stimulus to austerity -- entail?  Raising taxes (which could only be done responsibly by taxing large concentrations of wealth, which of course is not what these people have in mind) or cutting spending.  So forget about any attempts to supplement people's incomes with payroll tax cuts, unemployment benefits, or simple cash transfers.  The debt monster must not be fed!

In my Verdict column, I describe how Lynch fails in his effort to use Japan's relatively high public debt to support his claim that the U.S. is "locking in a future of lower growth."  Japan does, in fact, have a debt-to-GDP ratio that is about double ours, and its growth rate is slightly lower than ours, but the first thing did not cause the second thing.  In fact, Japanese debt went up because of the 2009-10 Great Recession, while its somewhat lower growth on a per-capita basis is driven by an aging population.  Moreover, its average growth has not slowed in the years since the debt level went up.

If anything, the use of the Japanese example is even more ridiculous than the "But what about Greece?" wailing during the Obama years.  Back then, a foreign country's experience was used to say, "See what happens when you borrow too much?" but the underlying story was about purported Greek wastefulness causing a genuine national economic tragedy -- a tragedy that was actually caused by anti-deficit mania among German politicians, but that is a discussion for another day.  Now, a foreign country that is not enduring an economic tragedy at all is trotted out as a warning not to borrow money even during crises.

Hulse's piece in The Times is not bumbling and clownish in the ways that Lynch's is, in part because Hulse mostly just allows hack politicians to say the things that they like to say.  To his minimal credit, Pennsylvania's Tea Party darling Senator Pat Toomey admits that we have to spend big now, but Hulse immediately adds that "he and like-minded fiscal watchdogs remain deeply worried about the inevitable consequences of the historic outpouring of cash from a government that was already deeply in the red."

And what are those inevitable consequences?  Giving undeserved air time to one of the well funded deficit scold groups (it hardly matters which one, since they all say the same thing), Hulse quotes a recent press release as saying: "At some point such high and rising deficits and debt levels will prove unsustainable, and corrective action will be needed."  No longer quoting anyone else, Hulse then adds in his own voice: "In other words, the bill will come due, as it always does."  Ominous!

And wrong; but even taken seriously, this at most says that there will be consequences in the future for our having had to borrow so much money now.  If that is not a call not to borrow and spend to fight the economic cataclysm, then it merely amounts to a statement that the current situation will irreversibly make the future less bright than it would have been.  In other words, the argument takes one of two forms:

(1) Debt is bad, so we must immediately stop taking on more debt, damn the consequences, or

(2) Debt is bad, but we cannot stop taking on more debt, and the consequences are still pretty damned bad.

If the latter, then all Hulse is doing is letting us know in advance that there might have been a better world in which we did not have to take on so much debt to fight a pandemic.  That, however, is trivially obvious.  Here is one such world: One in which there was no coronavirus pandemic!  And here is another: One in which the world's wealthiest people had long ago voluntarily funded a coordinated effort to end poverty and provide adequate health care to all as a right.  Or another: One in which no one needs to eat or receive medical care.

There is, then, no small amount of wishful thinking going on here.  "If only Trump and the Republicans hadn't already run up an extra $2 trillion in debt, we'd be better off."  (Yes, but that is not the point right now.)  "If only states had not had to spend money on Medicaid to make up for the shortfalls in our hugely wasteful health care system."  (Yup.)  "If only the pandemic had never happened, we would not have to choose between economic oblivion or manageable-but-increased federal debt."  (If only.)

The good news is that debt is not always bad, and the debt we are taking on today can be (other than the "corruption premium" that Republicans are demanding) well spent.  On Friday, I will write about how that money should be spent, in part to show why spending and borrowing can be good, and in part to respond to another emerging trope of the neoliberal orthodoxy, namely that "liberals should not use the pandemic to get what they have always wanted."

For now, I will leave it at this: America's two best newspapers just paid their reporters and editors to stoke fear about doing something that nearly everyone agrees is absolutely the only possible response to the current crisis.  What a waste.