Can Congress Learn to Love a 3:1:1 Deal for Growth?: Ezra Klein
Economist David Autor recently introduced me to a delightfully depressing concept: “now-more- than-everism.” Credit for the coinage goes to Larry Summers, the former U.S. Treasury secretary who is also former director of the National Economic Council, but anyone who follows politics will recognize the premise.
“Here’s how it works,” Autor wrote in an e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby- drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’”
There’s a lot of now-more-than-everism in Washington these days, at a time when we can afford it even less than usual. The recovery is sputtering. Unemployment is back above 9 percent. Economic growth projections are being revised downward. Yet neither political party is promoting policies crafted to address the crisis. Instead, each party calls for the same prescriptions they would offer in an economy with 6 percent unemployment and 3 percent gross domestic product growth.
Consider the big economic speech that Tim Pawlenty, a Republican presidential candidate, delivered this week. Tax cuts? Check. Declaration of war on regulations? Check. Balanced budget amendment? Uh-huh. Anything that the GOP wouldn’t have championed in 2006? Not a thing. Back in 1996? Nope.
The same goes for the “jobs plan” that House Republicans introduced a few weeks ago. The menu included tax cuts, trade agreements, regulatory reform, domestic energy production, more visas for highly skilled immigrants and vague spending cuts. It omitted anything designed to address a specific economic crisis in the specific country that Republicans happen to be trying to govern right now.
The Democrats are little better. They believe the economy needs more stimulus -- the Congressional Budget Office estimates that the 2009 stimulus increased employment by more than 1.2 million jobs -- but they’ve stopped pushing for it.
They know the housing market remains in crisis, but they’re not doing much about it. The smartest among them know that the Federal Reserve needs to lean harder into the recovery, but, unlike the Republicans who loudly oppose the Fed’s interventions, they’re not making a big deal out of it. In other words, we’ve got one party without solutions and another party that’s given up promoting them.
Both sides have their excuses, of course. Republicans say that deficit reduction is all that matters now. When they’re being more honest, they say that spending restraint is all that matters, and deficit reduction is a desirable secondary effect.
Democrats say that stimulus spending might be good for job creation and the economy, but that actually proposing legislation would accomplish nothing, because such proposals would be rejected by House Republicans or filibustered by Senate Republicans.
The two parties protest too much. In reality, they could help each other achieve their goals -- and help the economy in the process.
The Democrats’ desire for stimulus, for instance, gives the GOP leverage to extract concessions. In return for stimulus now, Democrats would probably agree to the kind of deep spending cuts and long-term deficit reduction that they normally oppose. For Republicans, more stimulus now could mean much more deficit reduction later.
For the Democrats, agreeing to deficit reduction later would also help make a stimulus more effective now. It would calm fears about federal spending, demonstrate that the government can overcome political paralysis and encourage businesses to take advantage of short-term tax incentives by confirming that Washington won’t be handing out more goodies once recovery takes hold.
Imagine a 3:1:1 compromise. For every three dollars in spending cuts between 2013 and 2022, there would be one dollar in tax increases, along with one dollar in stimulus prior to 2013. If Republicans were willing to be flexible on the precise nature of the spending cuts, I bet they could get Democrats to accept a 4:1:1 ratio of even deeper cuts. A commitment to stimulus would lure liberals to support the spending cuts in the deal, helping a bill pass Congress while neutering the 2012 campaign attacks that Democrats will otherwise wage against the cuts in the House Republican budget.
This sort of policy deal wouldn’t make sense in ordinary times.
Why should Democrats give up three or four dollars in spending later for one dollar in spending now? Why should Republicans accept further stimulus now when deficits and federal spending are already sky high? In ordinary times, a policy deal like this would never happen. But with 15 million unemployed Americans and with extremely low interest rates on federal debt, these times are far from ordinary, making this the kind of compromise that we need now more than ever.
(Ezra Klein is a Bloomberg View columnist. The opinions expressed are his own.)
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