Republicans Must Choose: Less Debt or More Jobs?

Illustration by Victor Kerlow Close

Illustration by Victor Kerlow

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Open

Illustration by Victor Kerlow

If you saw any of the Republican convention last week, or its garland of talk shows, you may be aware that President Barack Obama has run up deficits averaging about $1 trillion a year over his four years in office.

In case your math is weak, that’s $4 trillion added to the national debt -- a lot of money. But what would have happened if we hadn’t borrowed and spent that money?

Much of this $4 trillion was not borrowed for the usual purpose of spending in the reckless way Republicans suppose that Democrats borrow and spend money -- that is, for the purpose of shoveling out cash to poor people on the condition that they quit their jobs and go on welfare, and so on. Nor was this money spent for reasons Republicans might approve, such as subsidizing small businesses or building useless airplanes.

It was not borrowing in order to spend. It was spending in order to borrow, under the conventional Keynesian view that government deficits occasionally have to be used to stimulate demand in a recessionary economy. Even that part of the $4 trillion that wasn’t explicitly labeled “stimulus” was part of the calculation of how big the explicit stimulus should be. But in order for this trick to work, it must increase the size of the deficit. Cutting spending to pay for a tax cut, or raising taxes to pay for a spending spree, neutralizes the stimulus.

Stimulus Debate

Now, you can criticize this policy from many perspectives. You can say, with liberal economists like Paul Krugman, that the stimulus wasn’t big enough. The economy is still wobbly at best. We should have spent double or triple what we did. You can say (as I do) that the stimulus will lead to disastrous inflation unless we offer a more convincing plan about how we’re going to pay it all back in the long run. You can say, as the Republicans do, that we should have cut taxes more and increased spending less. You can get a similar bounce either way.

But you can’t say with any hope of being taken seriously that the stimulus of $4 trillion of deficit spending destroyed jobs.

This doesn’t mean that the deficits were necessarily a good idea. We have lots of goals for our economy, of which more jobs is only one. We want low inflation. We want capital formation. We want long-term growth. We want clean air and water. We would like our Social Security checks, please. We wouldn’t like to overburden our children with debt.

Deficit spending is bad for most of these other goals. All things considered, it’s not clear that this strategy was the right idea.

The Republicans, however, are not considering all things. They have decided to concentrate on one economic statistic: jobs. In his nomination acceptance speech, Mitt Romney made a joke of it, ridiculing Obama’s professed concerns about the environment and global warming. None of that pansy stuff for Romney. He promised to focus on “jobs. Lots of jobs.” And jobs in the very short run: People now await the release of the monthly unemployment number like news of the path of a hurricane.

So pop quiz: Would there be more U.S. jobs or fewer today if the government had run a balanced budget, or even just a smaller deficit, for the past four years? All else being equal, it is obvious beyond dispute that there would have been fewer jobs, not more.

As I say, this is far from the whole story. But it’s the only part Republicans are telling, and they’re getting it exactly wrong.

The Republican Party’s enthusiasm for curbing the national debt has waxed and waned, as has its alarm about what happens if we don’t. These days conservatives are quoting again from Ronald Reagan’s first inaugural address: the famous passage about how you and I have to pay our bills, so what makes us think the government doesn’t? At that moment, the Republicans pretty much had a lock on fiscal responsibility as an issue. In the public mind, whatever their other faults, Republicans were prudent; Democrats were spendthrift.

Record Deficits

Of course, Reagan famously ignored his own sermon and ran up record peacetime deficits. Because it was axiomatic that Reagan could do no wrong, deficits came back into Republican fashion. New theories arose. Republicans started saying that if you cut taxes first, spending would automatically follow. That didn’t happen.

During the Clinton years, temporary agreement between the parties, with help from the economy, actually did wipe out the deficit briefly. Then came President George W. Bush and his war in Iraq. Vice President Dick Cheney, concerned that alarm about the return of huge deficits might spoil the fun, declared that “deficits don’t matter.” Republicans began dismissing concern about the national debt as “Rubinomics,” a reference to Bill Clinton’s Treasury secretary, Robert Rubin. It was not intended as a compliment.

Now, in the latest chapter, Republicans have decided that deficits are heinous once again. No doubt they will continue to believe that for as long as there is a Democrat in the White House.

(Michael Kinsley is a Bloomberg View columnist. The opinions expressed are his own.)

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To contact the writer of this article: Michael Kinsley at mkinsley@bloomberg.net or @michaelkinsley on Twitter.

To contact the editor responsible for this article: Michael Newman at mnewman43@bloomberg.net.

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