Selling Keynesian Economics to Joe the Plumber
What explains Washington's continuing aversion to fiscal stimulus, despite mounting evidence that reduced government spending is hurting the nascent economic recovery?
The Times' Eduardo Porter offered a range of suspects last week, including partisan jockeying; inflation-wary creditors; the fetishization of thrift; and the conflation of future budget pressure with today's demand-starved economy.
Those explanations, though accurate on their own, together suggest that for the broad middle of U.S. society, there is no logical, economically literate reason to oppose greater federal spending in the name of growth. But before we accept that conclusion, let's remember Joe the Plumber.
When Barack Obama first ran for president in 2008, he told Joe, aka Samuel Joseph Wurzelbacher, that "when you spread the wealth around, it's good for everybody." The comment sparked an unsurprising backlash, and Joe the Plumber came to symbolize a deep aversion to the idea of government redistribution.
That view seems to have strengthened since the recession. In the Pew Research Center's 2012 American Values Survey, 59 percent of respondents agreed it's the government's responsibility "to take care of people who can't take care of themselves," down from 63 percent in 2009, and 69 percent in 2007. Similarly, just 43 percent agreed the government "should help more needy people even if it means going deeper in debt." In 2007, that figure was 54 percent.
Why are Americans' views on redistribution relevant to the stimulus debate? Because it's hard to devise an effective stimulus program that doesn't entail, by necessity if not intent, some redistribution of wealth across income groups.
That's obviously true for expanded unemployment benefits, food stamps or health coverage. It's also true for aid to states, which use that money to keep more teachers and police officers on the payroll, or infrastructure projects, which the Obama administration has pushed.
Someone needs to build those projects. And the Bureau of Labor Statistics last year estimated the median annual wage for construction workers to be $29,990, lower than the median for all workers of $34,570.
(Of course, the Obama administration could propose a stimulus that consists entirely of tax cuts for those with high incomes. But the Congressional Budget Office estimates that such cuts do less to spur the economy than almost any other type of approach.)
It makes good economic sense for the government to stimulate the economy by providing more money to those with below-average earnings, since they're likely to spend more of that money than someone in a higher income bracket. Aggregate demand increases, and the economy grows.
But what if economic growth is not as important to many middle-class Americans -- even those who understand the mechanics and recognize the value of stimulus spending -- as keeping their money out of the hands of others? Porter himself has noted this particularly American phenomenon, observing that unlike in Europe,
the ethnic, linguistic and cultural diversity of the United States can sap support for government redistribution. Ten years ago, the sociologist William Julius Wilson wrote that American whites rebelled against welfare because they saw it as using their hard-earned taxes to give blacks "medical and legal services that many of them could not afford for their own families." In more homogeneous European countries, taxpayers may be more willing to pay for social programs because recipients are similar to themselves.
Keynesians will argue, correctly, that stimulus isn't a social program: It's designed to benefit all of us, not just the worse off. But the road to an effective stimulus program usually runs through redistribution, at least in the eyes of people who don't like that sort of thing.
None of this is to say that an aversion to spreading the wealth, even at the cost of economic growth, is admirable. Just the opposite: Such a position can be callous to the suffering of others, and quite possibly self-defeating in the long run.
But that's different than concluding, as some stimulus proponents seem to, that anyone who disagrees with them either doesn't understand economics or won't admit they're wrong (though for many that may be true). Some opponents of government spending may simply hold a different view of the government's proper role in society.
Where does all this leave Democrats trying to rally support for greater government spending, at least until joblessness recedes to less alarming levels? The first step is probably to acknowledge that some Americans are of two minds here, whatever the reason, and speak directly to their concerns -- explaining why the case in favor of growth outweighs, at least for the moment, the case against spreading the wealth.
There's a strong argument to be made for more government spending -- right now. But acting as though what stands in the way is either partisanship or economic confusion, as some Democrats seem to, hasn't worked so far.
(Christopher Flavelle is a member of the Bloomberg View editorial board. Follow him on Twitter.)
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