Last Tuesday, the anti-Keynesians in the US Congress won a lopsided victory over the finances of the US government, conceivably, for the next ten years. At the behest of “certainty”, however, they traumatized the economy. The ensuing crisis in the markets seems to be big enough to encourage people to talk openly again about what government can do to support the economy, right now. Nobody, in the financial or political capitals, is picking up the cocky slogan “stay the course” or reciting the US Constitution to stop people thinking.
It was safe—up to a few days ago—to damn the Obama administration’s activism in the early months of 2009, when the economy was crashing. Today, the President probably feels a little gun shy. Nevertheless, economic circumstances and common sense voices are calling for action. Two already are quite compelling.
In the Financial Times, Clive Crook insists that “America can fix its inner workings” and calls for less big visions and more “humdrum pragmatism.” Music to Obama’s better angel is followed by this advice:
“It is a good thing for a democracy to set big competing ideas about the proper role of government in contention, so long as it does not cause mutually-assured paralysis. Lately the US has tended in that direction. Vision needs to be dialled down a little, and common sense dialled up.
“This, I think, would especially help the Democrats. Their vision often causes them to lose arguments they would otherwise win. The fight over taxes is a classic instance. Democrats are right that revenues must rise to balance the long-term budget. Voters understand this – or could be made to understand. But instead of reluctantly calling for higher taxes as a sensible way to curb borrowing, Democrats have come to champion higher taxes on households making more than $250,000 a year as a vital principle in its own right – a position from which many Americans recoil. Mr Obama, the supposed pragmatist, has fallen headlong into this trap.”
In the New Republic, John Judis offers some evidence that people will respond to a telling case for government measures to stimulate the economy:
“Could the public be won over? During the first stage of the debate over raising the debt ceiling, administration officials privately expressed doubt about whether they could ever convince the public that the debt ceiling needed to be raised. Instead, they focused on getting Wall Street to pressure the Republicans. But even without an administration effort to sway the public, support for raising the debt ceiling doubled during July (24% to 46%), as the public became aware of the consequences of not raising the limit. Could a noisy administration campaign—led by the president and based on the idea that there is a national and global crisis that requires extraordinary measures—win support for a new stimulus program? Perhaps not, but given the gravity of the situation, it should at least be attempted.”
Click on: http://www.tnr.com/article/john-judis/93287/obama-administration-economy-recession?page=0,1
If the ideologues in the Republican Party lose the initiative over the next few weeks it will not be because John Boehner only got 98% of what he wanted in the debt ceiling deal. It will be because the deal’s rigid vision doesn’t reflect the facts on the ground or the stubborn inclination of people in trouble to turn to strong government for redress.