Macro Outlook: Where Is Third-Quarter Growth Going to Come From?
Paul Krugman and Mike Konczal on the Political Economy of the Lesser Depression

No, No, No! First Loot, Then Burn...

Which viking tribe are you?:

When you capture a monastery, do you?

a. First loot, then burn.

b. First burn, then loot.

The correct answer, of course, is (a). Only Aethelraed Unraed says (b). A similar logic applies to jobs and the deficit. Do you (a) fix the short-run jobs crisis first and then tackle the long-run deficit problem, or do you (b) tackle the long-run deficit problem first and leave the short-run jobs crisis to wither on the vine until you get to it?

Barack Unraed appears to say (b).

Duncan Black is unhappy:

Eschaton: Jobs Now, Deficits Later: Would have made a lot more sense,because the jobs will help cure the deficit, in part from higher tax revenues and in part from lower spending on various programs related to unemployment. There's a very real (and IMHO climbing) chance that unemployment will still be above 8.5% a year from now. Oy. happy to be wrong

And David Dayen:

Obama’s “Deficit Now, Jobs Later” Strategy Doesn’t Seem Sound: I was in and out of the Obama press conference, but I didn’t get the sense that there was a lot new there. We did hear that what he didn’t like about Bowles-Simpson is that it cut too much from defense. So file that away.

There was another moment, near the end, that was notable as well. Here’s a rough transcript:

And, so, that’s where I have a selling job, Chuck, is trying to sell some of our party that if you are a progressive, you should be concerned about debt and deficit just as much as if you’re a conservative. And the reason is because if the only thing we’re talking about over the next year, two years, five years is debt and deficits, then it’s very hard to start talking about how do we make investments in community colleges so that our kids are trained. How do we actually rebuild $2 trillion worth of crumbling infrastructure. You know, if you care about making investments in our kids and making investments in our infrastructure and making investments in basic research then you should want our fiscal house in order so that every time we propose a new initiative, somebody doesn’t just throw up their hands and say more big spending, more government. You know, it would be very helpful for us to be able to say to the American people, our fiscal house is in order. So, now the question is, what should we be doing to win the future and make ourselves more competitive and create more jobs and what aspects of what government’s doing are a waste, and we should eliminate. And that’s the kind of debate that I’d like to have.

The Progressive Caucus budget actually eliminates the deficit faster than any other plan out there, and does it while also providing stimulus in the form of public works investment in the first two years. So this is largely concern trolling. There is no sell job that needs to be done on the importance of the deficit among politicians in Washington, even if there should be. The sell job is that this deficit should be closed in unnecessarily cruel ways instead of smartly.

Earlier in the press conference, Obama said that the budget deficit exploded because of unpaid tax cuts, an unpaid prescription drug benefit in Medicare, two wars and the recession. That’s largely correct.... But if you believe that, it seems that the course of action would be to end the Bush tax cuts, end the wars and get people back to work. Yet none of this will be a feature of even the “grand bargain” proposal that Obama still wants....

As for the idea that you can get the deficit “off the table,” I think the word naive actually fits best here. Even a $4 trillion solution would be... smaller than the Ryan budget.... Republicans are never going to stop shrieking about stopping the spending. And they would especially be angered by efforts to invest.... >This “get it off the table” strategy was behind the 2002 Iraq war resolution, actually. Getting Iraq off the table would lead to a focus on the economy and a victory for Democrats in the midterms. It didn’t work out that way. It never does. Especially in this case, future Congresses will not be bound by the dictates of past Congresses, and the spending debates will always be intense. There’s no way around this but to go through it.

Of course, Obama is sincere when he says that he believes deficits are a big problem. That’s what he said today when he demurred on the McConnell plan. “There are two problems,” he said, one a routine problem to raise the debt limit and the other a problem with deficits and debt. The McConnell plan “solves one problem. It does not solve the other.”

And that’s why $1.5 trillion or so in spending cuts were added to the plan, something Obama called the “bare minimum.” And that’s why the Catfood Commission II will be added to that plan, with a binding vote on the recommendations without amendments. Because the President isn’t interested in signing a bill without those elements.

The debt “crisis” is manufactured. Even the President said today that people are more concerned about getting a job. But the idea that we can turn to that later after slashing the discretionary budget more than ever before and setting up a commission to pummel Social Security and Medicare just seems wildly off base.

Comments