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Saturday, February 23, 2013

'Gambling with the Economy for Political Ends'

Change "George Osborne" to "the Republican Party," the "UK" to the "US," and this pretty much holds true. From Simon Wren-Lewis:

... As Paul Krugman has pointed out many times, the ‘debt problem’ is seen by many on the right as a useful cover to reduce the size of the state. Seen through this lens, the details of the austerity programme make much more sense. A focus on demand ‘rich’ items like investment, local authority spending and welfare, and avoiding temporary increases in taxes that have a much lighter demand impact? - because the aim is to permanently reduce the size of the state. George Osborne was prepared to take a gamble with the economy for political ends.

Of course all Chancellors are politicians. Most would take small liberties with the macoeconomics to gain political advantage: for example before 1997 by delaying raising interest rates until after the party conference, or after 1997 by being a little too optimistic about tax receipts to minimise unpopular tax increases. However in most cases these are the equivalent of minor indiscretions, which do not fundamentally alter the fortunes of the economy. The centrepiece of Osborne’s strategy was accelerated austerity for political ends, and it stopped the recovery dead.

So my final verdict on George Osborne? He is a political tactician, who time and again has put party political gain ahead of the economic interests of the economy. ... It is defined by both what he has not done (total inaction on monetary policy, when - unlike the US and Europe - he has considerable power), as well as what he has done (accelerated austerity). The politics may still come good for him, but the damage to the UK economy his action and inaction has caused is final.

When the recession hit, I expected politicians on both sides of the aisle to care deeply about the struggles of households dealing with unemployment, foreclosure, and other problems that were caused by events outside their control. Working class households didn't cause the problems, but they certainly felt the costs. But I feel kind of silly thinking that now, as it is clear that ideological goals, e.g. smaller government so that taxes on the wealthy can be lowered, are much more important to Republicans than the travails of middle class households. Even Democrats seemed to forget that the unemployed need to come first, and Democrats have not fought as hard -- win or lose -- to help those in need as I expected.

The fact that Republicns in particular have put "political gain ahead of the economic interests of the economy" ought to trigger outrage. Why isn't the public outraged (they kind of are, but the anger is, I think, misdirected)? One answer is that the media/pundits haven't been able to move from the center and point fingers at the true cause, Republican obstructionsism, hostage taking, and the like to get their way. But why not? Why has the media let us down? Why hasn't public pressure driven by media reports caused politicians on the right to change course? Paul Krugman tries to answer:

...they won’t change course; basically, they can’t, for careerist reasons. And that’s the story of a lot of what’s going on now.

Ralph Waldo Emerson understood this. The original version of his famous quote — I had forgotten this — reads:

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.

I don’t know about the divines bit, but the little statesmen thing is completely accurate. Suppose George Osborne were to admit that austerity isn’t working. What, then, would be left of his claim to be qualified to do, well, anything? He has to stick it out until something turns up, no matter how many lives it destroys.

Pretty much the same thing is going on among pundits now stuck in what Jonathan Chait memorably calls the “fever swamp of the center”. Suppose that some pundit who has spent his whole career calling for bipartisanship, a compromise between the extremes of left and right, were to admit the plain fact that Obama is very much a centrist, who is in particular proposing deficit reduction through exactly the kind of mix of tax hikes and spending cuts “centrist” pundits demand — and that the GOP, by contrast, is an extremist organization whose extremism is almost solely responsible for the bitterness of the partisan divide. A pundit making that admission would in effect be saying that everything he has said and done for the past several years was not just useless but harmful, actively misleading readers about the state of the debate. He just can’t do it.

The point is that a large part of the reason we’re locked into such a mess is careerism. And yes, that’s quite vile, if you think about it: politicians and pundits alike letting the world burn — probably unconsciously, but still — because their personal position would be hurt if they admitted to past mistakes.

And a pundit "making that admission" would be accused by Republicans as taking sides, something they can't seem to do while they are stuck in the “fever swamp of the center”. They might be viewed as partisan, and that would, in their minds, undermine their credentials as unbiased, very serious centrist observers. But when they refuse to take sides -- when they always put themselves in the middle and blame both Republicans and Democrats equally, or approximately so -- it makes it very easy for Republicans to pull the debate (the so-called Overton window) to the right and to keep the public in the dark about what is really interfering with progress in Congress that might actually help the majority of the people rather than the select few.

    Posted by on Saturday, February 23, 2013 at 11:17 AM in Economics, Politics | Permalink  Comments (27)


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