The big problem with the budget deficit is not that it is an economic problem. Nor is it that the people care about it as a policy issue. They don’t. The problem is that the Democratic Party elites care about it and they allow conservatives to use it to enact bad, conservative policy.
I’ve thought about starting a series of articles, “What Will Krugman Write Next?” Because if you read his blog and you have similar interests, it is very easy to predict what his next column in The New York Times will be. And yesterday, I knew it would be on the Congressional Budget Office (CBO) announcement that the federal deficit would be $200 billion dollars less than they had predicted. I wrote about it on Wednesday, Deficit’s Down and So Are Debt Scolds.
Krugman started his column, Secret Deficit Lovers, with a facetious question, “What if they balanced the budget and nobody knew or cared?” This brought to mind a conversation I had with my conservative father and his ultra-conservative girlfriend back in 2009. They were moaning about the federal deficit (“Trillion dollar deficit!”) as though it were Obama’s fault. Of course, like most conservatives at that time, they had long before repudiated Bush the Younger. You may remember at that time that the standard claim by conservatives was that Bush’s problem was that he was not a real conservative. It’s the same old thing: conservatism never fails; it is only failed.
Anyway, at some point I mentioned that the only reason we had a budget surplus under Clinton was that we had a really great economy. They just stared at me. It took a while me to figure out what the problem was: they didn’t know that the budget had been balanced. It surprised me, because there really was much made of this fact at the time. And they probably did know at the time, but they were very old at this point — in their late 70s — and the only news they listened to was Fox News, which gave them a constant diet of budget hysteria without any historical context.
Let’s leave aside the fact that Americans don’t actually care about the budget deficit. They don’t even understand it. During those periods when the media get them to notice it, they see it as an issue of morality, not economics. It’s the whole, “American families have to tighten their belts so the government should too.” The fact that this shows a shocking lack of understanding of macroeconomics doesn’t really matter. Let’s just focus on the issue that Americans don’t pay enough attention for it to matter.
The vast majority of Americans remember Clinton fondly. But they don’t remember his policies at all. They remember two things. First, they remember Monica Lewinsky because, hey, sex. But they don’t hold this against Clinton because, hey, sex. Second, they remember that the economy was doing great and his presidency was the first time since Carter was president that they saw their wages actually go up faster than the rate of inflation. That’s it. They don’t associate any of this with any policy. And it is a good thing too, because Clinton wasn’t responsible for the great economy; crazy old Alan Greenspan with his heterodox economic ideas was.
Similarly, people remember Reagan fondly because — well, to be honest, I’m not sure why. The economy was good under him, but that didn’t “trickle down” to most Americans. And again, his economic “miracle” was due to the Federal Reserve under Paul Volcker and not due to Reagan’s policies. What’s more, Reagan slashed taxes on the rich, but he raised them on the middle class.
The point is that people don’t care about policy. They care about the state of their lives. This is why I’ve always marveled at Obama’s obsession with being the “adult in the room.” The people never give him credit for that. Similarly, the people never turn against the Republicans for their childish antics. In fact, I saw a poll recently that found that most Americans trust the Republicans over the Democrats on the economy. This is despite the fact that our continued poor recovery is directly related to Republican policy.
Every year since Obama has been president, the deficit has gone down. Economically speaking, this was a huge mistake. And as I’ve noted, this is largely due to policy forced on Obama by the Republicans. The government should have been spending money to get the economy going again. Once it did that, it could balance the budget with tax increases and spending cuts — if that were even necessary (Clinton’s budget surplus was due entirely to the booming economy, not his budget deal). But regardless of the reason: under Obama, the deficit has gone down every year.
But as Krugman pointed out, a recent YouGov poll found that over half of Americans think the deficit has increased under Obama. Less than one-fifth were correct that it has gone down. That means over 80% of Americans either give Obama no credit for reducing the deficit or they blame him for supposedly making it worse. And remember: the budget deficit has not gone down a little; it has been cut in half.
Of course, Krugman’s article is (like mine on Wednesday) an attack on the deficit scolds. They supposedly do know and care about the deficit. But I have a hard time getting too excited about them. It’s always been clear that they are disingenuous. If Obama had gotten his cherished Grand Bargain, the result would have been that the people didn’t care about what happened to the budget. And the long term policy effects would have been that once the economy was doing better and Republicans got control of Washington, all those cuts to Social Security and Medicare would remain. But the money saved from starving seniors would be used to give new tax cuts to the rich.
Krugman is right when he says, “So let’s say goodbye to fiscal hysteria.” But it really isn’t “us” who need to say goodbye to it. It is the Democratic Party elite who need to say goodbye to it. Because “we” never cared about it in the first place.