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.

Jonathan Cohn brought up a very disturbing in issue in an article yesterday, The 5 Key Questions About Obamacare, Answered. The disturbing issue is not Obamacare or the questions about it. It is what Cohn was responding to: Peter Suderman.

I’ve written about Suderman a couple of times before. He’s a libertarian who writes for Reason and other publications. And he isn’t bad. He’s a smart guy. But he hates Obamacare. Well, let’s be honest: he would hate any kind of real healthcare reform. I’m sure if you got down to it, he hates Medicare and Social Security and pretty much everything the government does. He does, after all, write for Reason.

Cohn noted that Suderman brought up some real issues like the fact that a lot of new people are getting health insurance through the Medicaid expansion, which means that they are more likely to have difficulty finding doctors to treat them. You see, Medicaid doesn’t pay that well and so a lot of doctors avoid Medicaid patients. Of course, this is kind of a non-issue. What is harder: finding a doctor when you have Medicaid or finding a doctor when you have no insurance at all? This is all very typical of Suderman.

The question is why he is even allowed to write about Obamacare. He doesn’t like it because he doesn’t like it. Reading him write about what’s wrong with Obamacare is like listening to a 14-year-old hip-hop fan explain why classical music sucks. You aren’t going to learn anything about classical music; all you are going to hear are a bunch of excuses to justify why he doesn’t like classical music. That’s fine. Not everyone needs to like classical music. But it would be a waste of time to listen to this young man’s justifications as though they were something like actual music criticism.

As I discussed earlier this year, Another Libertarian Gets Trapped Talking About Practical Matters, Suderman will never get to the point of accepting Obamacare. His problem with the law is not practical; it is theoretical. And when all the practical complaints are exhausted, he will still be left with his theoretical opposition to the government being involved in healthcare — or pretty much anything else.

It bugs me that Cohn gives Suderman respect that he clearly doesn’t deserve, “Still, many of the flaws and complications that Suderman chronicles are very real and need to be accounted for.” I come back to this all the time. Conservatives insisted that we have this “free market” neoliberal healthcare reform policy. For example, one of Suderman’s totally valid complaints is that even though premiums will in many cases go down in general, individual premiums may go up and people may not be astute enough to realize that they must shop around next year just like they did this year.

But that’s the thing with neoliberal policy: it requires that people constantly be out there in the marketplace making sure that they are getting the best deal. Neoliberalism doesn’t care that people have actual lives to live because it sees people only as actors in the economy. And the reason we are stuck with neoliberal policy is that conservatives like Suderman demand it, even though in the end, they never support it. The libertarian take on healthcare reform is that we should do nothing, but if we must, we should go with neoliberal policy that harnesses the “magic of the market.” And with a major assist from the New Democrats who never tire of being “fooled” by conservatives into embracing policies conservatives demand, we get bad conservative policy that conservatives aren’t even willing to support.

So we have to put up with Suderman’s constant attacks on Obamacare. And those attacks will continue until Suderman just gives up and settles on his theoretical argument, which no one will be interested in publishing. Reason already has leather jacket wearing Nick Gillespie to write its theoretical articles, “The government has no business interfering with the private contracts people make!” But not to worry, there will always be new conservative poisoned legislation for conservatives to spend years complaining about. Suderman’s career is guaranteed!

I watched the Aaron Carroll video below, Pay for Performance. As you ought to know, because I write about him a lot, Carroll is a doctor and an healthcare policy experts — one of the few you ought to listen to, and one of the main people behind The Incidental Economist. And the video is about the effectiveness of paying doctors more for improved outcomes. For example, a doctor might be paid more for getting a patient with high blood pressure on medication. It sounds like a good idea — and one that would more than pay for itself.

The problem is that in general, it doesn’t work. The studies on it generally don’t show any effect and those that do are small studies that show modest and short-term effects. As Carroll points out, “pay for performance” also has a potential down side: it may turn medicine into a kind of libertarian dog-eat-dog world where doctors only do what is in their financial interest. I actually think this is the crux of the matter.

I don’t have the highest regard for doctors. I used to teach physics to premed students, and I’ve never really recovered. But even I admit that doctors generally want to do well by their patients. Sure, they value their over-compensated jobs, but they really do care. I even saw much altruism among my premed students. In fact, it is this altruism that shows the lie to the conservatives’ favorite healthcare “reform” idea: tort reform. The idea is that doctors over-treat patients to protect themselves from law suits. But studies have shown very clearly that such “reform” doesn’t work, because doctors tend to over-treat patients because the doctors actually care about the health of their patients and not because they are afraid of being sued.

So it isn’t surprising that doctors don’t treat patients better when you pay them more. They are already treating patients as well as they can. If you are really interested in the quality of care patients receive, reduce the case load of doctors so they can spend more time with patients. But of course, that would be too difficult and cost too much money, so we certainly aren’t going to do that! (Although note: American doctors make twice what they do in other advanced economies: France, England, Japan, Germany, Canada. If they were paid in accordance with international standards, they could spend twice as much time as they do with patients. But we can’t do that because the AMA is a powerful lobby and it doesn’t want more immigration of well qualified doctors into the United States.)

This all got me thinking about “merit pay” for teachers. I’ve always thought it was a really bad idea for the same reason that it is for doctors. The truth is that most teachers care very much about teaching their students. Again, if we really cared about improving education, we would do things that help the teachers like reducing class sizes, providing supplies, incentivizing continuing education. But we don’t. We do the easy things: give students standardized tests, deny teachers worker protections, and generally treat them like they are line workers at a manufacturing plant where the fastest worker gets a monthly bonus.

Alfie Kohn — my favorite education policy expert — wrote a great article on this subject over a decade ago, The Folly of Merit Pay. In it, he noted that schools have been implementing “pay for performance” schemes as far back as the middle 19th century. In each case, it failed. So things went back to the way they were until “reformers” forget about the previous failures. Try, try again! Because it just has to work. Economists tell us that incentives are all that matters. You want better teachers, pay them more! Well, sure. But what if pay isn’t the main issue:

As for the mid-19th century experiment:

But it isn’t just crazy educational liberal wackos like Alfie Kohn and me who think this. Marie Gryphon of the Cato Institute has noted a number of problems with the whole “pay for performance” scheme, including the way it incentivizes teacher cheating and favors teachers working in high income school districts.

Of course, maybe this is why we don’t hear so much about “merit pay” as we used to. Now the focus is on destroying teacher “tenure.” The main thing is that our solutions to educational problems should always be simple. But more important here is that both of these ideas for supposedly improving education have the result of making teaching a less appealing profession. Although as I follow the debate, that seems to be what education “reform” is all about. There doesn’t seem to be much concern about the children. It seems more about putting teachers in their place and destroying public sector unions.

What’s sad is that low paid teachers are very likely to fail in their efforts to protect their rights as workers and the ability to do their jobs well. Doctors, on the other hand, being wealthy will probably have no problem combating the equally harmful policy changes that are facing them. But that’s America!

And the la-hand of the Freeeeee!
And the hoooome, of thhhhhe, braaaave!

Afterword

Note that money does matter as I’ve written about in the past. But there is an interesting disconnect in the education “reform” movement. People get upset when teachers go on strike, because the idea is that teachers ought to be willing to live in poverty because all they care about are “the kids.” At the same time, the “reform” movement wants to treat teachers as if they were the same as manufacturing line workers. The point is not that financial incentives don’t help; it is that they aren’t that important and that they certainly aren’t the silver bullet that will fix our educational system.

The generally brilliant Sarah Kliff wrote one of those Vox “too cool for school” articles, Tens of Thousands of Walmart Workers Are About to Lose Their Health Insurance — and it’s Good News! This is what you get when you let Ezra Klein and Matt Yglesias spend too much time together. It’s got the Wonk Blog nerd factor with the counter-intuitiveness of a #SlatePitch: “What’s the giraffe’s most distinctive feature? Hint: It’s not the neck!” I just want to line up the whole Vox staff and slap them.

Here’s the thing. It actually isn’t counter-intuitive. When I heard that Walmart was going to drop their part-time employee’s insurance, I immediately understood. These people make so little money that they will certainly qualify for generous government subsidies under Obamacare. Of course, if the employee makes below 133% of the poverty rate, he will qualify for the Medicaid expansion. I don’t know what that means in the red states where ideological purity and “sending a message” mean more than helping the working poor. Regardless, I saw immediately that, at least in the long run (after all the red states get over their political hissy fits), that this is a good thing for the employees.

But this is not the main story. This is yet another story of how Walmart uses the government so it can bring its customers low-low prices while keeping the Walton family super-super rich. Kliff provides an example in her article that shows that a part-time employee getting insurance from Walmart would have to pay $111 per month through the company, but only $7 through the government. Well, I’m glad for that employee. But the broader story here is that Walmart treats its workers like dirt.

Consider food stamps. It is really great that Walmart employees can get food stamps to make ends meet. But let’s suppose that Walmart paid all their employees $17 per hour and so they didn’t qualify for food stamps. And then one day, Walmart announced that it was cutting all wages to $10 per hour and now the employees would qualify for food stamps and other forms of government aid. Would Vox publish a story, “Tens of Thousands of Walmart Workers Are About to Get Their Pay Cut — and it’s Good News!” No, they wouldn’t.

Even if the government made up every penny that Walmart cut, the story would be that Walmart was using government programs that help the poor in order to enrich its owners. And that is all that is going on here. The only difference is that in this case, it actually is good news for Walmart employees, but only because Walmart already treats them so badly. But notice that when Trader Joe’s did the same thing, it provided money to pay for what they expected their part-time employees would have to pay. Walmart could have taken the money that they now provide for insurance coverage for part-time employees and divide it up to help pay for their share of Obamacare. But they aren’t doing it. Instead, they are just ripping off the government and taking the windfall.

In her defense, Kliff understands this. She noted, “The loser in the Walmart decision is the federal budget.” But it is an afterthought. She spends a total of one sentence on this fact, “It’s shifting costs over to the government, which will now take on the financial burden of helping to pay for thousands’ of part-time workers’ medical bills.” And there is no mention of how else it might have been dealt with.

Conservatives should hate Walmart. All the money that goes to their poor workers is actually money that is taken directly from the government and given to the Walton family — the richest family in the United States. But when even liberals can’t seem to focus on this fact, it doesn’t speak well for future reform.

See Also: I Was a Middle Class Food Stamp Kid

“This could have been brought to our attention yesterday.” That was Jonathan Chait’s bottom line in a great article today, Debt Scolds: Pay No Attention to the Falling Deficit! You see, the Congressional Budget Office (CBO) has revised its estimate of the federal deficit this year. Before the year started, the CBO estimated that the deficit would be $680 billion. But government revenue was up quite a lot, and now the year is almost over, it looks like the deficit will be only $486 billion dollars.

Some would say, “Well, that’s still a very big deficit!” But the truth is that if the economy were fully recovered, we would be seeing a surplus. So this is very good news indeed. There is no reason for the federal government to cut spending. In fact, it is rather the opposite: the federal government should be spending more. And so if we lived in a rational world, or if we just didn’t pay attention to politics, we would think that the debt scolds would be thrilled. Of course, they aren’t.

Now, the debt scolds are saying that they never cared about the short term deficit. They were only worried about the long term deficit. The Committee for a Responsible Federal Budget (CRFB) is out today with a statement, “Washington’s myopic focus on short-term deficits has likely slowed the recovery by cutting deficits somewhat too fast in the short term while leaving substantial imbalances in place over the long term.” You see, it was always about the long term. How could anyone have gotten the impression that there was a short term problem with the budget?

Maybe they got it from the CRFB:

I don’t blame them. Even at the time, if you nailed them down about the fact that short term cuts would only hurt the budget outlook, these people would admit it was true. At the same time, they pushed debt hysteria with statements like the one above. They also talked about “trillion dollar budget deficits” all the time. And most important, these where the people who claimed that the deficit was such a big problem that any short term stimulus had to be tired to long term budget cuts.

And let’s not forget: these people’s jobs depend upon making people afraid of federal budget deficits. As I discussed last year, the CRFB Social Security calculator was designed to scare people about the program. Even if you made all the changes necessary to make Social Security solvent for the next 75 years (the stated purpose of the exercise), it told you that what you did wasn’t good enough because the plan wasn’t stable for the infinite time horizon — as if making Social Security viable for the year 2525 was a reason exercise.

The truth is that the whole deficit scold community is made up of a bunch of charlatans. Every one of them is primarily interested in lowering taxes on the rich. That’s not what you do when you care about the deficit. Matt Yglesias put it best two years ago:

So of course the debt scolds don’t care that the deficit is way down. Their purpose is to cut social security and lower taxes on the wealthy. Nothing the CBO published today has any bearing on that.

Tom Sullivan wrote a good article over at Digby’s Blog, Picking Sides. It’s about the split in the Democratic Party between the progressives and the “moderates.” The supposed moderates are actually just what the Democratic Party has been since Bill Clinton. I don’t want to go all John Birch Society on you, but more and more, it is hard not to conclude that the New Democrats were just the reserve troops of the Reagan Revolution. Just as only Nixon could go to China, only “liberal” Clinton could end welfare as we know it. And only “liberal” Obama could keep all the criminals in charge following the greatest economic crisis since the Great Depression by looking forward as opposed to looking backwards.

Sullivan goes through all the people who are saying that the Democrats must continue on pandering to their wealthy donors rather than their quickly liberalizing voters. He noted, “Village Democrats are consistently about a decade behind their base.” Actually, I think it is worse than that. For most of the last three decades, the Democratic establishment hasn’t followed the base in the least; there is simply no connection whatsoever. The Democratic establishment has the ultimate philosophy about the Democratic voter, “Who else are they gonna vote for? At least we aren’t as bad as the Republicans!” The fact that they lost the presidency in 2000 because of that philosophy, doesn’t seem too big a price to pay. After all, it’s not like Bush the Younger was bad for the Democratic donors!

But there was something in Sullivan’s article that was really very funny, although I’m not sure he meant it to be:

This is the kind of statement that can make me choke. It’s like Bush the Younger warning Sweden that the whole social democracy business may be a dead end. Even if it’s true, what possible reason would Sweden have for listening to Bush the Younger? So let’s see: a couple of guys who have a vested interest in populism losing the fight for control of the Democratic Party published an OpEd in one of the most wacko conservative publications in existence. Has there ever been a greater sign to the Democratic Party that it needs to move in the populist direction?

The truth is that the New Democratic movement was a conspiracy. It is just that it wasn’t hidden. The stated purpose of the Democratic Leadership Council (DLC) was to turn the Democratic Party away from its turn to the left in the 1960s and 1970s. But that was a lie. The party had turned to the left only on social issues. Democrats had brought down taxes in the 1960s and didn’t touch them in the 1970s. But the DLC wasn’t interested in the social left turn (that was mostly allowing blacks to vote, by the way). No, the DLC was only really interested in economic issues. So they weren’t turning the Democrats back into a former authentic self; they were turning the Democratic Party into what the Republicans were on economic issues. And this, of course, allowed the Republicans to simply go crazy.

So it is no surprise that the corporate Democrats think that the Democratic Party moving in a populist direction is a dead end. It is for the “moderate” Democrats. What it is for the Democratic Party at the ballot box, we will have to wait and see. But the people I talk to — liberal and conservative alike — are overwhelmingly populist when it comes to economic issues. Conservatives generally have a problem with liberal social policy. Adding liberal economic policy will make them more open to the Democratic Party. But I’ll admit: the billionaire donors of both parties will not be happy about this.

Oh! My! God! What are we going to do about the skills gap?! For those of you who are not aware, the skills gap is the reason there is high unemployment. It has nothing to do with a lack of demand in the economy. The problem is that there are all these jobs out there for JavaScript programmers and there are just too few JavaScript programmers. Or circuit board designers. Or pediatric oncologists. I don’t know. Whatever the skills are, we the people just don’t have em!

The laws of economics indicate that if there was big money to be made, then people would hit the books and become expert in JavaScript. The skills gap would disappear because people are pretty reasonable and will not keep starving as TV repair men when they can make BIG MONEY as JavaScript programmers. (Or circuit board designers or pediatric oncologists.) But wait, I just got some breaking information.

It turns out those companies that want to hire loads of JavaScript programmers only want to pay $7.25 per hour. In fact, these companies that are so desperate to hire JavaScript programmers left California (where there are lots of JavaScript programmers — many as young as eight years old) because the minimum wage is $9.00 per hour. They moved to Alabama where they could pay them the lower federal minimum wage. So these companies are desperate to hire JavaScript programmers, but only at $7.25 per hour.

If I were of a cynical turn of mind, I would think that these companies claiming that there was a skills gap were actually, I don’t know, disingenuous. I would think that they are mostly conservative ideologues who want to complain about poor people and blame the bad economy on them. Because here’s the thing. I’m very poor. But I have lots of work for people to do. I could easily use two researchers, a secretary, and someone to handle my Twitter account (it really is very boring). So if I could pay these people just 50¢ per hour, I’d create these four jobs. I like the sound of that, Frank Moraes: Job Creator!

But what I won’t do is run around saying, “I have good jobs for people, I just can’t find anyone!” There are plenty of excellent researchers around, but there are none who will work for 50¢ per hour. But the “job skills” crowd never admits the truth: they can’t find qualified people to work for the lousy pay they are offering. A couple of years ago, I wrote about a guy on 60 Minutes who was complaining he couldn’t find workers who knew trigonometry. He was offering $12 per hour. And the sad thing is that these people are pretty much never called on their nonsense in the mainstream media.

This morning Dean Baker brought my attention to a shocking new skills gap, It’s Hard to Find People With the Necessary Skills for Retail and Restaurant Work. It seems that new research shows that there has been a rise in the number of job openings but a fall in the number of hires. Here are the details:

Is there really a skills gap in wait staff and motel night managers? Probably not. It is probably an indication that slightly better jobs are becoming available. But that won’t stop conservatives and even your local news from telling you that people are just too stupid and unqualified to take all the cool JavaScript programming jobs that are available. No mention will be made of the fact that most of the new jobs are bottom wrung, low paying jobs that aren’t generally considered “skilled.” (Although no one would ever want to hire me to wait tables.)

I’ll probably be writing more about this later, but I think I know what’s going on. An economy is like an ecosystem. And in this economy system, the rich have become far too successful. They are gobbling up too many of the resources, and this is causing the resources to dry up. What we need is balance. In ecosystems, highly successful species often go extinct because they consume all their resources. The problem is the shortsighted success of the species, not the fact that other species don’t have the necessarily skills to eke out a living.

There is no skills gap. People said there was during the Great Depression. There was not. They say it now. There is not. They say it as a way to justify bad economic policy. They say it as a way to justify the status quo. They say it because they don’t want to admit that the economy needs balance. It isn’t possible for the rich to have it all.