Don’t get me wrong, Robert Reich says and writes a lot of things that make a lot of sense to me and, maybe living thousands of miles away from the nation’s capital it’s impossible to fully appreciate how difficult the political season is making things, but, to me, this characterization of the black and white choice about what economic advisors should be telling the President about more stimulus doesn’t really seem to add to the discussion.
A) Tell the president the economy will either go into a “double-dip” recession or, at best, suffer anemic growth over the next five years — creating enormous pain and suffering for millions of Americans, and imperiling his reelection — unless he immediately champions a $300 billion jobs bill, including zero-interest loans to states and locales to prevent them from having to raise taxes and cut services, public-service jobs (cleaning up the Gulf), and a one-year payroll tax holiday on the first $100,000 of income. To sell this, he’ll need to explain to the American people why larger short-term deficits are necessary now, in order to get jobs back and the economy growing again so that long-term structural deficits (read: health care and Medicare, mostly) can be tackled.
B) Tell the president you understand the political pressures for deficit reduction are growing, and Republicans are making headway fooling the public into believing that this terrible recovery is due to to excessive government deficits. So so it’s perfectly fine for the president to bend to those political pressures. Cut the budgets of most federal agencies by 5 percent, enforce “pay-go” rules that don’t allow bigger deficits, build up expectations for the report of his “deficit commission” on December, and tell the American public that we now have to move toward fiscal austerity.
If you choose B, you shouldn’t be advising the President.
How about a third choice? One that acknowledges the failures of contemporary economic theory and monetary policy. One that posits an entire nation that buys things it doesn’t need with money that it doesn’t have is not a sustainable system and that the transformation to something that is sustainable is going to be more painful the longer it is put off. Make sure people aren’t starving in the street, but don’t try to prop up a system that can not be saved.
This post has been republished from Tim Iacono's blog, The Mess That Greenspan Made.