Saturday, June 19, 2010

Can electorates walk and chew gum?

Martin Wolf presents a fact-dense, closely argued version of Paul Krugman's argument: that swings toward fiscal austerity in the EU and U.S. risk stopping the global recovery in its tracks and bringing on "cyclical fiscal deficits" - that is, depressed demand which slows growth and keeps tax revenues low.  He then asks:

The best policy is to put together measures that sustain strong growth in demand in the short run, while constraining the huge deficits in the long run. This is walking and chewing gum at the same time. Why should that be so hard?

Jonathan Chait has an answer for that. Citing a Wall Street Journal op-ed lambasting Obama for "hypocrisy" for advocacting precisely Martin Wolf's prescription, which Obama has done since taking office, Chait writes:
Moore and the Republicans think it's "hypocrisy" to be for high deficits during a liquidity crisis but against them during a recovery. Really. The whole Republican message is based on not understanding this distinction.
And why don't they understand?  Because drumming up fear of deficits and loathing of short-term stimulus is working:

By 59 to 35 in Tier 1 and 56 to 39 in Tier 2 [the most vulnerable and next-most vulnerable Democratic Congressional districts], voters endorse the proposition that “President Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow the record pace of job losses.” (They still blame Bush more than Obama for the state of the economy, however.)

In tough economic times electorates -- and especially swing voters --  need little convincing that current policy, whatever it may be,  is off-course.

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