Certainly one of the most striking features of current debates is the economic hawkishness of the American upper crust... That powerful CEOs and financial executives could cause so much damage and yet restore their position (and paychecks) so quickly suggests an extraordinary culture of self-justification and demand for deference. Perhaps most telling is the apparently genuine and widespread fury among financial elites at Obama’s occasional, mild criticisms of their excesses.
Balancing the budget…is the attention-getting device that enables me to reduce the size of government. Because the national concern over the deficit is larger than life…. So I take what I can get and focus it on the job I want. If you’re anxious about the deficit, then let me use your anxiety to cut the size of government.
America’s long-term debt picture poses serious problems, as both Stiglitz and Krugman recognize—especially in funding health care, for example—but Krugman pointedly reminds us that the economic and social costs of a premature pivot toward deficit reduction are catastrophic. (He quotes Keynes: “The boom, not the slump, is the time for austerity.”) The forces demanding major cuts now, however, are immensely powerful. To take just one example, former commerce secretary Pete Peterson (with a huge personal fortune built on Wall Street) has dedicated roughly half a billion dollars to the cause of reshaping elite and public discussion of deficits. Peterson and other deficit hawks have funded activities ranging from highly publicized Washington meetings with administration officials and politicians, to advocacy organizations insisting that deficits pose the nation’s greatest crisis, to educational materials for high schools. The latest such effort is a $25 million campaign led by the Peterson-funded Committee for a Responsible Federal Budget that includes one hundred CEOs of Fortune 500 companies. These campaigns are cast as nonpartisan drives for good governance and shared sacrifice. Far too often, however, the push for austerity falls on weak claimants rather than weak claims.
The priorities of the wealthy and powerful show up not only in the premature focus on deficit reduction, but in the way austerity seems likely to be targeted. A genuine effort to combat long-term deficits would address the myriad ways, documented by Stiglitz and many others, in which the federal government subsidizes economic behavior that has real costs for our society—whether by failing to require companies to pay a tax on their carbon emissions or allowing billionaire hedge fund managers to pay taxes at rates far lower than those affecting middle-class families.
Most obviously, since projected long-term deficits are largely driven by rising health costs (which threaten the private sector at least as much as the public), a serious response to long-term deficits would address the factors that make our health care by far the most expensive in the world. We would follow the example of other nations, using the buy- ing power of government to produce real cost containment in the medical industry, rather than following the blueprint outlined in the Ryan Plan, which produces “cost savings” by simply gutting the programs that give tens of millions of Americans access to care.
This is the central message of Krugman and Stiglitz: we have a choice. Politics got us into our economic mess, and only a revitalized politics can get us out of it.