We could cushion the impact of another big downward shock by a lot more deficit spending...But the centrist Democratic legislative caucus has now dug in its heels behind the position that we cannot undertake more deficit spending right now because we have a dire structural health-care financing proble afrer 2030. The Republican legislative causes has now dug in its heels behind the position that the fact that unemployment is 10% shows not that policy earlier this year was too cautious but rather that it was ineffective. And the Obama administration has not been able or has not tried to move either of those groups out of their current entrenchments.Well, I'm certainly not going to argue with DeLong about the economic analysis, but I think he's wrong about the politics of it. Yes, Democrats have been making a lot of noises about deficits lately, and I agree with DeLong (and with Matt Yglesias, who correctly in my view harps on this quite a bit) that it's fairly nuts to be worried about deficits given current conditions.
On the other hand...Democrats are making noises about deficits, but they're also talking about moving a jobs bill through Congress. And cap-and-trade, and an immigration bill, and of course health care. So I wouldn't be too concerned that Democrats have suddenly decided to make deficit fetishism their new main goal; it seem more likely to me that they've decided to extend plenty of lip service, and keep their options open as far as actual policy is concerned.
Meanwhile, stepping back and looking at actual government action, it seems to me that the key facts over the last fifteen months is that the political system did implement significant, quick, non-incremental action in the face of crisis. First, Congress passed and Treasury implemented the bailout bill last fall (despite divided government, an imminent presidential and Congressional election, and and an apparently disengaged president). Then, Congress passed a heretofore unheard of massive stimulus bill. Yes, GOP rabble-rousers tried to sink the bailout bill, but they failed; yes, deficit fetishist Members of Congress reduced the size (and presumably the effectiveness) of the stimulus, but only at the margins. It's hardly surprising that there's a bit of buyer's remorse...especially since the powerless GOP rump is throwing everything they have at both policies. But the bottom line is in the crisis (and I'll go with Nelson W. Polsby's definition of crisis: when everyone things something has to be done), Congress and the Executive Branch acted.
Mind you, I'm not claiming that government will get any of the details right. I'm just saying that, while government intervention is a blunt instrument, I see no reason to think that gridlock or misguided policy preferences would prevent the Obama administration and the Congress from using that instrument in a future critical period -- and every reason to count previous action as evidence for, not against, the prospects for future action.
I'm less optimistic about some of Ezra Klein's concerns:
The biggest danger America faces is not rising health-care costs or global warming or the budget deficit. It's the political system's inability to act on these issues, even though the solutions are generally quite clear. As any uninsured person will tell you, the fact that medicine exists doesn't do you much good if you can't get any of it.No question that problems structured like the (long-term) deficit and climate change -- issues with long-term costs that require short-term action -- are difficult for most democracies. Still, this very same political system was able to mostly solve the deficit problem only a few years ago, and it does look as if a pretty significant health care reform bill will, at long last, pass into law. So I can't really share Ezra's pessimism either.
On the economy, by the way, that makes me much more concerned about something similar to the Japan "lost decade" problem, rather than DeLong's Depression fears.