[Vision2020] This Republican Economy

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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June 3, 2012
This Republican Economy By PAUL KRUGMAN

What should be done about the economy? Republicans claim to have the
answer: slash spending and cut taxes. What they hope voters won’t notice is
that that’s precisely the policy we’ve been following the past couple of
years. Never mind the Democrat in the White House; for all practical
purposes, this is already the economic policy of Republican dreams.

So the Republican electoral strategy is, in effect, a gigantic con game: it
depends on convincing voters that the bad economy is the result of
big-spending policies that President Obama hasn’t followed (in large part
because the G.O.P. wouldn’t let him), and that our woes can be cured by
pursuing more of the same policies that have already failed.

For some reason, however, neither the press nor Mr. Obama’s political team
has done a very good job of exposing the con.

What do I mean by saying that this is already a Republican economy? Look
first at total government spending — federal, state and local. Adjusted for
population growth and inflation, such spending has recently been falling at
a rate not seen since the demobilization that followed the Korean War.

How is that possible? Isn’t Mr. Obama a big
spender<http://krugman.blogs.nytimes.com/2012/06/03/1937-2/>?
Actually, no; there was a brief burst of spending in late 2009 and early
2010 as the stimulus kicked in, but that boost is long behind us. Since
then it has been all downhill. Cash-strapped state and local governments
have laid off teachers, firefighters and police officers; meanwhile,
unemployment benefits have been trailing off even though unemployment
remains extremely high.

Over all, the picture for America in 2012 bears a stunning resemblance to
the great mistake of 1937, when F.D.R. prematurely slashed spending,
sending the U.S. economy — which had actually been recovering fairly fast
until that point — into the second leg of the Great Depression. In F.D.R.’s
case, however, this was an unforced error, since he had a solidly
Democratic Congress. In President Obama’s case, much though not all of the
responsibility for the policy wrong turn lies with a completely
obstructionist Republican majority in the House.

That same obstructionist House majority effectively blackmailed the
president into continuing all the Bush tax cuts for the wealthy, so that
federal taxes as a share of G.D.P. are near historic lows — much lower, in
particular, than at any point during Ronald Reagan’s presidency.

As I said, for all practical purposes this is already a Republican economy.

As an aside, I think it’s worth pointing out that although the economy’s
performance has been disappointing, to say the least, none of the disasters
Republicans predicted have come to pass. Remember all those assertions that
budget deficits would lead to soaring interest rates? Well, U.S. borrowing
costs have just hit a record low. And remember those dire warnings about
inflation and the “debasement” of the dollar? Well, inflation remains low,
and the dollar has been stronger than it was in the Bush years.

Put it this way: Republicans have been warning that we were about to turn
into Greece because President Obama was doing too much to boost the
economy; Keynesian economists like myself warned that we were, on the
contrary, at risk of turning into Japan because he was doing too little.
And Japanification it is, except with a level of misery the Japanese never
had to endure.

So why don’t voters know any of this?

Part of the answer is that far too much economic reporting is still of the
he-said, she-said variety, with dueling quotes from hired guns on either
side. But it’s also true that the Obama team has consistently failed to
highlight Republican obstruction, perhaps out of a fear of seeming weak.
Instead, the president’s advisers keep turning to happy talk, seizing on a
few months’ good economic news as proof that their policies are working —
and then ending up looking foolish when the numbers turn down again.
Remarkably, they’ve made this mistake three times in a row: in 2010, 2011
and now once again.

At this point, however, Mr. Obama and his political team don’t seem to have
much choice. They can point with pride to some big economic achievements,
above all the successful rescue of the auto industry, which is responsible
for a large part of whatever job growth we are managing to get. But they’re
not going to be able to sell a narrative of overall economic success. Their
best bet, surely, is to do a Harry Truman, to run against the “do-nothing”
Republican Congress that has, in reality, blocked proposals — for tax cuts
as well as more spending — that would have made 2012 a much better year
than it’s turning out to be.

For that, in the end, is the best argument against Republicans’ claims that
they can fix the economy. The fact is that we have already seen the
Republican economic future — and it doesn’t work.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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