I was a college debater a couple of decades ago and studied macroeconomics as an undergraduate. As often as I can, I read what people smarter than me write about the economy. There is just no more urgent issue now than this. So one would expect our leaders to be on top of it. They aren’t. I know this because of the discrepancy — the chasm — that separates the outcome of the debate about “what’s true” and the outcome of the debate about “what Government should do next.”
“What’s true” — as any one with an internet connection and half a day to spare can determine (strong coffee might also be helpful) — is that it would be a tragic mistake at this time, with our economy poised on the brink of tipping over backward, to cut Government spending now. It’s less clear what we should do in 2013 or 2014. But now, the people of the United States should, through our Government, hold our collective noses and spend money we do not have to invest it in ourselves. The country is in much the same situation as the high school kid with little money who wants to go to college. A student loan is risky only if you believe the kid has no future. But that is not true of most kids. And it is not true of us. Republicans — Reagan famously called us the “shining city on a hill” — cannot argue otherwise.
As of Friday, the interest rate the bond market would charge the U.S. if we were to borrow for that purpose would be around 2.8%. What an extraordinarily no-brainer of a good deal. But it appears that we will not take it.
I won’t say much more about “what’s true.” Other people more expert than I am have done so carefully and methodically, and update their blogs daily (e.g. Paul Krugman, Brad DeLong, and Dean Baker). They have answered every serious argument to the contrary. And the emerging data are confirming what they have been saying. The “austerity” side has been discredited. Our economy requires new fiscal stimulus. (See links at bottom of this post, if this is news to you.)
So what is our Government doing with this clear information? As we have discovered in the past 30 days, it is doing precisely the wrong thing. Despite all of our knowledge, the historical experience, and the advances made in economics, here we are in August, 2011 about to repeat precisely those mistakes that prolonged, if they did not cause, the Great Depression. It is unbelievable.
I’m not sure what all we should do about it. But here in Texas, I have decided to start singing.