"Top-Down Economics" -- Why 2012 Should Be About Reason For, Not Level Of, Unemployment
Posted by David Shorr
What does it mean to say that this election will be about the economy? For some, it's a supposed causal link between the level of unemployment and President Obama's fate. "No president has ever been reelected, etc."
Lately, all the savviest political observers have been slamming the Romney campaign for letting the focus of the election fight move away from the sluggish recovery. Romney should have this thing in the bag, they say, if only he could keep the attention on the weak state of the economy.
Casting the election in these terms might give Romney his best shot at becoming president. But I'd like to pause and ask whether such a campaign would serve the country well, or our economy for that matter. Is the best way to hold an election "about the economy" really to make the president pay for our hardship? Republicans like House Speaker Boehner love to accuse President Obama of not understanding how the economy works -- contrasted with Governor Romney and all his private sector experience. Okay then, let's have a great debate about how the economy works. Holding that debate, though, will neuter many of the Republicans' favorite talking points and subject their economic platform to more scrutiny than it's been getting.
Now why is a foreign policy blogger like me even writing about domestic and economic policy? Because the media and commentariat have, with certain exceptions, been doing such a bad job. Also because I believe in the crucial importance of reality-based discourse for our republic. As a foreign policy wonk / advocate, my professional trade has been to publicly debate the United States' actions in the world beyond our borders. Regular readers are familiar with some of the ideas from the far-Right that set off my BS detector -- e.g. the supposedly magical power of toughness and resolve to get others to do as we wish. Well the GOP economic platform is just as detached from reality and destructive in its consequences, yet it's still given a lot of credence because the media passively transmits instead of challenges it. In fact, economist Dean Baker of the Center for Economic and Policy Research devotes an entire blog, Beat the Press, to highlighting shoddy reporting and commentary on the economy.
According to Republican dogma (aka free market fundamentalism), prosperity comes from job-creating business owners in the private sector; the public sector's role in the economy is purely negative. Government regulation, spending, and taxation can only hinder economic growth. So that whole history of the New Deal, Great Depression, works projects, John Maynard Keynes, boosting demand and economic activity through spending? Never happened. We're living in a political moment of widespread Keynesian denialism that flies in the face of facts just as blatantly as climate change denial and evolution denial do.
The gaps between what passes for economic policy argument in 2012 and the hard empirical evidence are legion, so I'll just highlight a few of the most important. First, about those "job creators." Probably the single most important piece of commentary of this election season was by wealthy entrepreneur and investor Nick Hanauer, saying that despite having built successful businesses, he is not a job creator. The core passage is worth quoting at length:
I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.
When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.
It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.
This is exactly what President Obama is saying in his stump speech about prosperity being built from "the middle out" or "bottom up." And it isn't so much a philosophy or vision for America as how the economy really works. Which is why he also highlights the lack of a jobs explosion or widespread prosperity when the Bush administration pushed to get government off the private sector's back in the 2000s.
Two political writers in particular -- Greg Sargent who writes the WaPo's Plum Line blog and Ari Berman of The Nation -- have been incisive yet relatively lonely voices in talking about the substance that underlies the campaign rhetoric. I particularly recommend Greg's recent column on what the "didn't build that" debate is really about and Ari's piece explaining that President Obama has a jobs plan, and Romney really doesn't. When will the campaign discussion and coverage finally look at Romney's 59-point pland and Obama's American Jobs Act side-by-side? Do the Republicans just get to claim their approach will generate growth without any real plausible framework? Obamacare as a "job killer"? Seriously?
But the kicker is this: Romney himself doesn't believe all the nonsense. He knows just as well as President Obama the need for stimulative government spending to make up for weakness in the private sector. The real scandal of the 2012 economic debate and media coverage is the failure to note statements from the candidate directly contradicting the entire Republican argument about budget cuts leading to growth. This is what he said to Mark Halperin of Time magazine:
If you take a trillion dollars, for instance, out of the first year of the federal budget, that would shrink GDP over 5 per cent. That is by definition throwing us into recession or depression. So I’m not going to do that, of course. I don’t want to have us go into a recession in order to balance the budget.
How does this not make the GOP case against the Obama record hypocritical? Where does it leave "stimulus failed" critique? (For the fuller dossier on Mitt Romney, closet Keynesian, see this Nicholas Wapshott Politico op-ed.)
So the conventional wisdom has it backwards, every day we really talk about the economy is a good day for the Obama campaign.