Shame on you, Joe Nocera

by Russ Roberts on August 2, 2011

in Budget Issues

There is a lot to learn from this Joe Nocera column so I thought I’d go through it in detail. It is full of dishonest polemics.

Here is the opening:

You know what they say: Never negotiate with terrorists. It only encourages them.

That’s a bit strong, wouldn’t you say? In a democracy, people disagree. It’s kind of against the rules to call your intellectual opponents terrorists unless they are killing innocent bystanders. But I guess Nocera is competing with Mr. Krugman.

These last few months, much of the country has watched in horror as the Tea Party Republicans have waged jihad on the American people.

Huh? See previous comment.

Their intransigent demands for deep spending cuts, coupled with their almost gleeful willingness to destroy one of America’s most invaluable assets, its full faith and credit, were incredibly irresponsible. But they didn’t care. Their goal, they believed, was worth blowing up the country for, if that’s what it took.

Like ideologues everywhere, they scorned compromise.

A softening of tone. They’re only ideologues. That beats terrorists or Jihadists.

When John Boehner, the House speaker, tried to cut a deal with President Obama that included some modest revenue increases, they humiliated him. After this latest agreement was finally struck on Sunday night — amounting to a near-complete capitulation by Obama — Tea Party members went on Fox News to complain that it only called for $2.4 trillion in cuts, instead of $4 trillion. It was head-spinning.

All day Monday, the blogosphere and the talk shows mused about which party would come out ahead politically. Honestly, who cares? What ought to matter is not how these spending cuts will affect our politicians, but how they’ll affect the country. And I’m not even talking about the terrible toll $2.4 trillion in cuts will take on the poor and the middle class. I am talking about their effect on America’s still-ailing economy.

Here is where it gets a little more interesting. He’s right. What matters is how it affects the economy and the human beings who comprise it. Let’s start with the terrible toll of $2.4 trillion in cuts on the poor and the middle class.

According to the CBO baseline spending (go here, page 18), which I understand is the baseline for the cuts of $2.4 trillion, the Federal government will spend $46.1 trillion over the next ten years. So we’re going to go from 46.1 trillion over the next ten years to a mere $43.7 trillion? I know Mr. Krugman claimed the debt deal “slashed government spending.” This year we’re going to spend about $3.8 trillion. For further perspective, in the ten years between 2002 and 2011, the Federal government spent $28.1 trillion dollars. (This includes estimated outlays for 2011 but it will be close. Source for the numbers is here. It does not include inflation which would bump these numbers up a bit if we wanted to compare them to today’s dollars. But inflation hasn’t been big enough. We’re spending a lot more than we did ten years ago.) Do you think that if the “cuts” actually happen that it’s going to take a big toll on the poor and the middle class? Throw in the other $1.5 trillion that might happen later and that gets you all the way down to $42.5 trillion over the next ten years, an average of a mere $4.25 trillion per year. Yes, those are draconian slashes in government spending. George Orwell, please call your office.

America’s real crisis is not a debt crisis. It’s an unemployment crisis.

This is sort of true. If we don’t get our debt under control, the current unemployment level is going to look like a picnic.

Yet this agreement not only doesn’t address unemployment, it’s guaranteed to make it worse. (Incredibly, the Democrats even abandoned their demand for extended unemployment benefits as part of the deal.) As Mohamed El-Erian, the chief executive of the bond investment firm Pimco, told me, fiscal policy includes both a numerator and a denominator. “The numerator is debt,” he said. “But the denominator is growth.” He added, “What we have done is accelerate forward, in a self-inflicted manner, the numerator. And, in the process, we have undermined the denominator.” Economic growth could have gone a long way toward shrinking the deficit, while helping put people to work. The spending cuts will shrink growth and raise the likelihood of pushing the country back into recession.

That’s one theory. As I have said before, there isn’t a lot of evidence that spending cuts reduce growth.

Inflicting more pain on their countrymen doesn’t much bother the Tea Party Republicans, as they’ve repeatedly proved.

Because they want smaller government? Which they didn’t achieve. They just slowed the growth from the baseline. But let’s look at the analysis: those of us who think the government spends too much money–we’re sadists? We want to inflict pain our countrymen?

What is astonishing is that both the president and House speaker are claiming that the deal will help the economy. Do they really expect us to buy that? We’ve all heard what happened in 1937 when Franklin Roosevelt, believing the Depression was over, tried to rein in federal spending. Cutting spending spiraled the country right back into the Great Depression, where it stayed until the arrival of the stimulus package known as World War II. That’s the path we’re now on. Our enemies could not have designed a better plan to weaken the American economy than this debt-ceiling deal.

There was a recession in 1938. Some blame it on tax increases. Some on cuts in spending. Some on monetary policy. And some on animal spirits. What is clear is that the economy did get worse. And as Robert Higgs has argued, the economy struggled through the way until the war ended.

One thing Roosevelt did right during the Depression was legislate into being a social safety net to soften the blows that a free-market economy can mete out in tough times. During this recession, it’s as if the government is going out of its way to make sure the blows are even more severe than they have to be. The debt-ceiling debate reflects a harsher, less empathetic America. It’s sad to see.

This is grotesque. The government has made sure the blows are more severe? Unemployment insurance has been extended many times. What is he talking about?

This is how the piece ends:

For now, the Tea Party Republicans can put aside their suicide vests. But rest assured: They’ll have them on again soon enough. After all, they’ve gotten so much encouragement.

Suicide vests? Shame on you, Joe Nocera. Shame on you for demonizing people who disagree with you. Shame on you for comparing people who want smaller government to people who blow up innocent bystanders eating a pizza or riding on a bus.

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Kirk Hartley August 9, 2011 at 2:19 pm

Your argument would be better if you were consistent. You enthusiastically note that the projected next 10 years of spending is 43t, up from 28t, in the prior 10 years. So, spending called for by Obama is going up well less than 2x. You forgot to mention that the source you cite shows that the 28t spent over the last 10 years was 2x the 14.8 spent in the 10 prior years (the 1990s).
The net outcome is the truth – Bush et al tax-cut and spent us into a hole that current leaders must bail us out of, and are doing, with or without the tea party crowd.

It’s also true that growing current expenses are foreseeable payments on health care promises made decades ago. That of course reminds us of the car company failures to set aside cash to pay for promised future medical because accounting “rules” do not require adequate cash reserves for future obligations. So, the problems of goverment are in large measure echoes of private enterprise failures. Oh, and by the way, the federal government also is now paying for health care for lots of people whose benefits were axed in chapter 11 cases. So, we are all paying for business failures.

Kevin Mann August 12, 2011 at 12:57 pm

A few quick things…

“Your argument would be better if you were consistent.”

You note that Russ isn’t calling out Bush and his predecessor, together with the Congressmen that were serving at the time, for also increasing spending and encouraging deficits. But you haven’t pointed out an inconsistency, simply an omission. Inconsistency would be praising under Bush the behavior that he now condemns under Obama. Pointing out that he’s not pointing the finger at the same past behavior does not indicate his approval of that behavior, explicit or implicit. Remember, this isn’t Fox News you’re reading.

“That of course reminds us of the car company failures to set aside cash to pay for promised future medical because accounting ‘rules’ do not require adequate cash reserves for future obligations.”

Within reason, such “future obligations” in sum and total would be very difficult to predict. It depends on workforce size, retirement ages, the provisions negotiated into the contract renewal coming down the line next year, etc. Additionally, it’s hard to set aside anything for future obligations when you’re not making enough to make ends meet in the present, much less the future.

But if you’re trying to state that Republican laissez faire tactics resulted in accounting regulations that resulted in the failure of the car companies, I must protest that no tweak or quirk of accounting rules would’ve made the Chevy Cobalt a good car.

Joey August 11, 2011 at 2:48 pm

Ok, here’s Jim Demint calling the current administration anti-American, that is, traitors.

Why, oh why, aren’t you condemning this?

I sense an agenda.

Greg Webb August 11, 2011 at 4:25 pm

Here is Jim DeMint’s comment” “We saw within a few days that this President was going to be heavy-handed, he was going to implement his agenda and pay back his political allies, and it just went on from there to ObamaCare and then to Dodd-Frank. It has been the most anti-business and I consider anti-American administration in my lifetime. Things that are just so anathema to the principles of freedom, and everything he has come up with centralizes more power in Washington, creates more socialist-style, collectivist policies. This president is doing something that’s so far out of the realm of anything Republicans ever did wrong, it’s hard to even imagine.”

Yes, Joey, you are right in sensing an agenda. And, it’s yours. There is nothing wrong with saying that President Obama is pursuing policies that centralizes more power in the federal government because that is the truth. It is also true to say that these are anti-American policies because the founding principles of the country are to preserve individual liberty by limiting the power of the federal government.

Joe Nocera’s hysterical claim that the tea party political movement consists of terrorists is nonsense and simply a lie. So, the only agenda that you sense is the one that you support, which is the agenda of the idiotic statist in promoting the further centralization of power and wealth in the federal government.

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