The Neverending Morality Play of the Deficit Hawks
Credit: Wiki Commons.
When I returned from a long stay abroad, my first blog post noted how much the new news at home looked like the old news, as if I’d never left. I assumed that new, important events had unfolded. They just didn’t make the headlines. Sure enough, I had barely returned to my news junkie habits when Paul Krugman confirmed that I was right.
For years, he wrote, he and other liberal economists have been fighting “the policy elite's damaging obsession with budget deficits, an obsession that led governments to cut investment when they should have been raising it, to destroy jobs when job creation should have been their priority.”
The big news: “That fight seems largely won -- in fact, I don't think I've ever seen anything quite like the sudden intellectual collapse of austerity economics as a policy doctrine.”
A bit of research suggested that Krugman’s victory celebration (shared by The New Yorker and others) is probably a bit premature. The academic champions of budget-cutting did take some serious body blows while I was away. But they are still fighting back, with plenty of influential allies.
And it’s a long way from the halls of academe to the halls of Congress where the federal budget is actually made, and where budget hawks still wield the same power they did before I left the country.
The battle of economic theories is also still being waged in the White House, too, where the outcome is likely to be the kind of “split the difference” policy that Barack Obama opts for on nearly every major issue.
Why does the passion for cutting government spending stay so strong, when it’s increasingly clear that it is indeed a passion, not a rational view well-grounded in solid evidence and theory? Krugman’s answer takes the conversation directly into the realm of myth:
Everyone loves a morality play. “For the wages of sin is death” is a much more satisfying message than “Shit happens.” We all want events to have meaning. When applied to macroeconomics, this urge to find moral meaning creates in all of us a predisposition toward believing stories that attribute the pain of a slump to the excesses of the boom that precedes it.
He cites the well-known example of German bankers chastising the Greeks for indulging their own passions to excess. Now the Greeks, like all sinners, must pay the price. Bail them out and you’ll just encourage them to go further on the road to hell, which is paved with government-funded good times for all, whether they earn it or not.
The same kind of moral fear of pleasure-seeking foreigners has haunted white middle-class America for a long time (as I noted in my very first MythicAmerica post). Among economic theorists, too, it’s an old story. Economist Steven Conn traces it back to the Gilded Age, digging up this pithy quote from the prophet of “Social Darwinism,” William Graham Sumner:
If we should try by any measures to relieve the victims of social pressure from the calamity of their position we should only offer premiums to folly and vice and extend them further....The only two things which really tell on the welfare of man on earth are hard work and self-denial.
“Except for its eloquence,” Conn adds wryly, “that sentence could have been uttered by any member of the GOP leadership yesterday.”
But let’s be fair to America’s deficit hawks. Unlike their German counterparts, they don’t typically promote their case by preaching the moral dangers of excess and vice.
What they claim over and over again (at least in public) is that they are merely trying to save the nation from the economic disaster that is bound to befall us if the national debt grows too large. As GOP economic guru Bruce Bartlett put it, “The debt limit is the real fiscal cliff.”
And like falling over a cliff -- or like the biblical apocalypse -- it could all happen in a flash. Washington Post columnist Robert Samuelson quotes this frightening vision of instant collapse from austerity theorist Barry Eichengreen: “Investors will wake up one morning and conclude that the situation is beyond salvation. They will scramble to get out.…The United States will suffer the kind of crisis that Europe experienced in 2010, but magnified.”
The American public has long shown itself ready to respond to such warnings of a sudden surprise attack. But in the past the attackers haven’t been bond traders. They’ve been fascists, communists, or terrorists. The deficit hawks are giving us a new version of the old myth of homeland insecurity: America is constantly at risk. Arm yourself well, circle the wagons, proceed with the utmost caution. Any morning you may wake up and find your nation under assault. Any misstep might plunge you into the abyss of national catastrophe.
That kind of worldview is bound to make most people more conservative. And conservatives can tie the rising federal debt to traditional fears of foreign foes, citing warnings that the debt is “the most significant threat to our national security” (Admiral Mike Mullen, former chair of the Joint Chiefs of Staff) and puts the U.S. “at risk of squandering its global influence” (New York Times’ analyst David Sanger).
That’s not to say the morality-play theory of Krugman and Conn is irrelevant. On the contrary, it fits into the pattern of conservative fears quite easily. If every new experience that brings pleasure is bound to be followed by pain; if every burst of excess is bound to provoke punishment; if the only way to avoid punishment and pain is a limited, constricted life of constant self-denial; then the world must indeed look like a dangerous place, full of pitfalls everywhere, with every step a risk that wise people will surely avoid. That’s the kind of world the myth of homeland insecurity gives us.
Like any deep-rooted mythic worldview, it is largely impervious to logic. It’s never easy to give up, or even question, the narratives we use to give our lives meaning. As Steven Conn warns his fellow economists, if they view policy “as the expression of unyielding [moral] principles, admitting that you were wrong means the whole edifice comes crashing down. Which is why we may be stuck with austerity economics for the foreseeable future.”
At least it’s a safe bet that the debate between budget hawks and doves is very likely to continue. It’s just what last winter’s “fiscal cliff” debate was: another battle in an ongoing policy war that is really a war of competing myths and has no end in sight. As I said, Professor Krugman’s celebration is probably premature.
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