Thursday, June 17, 2010
Too much, yet too little, deficit aversion
I have to agree with Ezra Klein that the current Washington mania for refusing to address unemployment via stimulative fiscal policy is giving us the worst of both worlds. On the one hand, ignorance and an essentially aesthetic aversion to doing things that are known to work mean that we will have higher unemployment than necessary for years to come. This disastrously affects people's long-term earnings prospects and guarantees continued poisoning of the political environment. Of course, the people who oppose fiscal stimulus will be the main political winners from the anger that ongoing unemployment creates. Talk of having the wrong incentives. Yet I see absolutely no evidence - not the slightest - that the dominant political aversion to short-term stimulus implies any willingness whatsoever to address the long-term fiscal problems we face. If anything, the aesthetic mood includes an increased eagerness, documented by Bruce Bartlett, to force a U.S. default as an almost criminally negligent act of political posturing.