Insular Economics: Deficit Killers Destroy Economy
By Burr Deming on Feb 11, 2013 | In Policy | 1 feedback »
Legend has it that Daniel Boone moved from Kentucky to what now is Missouri in 1791 because it was getting too crowded. He knew this because he could see smoke coming from a neighbor's chimney.
The story is almost certainly false, invented by writers generations later to help sell magazines and books. The move was likely made because most game had been killed off in Kentucky and Boone had a desire to continue to feed his family.
The nearest we have to neighbor-aversion is more a motivation of hermits, who don't want to be close to humanity, and Republicans, who don't want to come near non-conservatives.
Okay, okay. It's not a perfect analogy. Republicans don't avoid everyone, just ideas that differ from their own. It isn't an intolerance to disagreement, it's a complete insularity from other views. Liberals are more likely to peruse National Review online than conservatives are to glance toward the New York Times.
The self-cocooned Republican base is the reason I believe the current effort of the GOP establishment to retake control of the party is doomed to failure.
The core reason for this lack of contact with other points of view is technology. The computer chip, and all that flows from it, give Republicans a new opportunity to a universe separate from the outside world. Cable television and the internet did not exist a generation ago.
There are, of course, other forms of insularity. A while back, I was invited to join an audience for a panel discussion. It was conducted as part of the formulation of the new federal Consumer Financial Protection Bureau. I came away deeply discouraged. With some exceptions, the experts on the panel were quite unaware that ordinary consumers, those they seek to protect, did not share their viewpoints, their knowledge, or even their vocabulary.
The panel devoted a substantial part of the discussion to various implications of "REO lending." There was not a word of explanation of just what REO lending is or why it is important. Actually, REO property is real estate owned by a lender, and it involves a class of lending that impacts on the treatment of ordinary mortgage buyers.
Members of that panel would, I suspect, have been surprised to find most of their audience, and almost all Americans, to be unaware of what was consuming their professional interest. It was only one of several examples of how disconnected the experts were from ordinary lives of ordinary people, and how their expertise could affect those lives in positive ways.
It is not technology that insulates them. It is their own expertise. Their efforts to hone that knowledge puts them into daily contact with other experts. A mutual vocabulary, a shared way of thinking, develops. And a realization that everyday Americans are not part of their little world fades from consciousness. An empathy with a mortgage holder faced with misrepresentation or fraud, or a foreclosure during which alternatives are not offered, is also lost.
Deficit spending is a Washington DC obsession. Ordinary Americans worry about employment, and regard deficits as an issue to be solved after current economic survival is assured.. Mainstream economists, and those students who have taken Macro-Economics 101, are concerned with deficits as a vitally important long term problem, one that does not need short term solutions,particularly during a recession.
It is one of those instances in which what is apparent to average folks, and what is apparent to experts in economic models, pretty much coincides, at least for now.
But those in Washington are insulted from both groups. Journalists, pundits, congressional staff members, and lobbyists do not lunch or commune with economists. The rare mainstream economist that comes across the radar, insisting that deficit reduction is a bad thing during recessions, is regarded as something of an outlier - a bit of a kook. And most who roam the halls of Washington have little daily contact with everyday Americans, those concerned with jobs and paychecks.
Their contact with the narrow groups in the nation's capital put them into a stream of habit and concern that has been shaped by 30 years of conservative political dominance. That deficits are evils in all times and places is not a conclusion, based on evidence. It is a premise, impervious to challenge.
Thus politicians and pundits regularly assure national audiences that deficits represent a problem that must be solved right now. As they speak in serious tones about the need for instant austerity, they seem to be unaware that they are saying anything that is at all open to disagreement.
The insularity, the separation from expertise and ordinary experience, is at least partly cultural. But like the technological insularity that is killing a political party, and the academic insularity that disconnects experts from ordinary people, DC cultural insularity has very real effects. When ideology overrules the real world, unnecessary suffering is almost always the result.
Simple economic theory is based on a century of real evidence, reinforced every year. It coincides with current mainstream thought among the public. Deficits are a problem during times of prosperity. They are to be solved by cutting costs and raising taxes during the good times.
Austerity during a recession is a cure that kills the patient.
Killing the patient is generally thought to be a bad idea, outside the insular world of Washington DC.
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