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Hullabaloo


Sunday, December 01, 2013

 
Does deficit fetishism require supply-side ideology?

by David Atkins

Earlier today I noted that supply-side economic ideology has been proven so utterly wrong that it doesn't even belong as a valid opinion in the public square, and postulated that racism and prejudice had to be the primary drivers behind the unwillingness of so many Americans to support demand-side solutions. Digby in turn had a great and interesting insight into the role of deficit fetishism in distracting from the failures of the unregulated market, misdirecting pubic anger from its proper target onto the government.

But the conflation of Keynesianism and demand-side solutions has often troubled me. Certainly, demand-side policies require government intervention in a way that supply-side policies do not. A libertarian must by necessity be a supply-sider, so if your gut instincts about the world run libertarian, intellectual consistency will also lead you to gravitate toward supply-side theories. But it doesn't actually logically follow that obsessing over government deficits should lead to insistence on low taxes for the rich and cuts to Social Security. The question of whether it's important to keep deficits low is actually a separate question from whether we need to allow gigantic income disparities.

It's unusual but logically consistent to be a demand-side deficit fetishist who doesn't believe that the rich create jobs, wants to drastically raise taxes on corporations and the wealthy, and proposes to use the extra revenue to draw down the deficit. That, in fact, is the position of many neoliberal Democrats including Jerry Brown and presumbly Barack Obama. It's also theoretically possible, though even more unusual, to be a supply-side Keynesian, believing that deficits don't matter and that the best way to stimulate the economy is to give lots of money to rich people. In fact, it's arguable that this guns-and-butter approach was the operant policy of the Reagan and Bush II administrations.

Deficit fetishism is a frustrating and deeply misguided ideology that certainly prevents a lot of the public stimulus that demand-side economics often requires. But it's also a failure of progressives at a certain level to have allowed the conservative movement to conflate concern over deficits with acceptance of supply-side economics. The two aren't intrinsically linked.

It will be always be a tough sell, politically, to convince people that big deficits during recessions should be met with delving farther into debt, and that taxes should be raised and spending cut countercyclically during good times precisely when the government seems to be flush with money. That argument, even though it's right, will always be very hard.

But that argument should in theory be entirely separate from whether rich people are job creators. Not even deficit fetishists should be buying into that one anymore.


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