On Monday, President Barack Obama called for a significant increase in spending, reversing the harsh cuts of the past few years. He won’t get all he’s asking for, but it’s a move in the right direction. And it also marks a welcome shift in the discourse. Maybe Washington is starting to get over its narrow-minded, irresponsible obsession with long-run problems and will finally take on the hard issue of short-run gratification instead.
OK, I’m being flip to get your attention. I am, however, quite serious. It’s often said that the problem with policymakers is that they’re too focused on the next election, that they look for short-term fixes while ignoring the long run. But the story of economic policy and discourse these past five years has been exactly the opposite.
Think about it: Faced with mass unemployment and the enormous waste it entails, for years the Beltway elite devoted almost all their energy not to promoting recovery, but to Bowles-Simpsonism — to devising “grand bargains” that would address the supposedly urgent problem of how we’ll pay for Social Security and Medicare a couple of decades from now.
And this bizarre long-termism isn’t just an American phenomenon. Try to talk about the damage wrought by European austerity policies, and you’re all too likely to encounter lectures to the effect that what we really need to discuss is long-term structural reform. Try to discuss Japan’s effort to break out of its decades-long deflationary trap, and you’re sure to encounter claims that monetary and fiscal policy are sideshows, and that deregulation and other structural changes are what’s important.
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Am I saying that the long run doesn’t matter? Of course not, although some forms of long-termism don’t make sense even on their own terms.
Think about the notion that “entitlement reform” is an urgent priority. It’s true that many projections suggest that our major social insurance programs will face financial difficulties in the future (although the dramatic slowing of increases in health costs makes even that proposition uncertain). If so, at some point we may need to cut benefits. But why, exactly, is it crucial that we deal with the threat of future benefits cuts by locking in plans to cut future benefits?
Anyway, even where the long-term issues are real, it’s truly strange that they have so often taken center stage in recent years. We are, after all, still living through the aftermath of a once-in-three-generations financial crisis. America seems, finally, to be recovering — but Bowles-Simpsonism had its greatest influence precisely when the U.S. economy was still mired in a deep slump. Europe has hardly recovered at all, and there’s overwhelming evidence that austerity policies are the main reason for that ongoing disaster. So why the urge to change the subject to structural reform? The answer, I’d suggest, is intellectual laziness and lack of moral courage.
About laziness: Many people know what John Maynard Keynes said about the long run, but far fewer are aware of the context. Here’s what he really said: “But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.”
Quite. All too often, or so it seems to me, people who insist that questions of austerity and stimulus are unimportant are actually trying to avoid hard thinking about the nature of the economic disaster that has overtaken so much of the world.
And they’re also trying to avoid taking a stand that will expose them to attack. Discussions of short-run fiscal and monetary policy are politically charged.
Oppose austerity and support monetary expansion and you’ll be lambasted by the right; do the reverse and you’ll be criticized and maybe ridiculed by the left.
I understand why it’s tempting to dismiss the whole debate and declare that the really important issues involve the long run. But while people who say that kind of thing like to pose as brave and responsible, they’re actually ducking the hard stuff — which is to say, being craven and irresponsible.
Which brings me back to the president’s new budget.
It goes without saying that Obama’s fiscal proposals, like everything he does, will be attacked by Republicans. He’s also, however, sure to face criticism from self-proclaimed centrists accusing him of irresponsibly abandoning the fight against long-term budget deficits.
So it’s important to understand who’s really irresponsible here. In today’s economic and political environment, long-termism is a cop-out, a dodge, a way to avoid sticking your neck out. And it’s refreshing to see signs that Obama is willing to break with the long-termers and focus on the here and now.