Return of the Phony Deficit Hawks
Suddenly,
Republicans are pretending to care about debt.
By Paul Krugman
Opinion
Columnist
- Dec. 17, 2020, 7:00 p.m. ET
It looks as if Congress will soon pass
a much-needed economic relief (not stimulus) bill — something that will help distressed
Americans get through the next few months, while we wait for widespread
vaccination to set the stage for economic recovery. That’s good news, because
something is better than nothing, even though what we know about the
legislation says that it’s going to be deeply flawed.
But the way this debate has been
playing out is ominous for the future. Even some of the good guys seem a bit
confused about what they’re trying to do. And the bad guys — Mitch McConnell
and company — are clearly doing some of the right things only under political
duress, while giving every indication that they’ll systematically undermine the
economy once President-elect Joe Biden takes office.
About good guys getting it wrong:
Economic relief legislation is largely about providing individuals and families
with a financial lifeline during the pandemic. But who should get that
lifeline? Should it go to a majority of the population, like those $1,200 checks sent
out in the spring? Or should the focus be on enhanced unemployment benefits for
the millions of workers who, thanks to the pandemic, have no income at all?
According to The
Washington Post, Senators Bernie Sanders and Joe Manchin had a heated argument about
this issue on Wednesday during a conference call, with Sanders pushing for
broad aid while Manchin argued that enhanced unemployment benefits were more
crucial.
Well, on most issues
I’m a lot closer to Sanders than to Manchin, the most conservative Democrat in the Senate. But in
this case I’m sorry to say that Manchin is right. The economic pain from the
coronavirus has been very unevenly distributed: A minority of the work force
has been devastated, while those who have been able to keep working have, by
and large, done relatively well. Overall wages and salaries have bounced back quickly.
So if there’s a limit on the amount of
aid that can be given, it’s more important to help the unemployed — and, in
particular, to sustain that help well beyond the 10 weeks reportedly
in the current deal — than to send checks to those who have been able to keep
working. The best argument I can see for broader payments is political — people
who haven’t lost their jobs to the pandemic may be more willing to support
economic relief for those who have if they also get something from the deal.
But why is there a limit on the amount
of aid?
Republicans appear willing to make a
deal because they fear that complete stonewalling will hurt them in
the Georgia Senate runoffs. But they are determined to keep the deal under a
trillion dollars, hence the reported $900 billion price tag.
That trillion-dollar
cap, however, makes no sense. The amount we spend on emergency relief should be
determined by how much aid is needed, not by the sense that $1 trillion is a
scary number.
For affordability isn’t a real issue
right now. The U.S. government borrowed more than $3 trillion in the 2020 fiscal
year; investors were happy to lend it that money, at remarkably low interest
rates. In fact, the real interest rate on U.S. debt — the rate adjusted for
inflation — has lately been consistently negative, which means that the additional debt won’t
even create a major future burden.
And even economists who worry about
deficits normally agree that it’s appropriate to run big deficits in the face of
national emergencies. If a pandemic that is still keeping around 10 million workers unemployed isn’t an emergency,
I don’t know what is.
Of course, we know what’s going on
here. While Republicans have made the political calculation that they must
cough up some money while control of the Senate is still in doubt, they’re
clearly getting ready to invoke fear of budget deficits as a reason to block
anything and everything Biden proposes once he’s finally sworn in.
It should go without saying that the
coming G.O.P. pivot to deficit hawkery will be completely insincere.
Republicans had no problem with rising deficits during the pre-pandemic Trump
years; they cheerfully passed a $1.9 trillion tax
cut, mainly for corporations and the wealthy.
But the hypocrisy isn’t the main issue
here. More important, shortchanging relief in the name of fiscal prudence would
mean vast, unnecessary hardship for millions of Americans. I’m an optimist
about prospects for economic recovery once we achieve
widespread vaccination. But that won’t happen until well into 2021, and even a
rapid recovery will take months after that to bring us back to something like
full employment. Making a deal that only provides enhanced benefits for 10
weeks is like building a bridge that goes only a quarter of the way across a
chasm.
And the case for more spending won’t
end with short-term economic recovery. We’ll still need huge investments in infrastructure,
child care, clean energy and more.
Republicans will try to stop all of
this, claiming that it’s because they’re worried about debt. They’ll be lying,
and we shouldn’t be afraid to say so.
Paul Krugman has been an Opinion columnist
since 2000 and is also a Distinguished Professor at the City University of New
York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences
for his work on international trade and economic geography. @PaulKrugman