Ben White and Tarini Parti write in Politico that some Dems are finally pushing back against the “debt crisis” myth.
These Democrats and their intellectual allies once occupied the political fringes, pushed aside by more moderate members who supported both immediate spending cuts and long-term entitlement reforms along with higher taxes.
But aided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.
I’ve always thought of Kaine as something of a milquetoast, so good for him.
Joe Weisenthal of that socialist rag Business Insider writes,
You might wonder what, exactly, is the big deal here. After all, Democrats haven’t been the ones pushing for spending cuts. Republicans have. But most of the time, Democrats have ceded the general point to Republicans that debt is a major problem, and that in some form or another, fiscal policy should focus on reducing that debt. The realization that growth is how you close the deficit and that austerity (because it saps growth) is counterproductive allows Democrats to form a counter-argument that doesn’t cede to the GOP’s premise. And that in itself is an important change in the debate.
Make no mistake that the data supports this concept.
He has line graphs. Do look.
Now, it’s surely the case that the spell isn’t as broken as all that–the force has been disturbed, the U-Mass team sprayed a heavy hose on the hair-on-fire austerions. But neither is Keynesianism about to break out all over.
Still, you gotta love the incredibly juicy irony of what’s going on. Nobel laureates, former Treasury officials, think tankers, yours truly and zillions of others have been trying to break through on this for years. Some bespectacled twenty-something comes along, and for a term paper–a term paper!–tries to replicate Rogoff and Reinhart’s study, he perseveres, gets some solid guidance from his profs, who happen not to genuflect at either the alter of austerity or the academic hierarchy (I’m afraid other profs might have shut the young man down)–and BOOM!
Somebody really needs to make a movie out of all of this someday.
I don’t think the debunking of Reinhart/Rogoff all by itself caused the partial collapse of the austerity myth. There were signs of disillusionment elsewhere, especially in Europe. The debunking may have been a tipping point, though. The myth isn’t dead, of course; it will be with us for a long time. But it’s nice to see the myth being challenged.
I disagree with White and Parti that this is going to hurt President Obama. The more Dems tell Republicans they can take their austerity and shove it, the weaker the Republican position. My sense of things is that the President is less pro-austerity than pro-get something passed, even if it isn’t what he wants.
See also “What if Simpson and Bowles threw a debt-reduction party and nobody came?”
Update: Krugman