Today Prospect Magazine published my response to Larry Summers and others who think that the $1.9 trillion emergency aid bill being pushed by President Biden and Democrats in Congress is “too much stimulus” that will “overheat” the economy. For the macroeconomics, go read the article. Here I want to add a word about the politics.
Since the late 1980s, the Democratic establishment has been laboring under a self-imposed mandate to be “fiscally responsible.” As I discuss in Chapter 1 of Take Back Our Party, the centrists of the Democratic Leadership Council (including most prominently Bill Clinton) wanted to dissociate the party from what they saw as a disreputable legacy characterized by labor unions and spending on the welfare state. They saw fiscal responsibility—low deficits—as a way to placate Wall Street and to rebrand the party as pro-business and economically hard-headed. As Republicans became more and more fiscally irresponsible—slashing taxes for any reason at all while running up spending on foreign wars—Democratic moderates became even more enamored of their credibility as deficit fighters, thinking it distinguished them from their opponents on the right and left and hoping that the public would give them credit for being sound economic managers.
The consequent fear of doing anything that might smack of “big government” has constantly hamstrung attempts by Democrats to do much of anything about our country’s most important problems. The 2009 stimulus was too small because of deficit fear; President Obama’s Chief of Staff Rahm Emanuel said at the time, “No fucking way is this number coming anywhere near a trillion dollars.” Obamacare was limited by the need to be budget neutral. In 2012, President Obama offered to reduce Social Security benefits in pursuit of a “grand bargain” with Republicans to cut deficits. Moderates like Senator Dianne Feinstein lecture children that we can’t afford a Green New Deal. Elizabeth Warren’s presidential campaign stalled amid attacks on her plan for financing Medicare for All (even though her proposal would have vastly benefited the American people as whole).
Politically, however, this reflexive sabotaging of progressive priorities gets us nothing. No one except the technocratic elite gives Democrats any credit for being fiscally responsible. Republicans still attack us as “socialists” at every opportunity. The 1993 tax increase helped us lose the 1994 midterms (along with the failure of health care reform); the inadequate 2009 stimulus helped us lose the 2010 midterms (along with the demonization of Obamacare).
Once again, our party stands at a crossroads. Everything about the 2022 midterms looks bad: it’s a new president’s first midterm; both the economy and the public health situation are bleak; our congressional majorities are tiny; and we can’t count on Donald Trump to get out our vote. Right now, the people are hurting in many ways. Joe Biden needs to do something, and he needs to be seen as doing something.
The argument that $1.9 trillion will over-stimulate the economy is about inflation, not deficits (see the Prospect article), but the message is the same: Democrats can’t be the party of giving stuff away, of spending money willy-nilly without regard for the consequences. We have to bow to macroeconomic theory and sacrifice the welfare of ordinary people today because we’re afraid of inflation five years from now.
But the big risk right now is not future inflation. The big risk is people dying before enough of the population is vaccinated, children falling further behind in school, widening racial disparities in education, renters being forced onto the streets, mass layoffs by state and local governments starved of tax revenue, and millions of people falling out of the workforce permanently. That’s what Joe Biden should be afraid of—not the inflation fairy.