The big, overarching fact of the period following 2008’s financial crisis is the failure of economic stimulus. Nearly a trillion dollars in bailouts, followed by nearly a trillion dollars in fiscal stimulus, followed by a multi-trillion dollar increase in the money supply have mortgaged our future for decades to come, in order to produce chronic high unemployment and growth rates stuck at a stagnant 1-2%.
So how does the left, whose favorite economy policy is stimulus spending, confront this fact? They pretend that the stimulus never happened and describe our current malaise as a product of austerity, claiming that everything would have worked out so much better if we had spent much, much more.
Paul Krugman has been doing this for years, so it’s nice to see that he can take a rest for a bit while someone else carries the water for stimulus. Joe Weisenthal at The Business Insider posts a graph that is supposed to show the economy isn’t surging because “we’re still running a policy of government austerity” because “at this point in his presidency, Reagan was running a deficit as a % of GDP that’s higher than what Obama is today.” The whole thing is published under the headline “Obama Is More Fiscally Conservative Than Reagan.”
I’m starting to think that maybe he’s just trolling us, because look at what the graph actually shows.
Yes, the black line is Reagan and the blue line is Obama. They’re not reversed. Obama is considered “more fiscally conservative than Reagan” because just now, five years into his presidency, Obama’s deficits are getting to be about where they were, as a percentage of GDP, near their highest point in Reagan’s presidency. But that’s only after years of Obama’s deficits being much, much higher.
So Weisenthal is living in an inverted, Orwellian world where stimulus is austerity.
Back in the real world, this graph shows exactly what critics of Obama have been describing: three to four years of ginormous stimulus spending, with deficits nearly twice Reagan’s average level for the same period, which is now finally beginning to crash down to earth as it becomes unsustainable and meets growing political resistance.
As for Reagan, if Obama’s current level of deficit spending constitutes “austerity,” then Reagan imposed austerity throughout his entire presidency—with results that look far, far better than Obama’s. Instead of limping along at 1-2% annual growth, Reagan’s economy was booming at rates well above 3%, and for five straight quarters grew at more than 7%, which in today’s context is beginning too look like something from myth and legend. Tell me once against, grandpa, about the 7% growth.
And that doesn’t even begin to tell the whole story, because at the point when Reagan’s deficit spending was proportionally less than or equal to Obama’s, Reagan was able to maintain a higher absolute growth in spending, i.e., less austerity, because the economy was growing much faster.
That’s one of the lessons, by the way, of the Obama economy. There is one sense in which stimulus really is austerity: stimulus runs up the debt and pilfers the nation’s reserves without actually stimulating the growth of the private economy—which inevitably makes genuine austerity necessary later on when debt crushes the entire system. That is the real austerity that is looming, and we haven’t even begun to see it yet.
There’s another lesson in the history of Obama’s stimulus, and it’s an answer to those, like Krugman and Weisenthal, who tell us we would be doing just fine if we had tried a much bigger stimulus, or those who tell us that the only problem with ObamaCare is that we stopped halfway and didn’t go all the way to single payer.
The answer is: there’s a reason we don’t let you do it all at once. There’s a reason the American people and the American political system will only let you go halfway on stimulus spending or socialized medicine. We want to give you a smaller scale test so we can see the actual results of your policies before we give you any more power.
And it’s a damn good thing we do, because now we can see the results—not just in failure of these policies, but in the evasions of the media boosters who keep telling us that black is white, up is down, ObamaCare is working, and stimulus is austerity.
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