In order to buy into this post, I’ll need you to start with a simple proposition, with which I hope you’ll agree: Politicians aren’t bright. I don’t mean this in a “send pictures of your penis on Twitter” way, or “stash the cash in the freezer” way. I mean this is an “aren’t likely to really understand the nuance of advanced economics” kind of way. There are a lot of lawyers in Congress, but not a lot of economists, or mathematician, or even engineers. You get to Congress by working your way up the lackey ladder, or by developing great networking skills, or by saying ridiculous things with straight face, or by having enough money (by inheritance, or luck, or, ever-so-rarely, through actual work) to buy your entrance into the political arena. But generally, people aren’t elected because they seem to have a scholarly mind. (Though perhaps Obama was, to some degree).
So let’s agree that most politicians aren’t actually reading Keynes, or Hayek, or Friedman, or if they do, they aren’t likely understanding them. So when they choose to push certain policies, they might not be choosing them on their actual merits. (Will they rely upon the expertise of others in helping them sort through these issues?—Certainly. But there are experts on every side of these debates. How do they choose who to believe?)
It is entirely possible that the politician (in his natural habitat) is driven to improve the conditions of this country because he deeply cares about his fellow citizens. But then, that doesn’t explain, say, ethanol subsidies, or all of the other nonsensical things your politician does. Certainly the desire to be reelected motivates politicians in a rather substantial way. For many of them, after all, it is their career. (Some of them without any other marketable skills even go to rehab (and pretend to take it seriously) because they think it might save such a career.)
I used to drive through West Virginia a lot—not to go to West Virginia, but to go places you drive through West Virginia to get to. And so I’ve spent a lot of time driving on Robert C. Byrd roads, going over Robert C. Byrd bridges, passing by Robert C. Byrd schools. There’s a lot of things in West Virginia named after the former Senator Byrd, and they’re named after him because he wanted them to be named after him. It seemed fair to him; after all, he supplied the money for all of these projects. Well, I suppose he didn’t supply the money, really; he just made sure that the government took money from the other states and gave it to West Virginia. Not surprisingly, this made Senator Byrd popular in West Virginia, and not-so-popular in other states.
Senator Byrd was an awful man—we can all agree upon this, right? Sure, there were some old Beltway pundits and reporters who spoke of him as if he had some kind of dignity, based, I suppose, on Byrd’s white hair, knowledge of obscure Senate rules, and the fact that he spoke like an erudite, Southern gentleman (though mostly, like the slave-holding kind.) He was awful because of his role in the KKK, of course, but also because of the way his allies were forced to defend him as a man who had found a way to become a better man, despite his ongoing willingness to use the N-word and such.
Why, then, did West Virginia keep electing this awful man to the Senate? I don’t think it’s because the state is entirely racist, or that the state is entirely stupid. I think it’s because Senator Byrd keep bringing money to the state from other places. Gobs of money.
Every politician wants to be Senator Byrd for his constituents. Who wouldn’t want to bring gobs and gobs of money back to the people who vote for them? But not everyone in Congress wields the power of a Robert C. Byrd. And while it’s certainly possible for some jurisdictions to take money from other jurisdictions, not every jurisdiction can net money on the deal, right? Well …
Actually, every jurisdiction can take more money than it puts in, but to do this, the government has to either print more money or borrow more money. People don’t like it when the government prints money because it leads to inflation. And people don’t like it when the government borrows money because then their kids have to pay for it. So, being a politician is kinda tough. People want free money, but they don’t want it to come with any strings attached. What’s a politician to do? Usually, they just vote for more and more spending, while lambasting the other side for blowing up our debt.
But then something wonderful happened … a huge financial crisis. This is wonderful because of a man named Keynes. The politician doesn’t know much about Keynes, for sure. He certainly pays not attention to this man during good economic times. But during bad economic times, Keynes offers him the greatest gift in the world.
A self-interested politician wants to do two things in a financial crisis: (1) appear to be taking it seriously and doing something, and (2) keep bringing money back home. Any politician who does those two things is likely to be reelected.
Guess what? Keynes gives you cover for both. According to Keynes, you get to—no, you have to—borrow to bring even more (no, much more) money back to your district. And while this would normally be considered insane and reckless and even, at some level, corrupt … this time it isn’t, because it’s a serious crisis, and Keynes (brilliant Keynes) says this is exactly what you have to do. The more you borrow and spend, the more serious and sober and substantial a person you are. And all of those people who have criticized you for this kind of spending, now they aren’t just buzz-kills, but they are actually undermining the financial integrity of the nation.
Okay, take a deep breath for a moment. I’m not saying that Keynes is wrong here. For all we know, maybe he is right … maybe massive stimulus during a downturn is exactly the right thing to do. (I don’t think so, but then again, I’m almost as dumb as a politician). But remember, this isn’t about the merits of the debate; it’s about why a politician would be enticed by Keynes. Keynes lets the politician do something that (1) he wants to do, but (2) is normally considered reckless and wrong. If you went to the doctor and he told you that you had to eat nothing but cake and ice cream in order to live, wouldn’t you be happy?
Now, the other side is talking about eating healthy and exercising. And if your a politician, that’s the last thing you want to try to sell to your constituents, right? You might have heard them lambast this as “austerity.” We’re told that Europe is trying “austerity,” and that it’s a terrible failure. Of course, we’ve been eating cake and ice cream here, and we’re not doing so great either. (That’s because we need more ice cream, Krugman screams).
Let’s take a little detour on austerity, can we? ”Austerity” is the word we’re using to describe attempting to reduce our deficits. What a weird word to use, right? I remember reading about Bill Gates’ home back when he was building its; it’s massive and super high-tech; when you walk into the room, the high tech picture frames flash your favorite artwork on their screens. Bill Gates spends less (far less) than he takes in, but I don’t think of his lifestyle as austere. You’ve seen Oprah’s mansion, right?—is that austere? Everyone has seen pictures of Al Gore’s energy-consuming homes, right?—massive, guzzling edifices fit for a family of dozens but filled mostly with a lot of furniture, and, I’m guessing, toilets that have never actually been used. Would anyone call Gore’s lifestyle “austere?”
Okay, back to the issue at hand, though. There’s a crisis. Politician X has two ideas presented to him: (1) incredible, massive spending back home, or (2) “austerity.” It’s not a surprise which one he picks, right?
It’s two years later. Things are still pretty bad. Lots of people are still unemployed. Housing prices are continuing to drop. People are scared.
Krugman screams: More ice cream! More cake! And the progressive blogosphere dutifully repeats it: More stimulus now!
So why aren’t the politicians doing it now? Why not another round of stimulus? Because no one believes it. We tried massive stimulus and it didn’t seem to work. To the people, it no longer seems sober or serious or substantial. It looks like a big, reckless waste.
Again, I’m not arguing on the merits here. Maybe Krugman is right, the stimulus should have been bigger, the stimulus made things better than they would have been, and we need more stimulus still. (I doubt all of these things, but again, I’m no Krugman, so don’t listen to me). For the people, it’s: Fool me once, shame on you, right? We all wanted to believe that ice cream and cake were answer, but we secretly doubted it the whole time. We only went along with it the first time because we really, really wanted it to be true.