As you can see, the interest rate on our national debt is at an historic low. But it can’t be. Because we all know that we are just like Greece, in the throes of an existential debt crisis so intense that Republicans have been dancing with national default now for weeks. No one wants to lend us money. They so much don’t want to lend us money that they’re willing to take a pittance in interest for the privilege of taking this enormous risk. Anybody want to explain this to me?
Our current debt crisis is just one of the many facts we know to be true that are, in fact, not true.
[Late add: I should note, although it ought to be obvious, that if Teahadists succeed in forcing a gratuitous default, we will have a debt crisis. But that has nothing to do with our capability of servicing our current debt.]
I was a bit snotty in the piece that ran yesterday describing the monumental folly on display in this debt ceiling rigamarole. That’s because the current Republican leadership in Congress is willing to publicly use a gratuitous debt default to try to extort big cuts in Medicare and Social Security from Democrats that they can then use to run against Democrats in 2012. It’s really nothing more than that. And it looks increasingly unlikely to happen with a number of leading Republicans suddenly declaring that the debt ceiling is really no big deal after all if we can just blame Obama for it. The have apparently been chatting with their big money flow contributors, who are saying, “OK, enough.”
Maybe now they’ll actually run on ending Medicare as we know it, as many of them, including Dennis Ross, have already voted to do in endorsing Paul Ryan’s steal-from-the-young-and-give-to-the-old budget plan. That will be a fun election.
Anyway, in today’s piece I want talk about something a little more fundamental to our national fate–our ability to convince ourselves of things that aren’t true and then never question ourselves about them. Let’s open the discussion with a nugget of “conservative” propaganda cranked out by a local Twitterperson.
I noticed on the Twitter machine a couple of days ago the that she dug up an old Obama quote in which he declared it a bad idea to raise taxes in a recession. (I’m putting aside the technical fact that we’re not in a recession. The economy is bad. We can all agree on that, I suspect.) It was a good moment of gotcha. The flipside of that quote, which she did not cite, of course, is that it’s foolish to cut spending in a recession, which has long been an equal bit of conventional wisdom. The theory in both cases is that extra money–either in tax cuts or government spending on services, funded by deficits–helps maintain or increase economic activity when the private sector can’t do so on its own. This is classic Keynsian economics. Most sane people agree it more or less worked to help us out of the Great Depression.
What’s interesting here is she isn’t interested in the truth of the statement she quoted, just who said it and in what context.
It turns out that I read this Tweet on the same day I learned something about Herbert Hoover, every Keynesian’s favorite punching bag. I have long known that Hoover, towards the end of his benighted Great Depression administration, began to pursue a more expansionist, Keynsian economic policy than is generally acknowledged. Watching unemployment go from 3 to 4 percent to more than 20 percent on your watch might tend to make you more ideological flexible. I wrote about that a long time ago in an article called The Graph of Doom. I remain quite proud of it.
However, I did not fully realize that in the summer of 1932, with unemployment near 25 percent, Hoover signed the largest peace time tax increase on the wealthy in our history until that time. It didn’t do him a hell of a lot of good, politically. FDR trounced him later that year in the election. But it is an undisputable fact that in the four years immediately following that giant tax increase, which corresponded with FDR’s first four years, unemployment plunged by half, to about 13 percent. I would love for some anti-tax type to explain how that could be. For that matter, maybe Barack Obama could explain it. Maybe it’s why he’s pushing for tax increases on the wealthy now. Maybe not.
I only play historian when it comes to the pre-Depression 20s–and mostly in Florida. But doesn’t Hoover’s tax increase and stimulus-type spending at the very end of his term–and the rapid economic growth and drop in unemployment that followed–suggest that raising taxes on the wealthy in a difficult economy isn’t such a terrible idea after all? We often hear the current economic malaise described as our worst since the Great Depression. Isn’t Hoover’s tax record in the actual Great Depression–and the results that did or didn’t ensue–worth considering when thinking about what we should do to get ourselves out of this mess? Maybe Hoover deserves a little credit for late-term flexibility.
I would like to think that considering the truth of conventional wisdom in relation of public policy–not just who spews it–is the difference between being a partisan hack and a citizen.
This is serious business. Policy is not faith. We can, in many cases, test it empirically, with numbers and history and honesty. I couldn’t care less about unity or coming together to do big things or any of the meaningless rhetoric we babble about. We disagree. That’s not the end of the world. But I do care quite a bit about getting things right.
So in that spirit, I’d like to encourage readers to point out other bits of conventional wisdom that are simply wrong. Come with evidence. Just calling something wrong, libertarians, doesn’t count. I’d also encourage you to note any idea I cling to that is empirically wrong. I’m as prone to tribalism and rhetoric as anyone else. So come and call me out on something, with evidence. We’ll discuss it. I’ll be nice.