Donald
Trump has said many strange things in recent interviews. One can only
imagine, for example, what America’s military leaders thought about his
rambling, word-salad musings about how to improve our aircraft carriers.
Over here in Econoland, however, the buzz was all about Trump’s expressed willingness, in an interview
with the Economist magazine, to pursue tax cuts even if they increase
deficits, because “we have to prime the pump” — an expression he claimed
to have invented. “I came up with it a couple of days ago and I thought it was good.”
Actually, the expression goes back generations
— F.D.R. used it in a 1937 speech — and has been used many times since,
including several times by Trump himself. What’s more, it’s a bad
metaphor for modern times. Twenty years ago, in a paper
warning that Japanese-style problems might eventually come to America, I
urged that the phrase be withdrawn from circulation: “Since hardly
anybody in the thoroughly urbanized societies of modern America and
Japan has any idea what it means to prime a pump, I hereby suggest that
we rename this the jump-start strategy.”
But why should anyone besides pedants care?
First,
a mind is a terrible thing to lose. Senior moments, when you can’t
remember a name or phrase, or misremember where it came from, happen to
many of us. But that Economist interview was basically one long senior
moment — and it wasn’t very different from other recent interviews with
the commander in chief of the world’s most powerful military.
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Second,
we’re talking about some really bad economics here. There are times
when temporary deficit spending can help the economy. In the first few
years after the 2008 financial crisis, for example, unemployment was
very high, and the Federal Reserve — normally our first line of defense
against recessions — had limited ability to act, because the interest
rates it controls were already very close to zero. That was a time for
serious pump-priming; unfortunately, we never got enough of it, thanks
to scorched-earth Republican opposition.
Now, however, unemployment is near historic lows; quit rates, which show how confident workers are in their ability to find new jobs, are back to pre-crisis levels: wage rates are finally rising; and the Fed has begun raising interest rates.
America
may not be all the way back to full employment — there’s a lively
debate among economists over that issue. But the economic engine no
longer needs a fiscal jump-start. This is exactly the wrong time to be
talking about the desirability of bigger budget deficits.
True,
it would make sense to borrow to finance public investment. We
desperately need to expand and repair our roads, bridges, water systems,
and more. Meanwhile, the federal government can borrow incredibly
cheaply: Long-term bonds protected from inflation are paying only about 0.5 percent interest. So deficit spending on infrastructure would be defensible.
But
that’s not what Trump is talking about. He’s calling for exploding the
deficit so he can cut taxes on the wealthy. And that makes no economic
sense at all.
Then
again, he may not understand his own proposals; he may be living in an
economic and political fantasy world. If so, he’s not alone. Which
brings me to my third point: Trump’s fiscal delusions are arguably no
worse than those of many, perhaps most professional observers of the
Washington political scene.
If
you’re a heavy news consumer, think about how many articles you’ve seen
in the past few weeks with headlines along the lines of “Trump’s budget
may create conflict with G.O.P. fiscal conservatives.” The premise of
all such articles is that there is a powerful faction among Republican
members of Congress who worry deeply about budget deficits and will
oppose proposals that create lots of red ink.
But there is no such faction, and never was.
There
were and are poseurs like Paul Ryan, who claim to be big deficit hawks.
But there’s a simple way to test such people’s sincerity: when they
propose sacrifices in the name of fiscal responsibility, do those
sacrifices ever involve their own political priorities? And they never
do. That is, when you see a politician claim that deficit concerns
require that we slash Medicaid, privatize Medicare, and/or raise the
retirement age — but somehow never require raising taxes on the wealthy,
which in fact they propose to cut — you know that it’s just an act.
Yet
somehow much of the news media keeps believing, or pretending to
believe, that those imaginary deficit hawks are real, which is a
delusion of truly Trumpian proportions.
So
I’m worried. Trump may be not just ignorant but deeply out of it, and
his economic proposals are terrible and irresponsible, but they may get
implemented all the same.
But
maybe I worry too much; maybe the only thing to fear is fear itself. Do
you like that line? I just came up with it the other day.
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