I don’t want to talk about politics too much on this blog, but the historic loss of someone like Russ Feingold last night has me in the mood to soapbox just a little bit.
Let’s suppose for a moment that Krugman is right: the only reasonable solution to a depressed economy stuck in a liquidity trap, up against the zero lower bound on interest rates, is for the government to take on the role of borrowing and spending on a massive scale. Because nobody else is.
Now, Krugman’s explanation for why Democrats lost big time this week (and note the date on that article: he was predicting this almost two years ago) is that it didn’t go far enough. The democrats’ lack of spine or political boldness meant they went with a stimulus package half as large as it should have been.
I agree with that assessment, but I think the real reason democrats lost wasn’t that they didn’t pump enough money through the economy. It’s that they didn’t do it visibly.
Who is going to notice $300 billion in tax cuts that were in that stimulus bill? For most people it’s probably margin of error on their taxes every year. Will it have some effect? Yeah, but when it comes time to vote, what are the democrats going to be able to say? “Well, it somehow helped… I’m sure… Somewhere…”
Who is going to even notice the $500 billion in direct spending in that bill? Will it save and create jobs? Yeah, but are those people going to know it did? Will their friends and family know it did?
Now, if we had pumped that $800 billion into resurrecting the Works Progress Administration, I think things would have turned out quite a bit differently this week.
People understood during this election that unemployment was enormous. Everyone has friends or family who have lost their jobs. What they didn’t understand was how best to fix that, or who’s offers–democrat or republican–were actually going to produce the better result.
And I think everyone would have understood, if half of their friends and family who lost their jobs were now working for the WPA. If democrats could stand up and say “look, here are the eight million people we’ve employed,” things would be different.
And we might not be in for a minimum two years of bad government.