The Long-Politicized Debate Over Austerity

In a recent blog post, the economist Tony Yates asks: “Why can’t we all get along?”

Lamenting another really bad, obviously political defense of austerity, he declares that, “it’s disappointing that the debate has become a left-right thing. I don’t see why it should.”

But the debate over business-cycle economics has always been a left-right thing. Specifically, the right has always been deeply hostile to the notion that expansionary fiscal policy can ever be helpful or austerity ever harmful. Most of the time, conservatives have been antagonistic to expansionary monetary policy too. So the politicization of the macroeconomics debate isn’t some happenstance – it has deep roots.

And some of us have been discussing those roots in articles and blog posts for years now. We’ve noted that after World War II there was a concerted, disgraceful effort by conservatives and business interests to prevent the teaching of Keynesian economics in universities, an effort that succeeded in killing the first real Keynesian textbook. And William F. Buckley Jr.’s “God and Man at Yale,” published in 1951, was a diatribe against atheism (or the failure to include religious indoctrination, which to him was the same thing) and collectivism – by which he mainly meant teaching Keynesian macroeconomics.

So what’s all this opposition about? The best stories seem to involve ulterior political motives. Keynesian economics, if true, would mean that governments don’t have to be deeply concerned about business confidence, and don’t have to respond to recessions by slashing social programs. Therefore Keynesian economics must not be true, and must be opposed. Or as I put it in 2013, “one way to see the drive for austerity is as an application of a sort of reverse Hippocratic oath: ‘First, do nothing to mitigate harm.’ For the people must suffer if neoliberal reforms are to prosper.”

If you think I’m being too flip, too conspiracy minded or both, OK – but what’s your explanation? For conservative hostility to Keynes is not an intellectual fad of the moment. It has been absolutely consistent for generations, and is clearly very deep-seated.

Nobody Cares About the Deficit

Sitting here in Britain, where everyone continues to believe that budget deficits are the central issue in the economy, despite overwhelming evidence to the contrary, it’s refreshing to look home once in a while and contemplate the utter collapse of the deficit-scold agenda.

One way to see this is to track the disappearance of former Senator Alan Simpson from the radar. Another is to look at polls that ask people to name important issues. For example, CNN/ORC International has been asking consistent questions for several years; here’s the percentage of American voters naming the budget deficit as “the most important issue facing the country today”:

• January 2013: 23 percent
• May/June 2014: 15 percent
• September 2014: 8 percent

In the most recent CBS/New York Times poll, which was open-ended, the deficit didn’t even make it onto the list.

And you know what? The public is right, and the Very Serious People were and are wrong.