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Do Budget Deficits Reflect American Character?
Posted By David Weinberger On March 8, 2012 @ 12:22 pm In Economics | Comments Disabled
Ezra Klein , Mark Thoma , and Paul Krugman  take issue with David Brooks  for suggesting that the failure in recent years to keep budget deficits under control represents a moral issue. “Every generation has an incentive to spend on itself,” Brooks writes, “but none ran up huge deficits until the current one. Some sort of moral norms prevented them.”
Krugman and company are having none of it. In their view, busting deficits are just the natural result of a recession, not a matter of American virtue or character.
“Current deficits reflect the aftermath of a generational financial crisis,” writes Klein. “They show an economy saving itself, not a generation spending on itself.” Agreeing, Thoma adds: “Saying that recent changes in debt reflect a moral issue when it is being driven by the recession is very misleading.” And Krugman ridicules the “utterly bizarre claim that the large budget deficits we’re currently running are the result of a loss of self-control.”
Spending somewhat more on unemployment benefits in a recession is reasonable, even though extending benefits to 99 weeks was excessive, but could we not have exercised any self-control by cutting elsewhere to pay for them? Was spending $800 billion in “stimulus” and perpetually increasing annual federal budgets a matter of choice or inevitability?
To be sure, the recession and anemic recovery under President Obama’s policies increased current budget deficits substantially while shrinking tax revenues and somewhat elevating federal spending. No doubt Brooks would agree with that observation. But the recession doesn’t begin to explain away the current deficits. According to the Congressional Budget Office, the federal government ran a budget deficit of about a trillion dollars in both 2009 and 2010 after adjusting revenues and spending for the recession. No doubt the picture was just as grim in 2011 and will be again this year.
Worse—if anything could be worse—even after massive tax hikes and a passel of budget gimmicks, President Obama’s own budget shows a deficit that never dips below $610 billion in the next 10 years. No, the issue is not the recession. This issue is the choices we make and why.
Former statesmen seemed to think we had a choice. Consider this message from President Grover Cleveland as he attempted to tighten the government’s belt by vetoing spending bills  during a downturn in the 1890s: “Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character.”
Likewise, a few decades later, President Warren Harding struck tones of a virtuous government living within its means in his acceptance speech  for the Republican nomination. He indicated that government needed to axe spending, even during a sharp recession (which it did under his leadership ):
We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil.… Needless spending and heedless extravagance have marked every decay in the history of nations.
Moral conventional wisdom has surely changed since the 1930s. James Wilson traces  the genesis of the change back to economist John Keynes. “Keynes,” writes Wilson, “was a moral revolutionary.… He subjected to rational analysis the conventional restraints on deficit financing, not in order to show that debt was always good but to prove that it was not necessarily bad.”
Keynes’s message, Wilson continues, was that government deficit spending “should be judged by its practical effect and not by its moral quality.” By Keynes’s own standard then, the Obama stimulus has failed, because the economy did not respond and is only now picking up steam two years after the Obama stimulus began—despite, not because of, the stimulus and the rest of Obama’s policies.
Setting aside the moral dimensions is a widely accepted view today, especially among the left. However, setting aside moral considerations for the sake of convenience is a dangerous path. There’s no denying that in recent years, spending money we don’t have and deferring the repayment to the future has eclipsed the right of our children to be born free of these obligations. And as our children will remind us in the coming years, that is an issue that morality cannot escape.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2012/03/08/do-budget-deficits-reflect-american-character/
URLs in this post:
 Image: http://blog.heritage.org/wp-content/uploads/cash-dollars-bills.jpg
 Ezra Klein: http://www.washingtonpost.com/blogs/ezra-klein/post/deficits-dont-reflect-a-crisis-of-american-character/2011/08/25/gIQARBFvuR_blog.html
 Mark Thoma: http://economistsview.typepad.com/economistsview/2012/03/the-real-moral-problem.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29&utm_content=Google+Reader
 Paul Krugman: http://krugman.blogs.nytimes.com/2012/03/06/deficits-and-virtue/
 David Brooks: http://www.nytimes.com/2012/03/06/opinion/brooks-the-rediscovery-of-character.html?_r=2&src=me&ref=general
 vetoing spending bills: http://blog.heritage.org../../../../../2011/11/09/austerity-successes-in-previous-downturns/
 acceptance speech: http://resolutedetermination.wordpress.com/2009/10/19/warren-harding-and-the-depression-of-1921-a-lesson-for-today/
 which it did under his leadership: http://blog.heritage.org../../../../../2011/10/27/does-austerity-work/
 traces: http://www.nationalaffairs.com/doclib/20080708_1985811therediscoveryofcharacterprivatevirtueandpublicpolicyjamesqwilson.pdf
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