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What an Honest Economic Debate Looks Like

Television talk shows tend to reinforce the misperceptions of our political debate. But a segment on CNN this Sunday was the rare exception, because it showcased what Republicans really think about the economy—and what might happen if their preferred policies prevail.

The segment came on “GPS with Fareed Zakaria” (which airs at 4 am in China, perfect timing for jet-lagged Americans like me). The guests were Robert Reich, the Clinton-era Labor Secretary, and David Stockman, the Reagan-era Budget Director. Reich was there to represent the left and his arguments were broadly in line with what Democratic Party leaders, particularly in Congress, have been saying for a while. The most immediate problem with the economy is its failure to create enough jobs, Reich said, and the best way to correct that is with short-term deficit spending, ideally including a public investment program that would put idle construction workers back on the job.

Stockman responded by saying the country simply can’t afford to engage in that kind of policy. The deficit has gotten too high, Stockman said. A new round of deficit spending, he warned, would spook the bond markets, spike interest rates, and raise the specter of a total economic collapse—the kind we’re seeing in Greece.

I know, that’s what Republicans always say. But Stockman also said something unexpected. Zakaria noted that a policy of austerity, along the lines of what Stockman was recommending, would probably make the jobs situation worse. “Yes,” Stockman responded, “the scenario is pretty grim.” Stockman then went on to predict another decade of double-digit unemployment. “It sounds like very harsh medicine,” he said. “But it happens to be a very harsh reality.”

As readers of this space know, I’m partial to Reich’s point of view. The costs of borrowing money right now are low, the country’s infrastructure is in disrepair, and the inability of so many Americans to find gainful employment constitutes a real crisis. Particularly if another round of deficit-spending were part of a deal to reduce deficits in the long run, when they are actually a threat to our well-being, it would make a lot of sense.

But put that aside. At least Stockman is being honest about the implications of austerity. All too often, Republicans claim that reducing deficits will, by itself, restore jobs and growth in the short term. (I know, they don’t worry about deficits from tax cuts. That’s another story.) But no serious economist believes that reducing deficits now will boost growth. Rather, the argument for austerity is the one that Stockman made: The deficit problem is so severe that we must deal with it right away, even if that means slow growth high unemployment persists for many years.

Of course, that’s not an argument that wins elections—which is a big reason why, I’m sure, that the Republicans aren’t making it.

P.S. This is about the third or fourth time I’ve heard Reich talk about jobs in recent weeks. And you know what? He’s really good. In fact, I think he talks about the economy, and liberal answers to unemployment, better than just about anybody in the greater Democratic universe right now.