A few thoughts about the political economy of the midterms| Jared Bernstein

By Jared Bernstein

November 2nd, 2014

It’s a chilly, gray, October Sunday, an apt backdrop for a bit of navel gazing. Assuming the midterm elections turn out as predicted, why is it that the arguments you read here and in other similar venues are failing to persuade? Why does it seem like the OTE world view is getting crushed in the midterms?

That is, the premise of this blog from the beginning has been to present fact-based arguments designed to expand what I viewed in 2011, at OTE’s inception, to be a uniquely cramped and poorly informed economic policy debate. As I said back then, “not meaning to be at all grandiose, I’m going to try to do my part to improve the debate from the outside [I’d just left the White House], to make sense out of the arguments, to go for truth over truthiness, to elevate the facts of the case in a way that’s respectful to all sides of the case…And while I have only one voice, I’m joining a choir that already makes some very powerful music…”

Yet, while it goes too far to say our music has fallen on deaf ears, the current state of the political economy debate and the politics it generates sound just as unharmonious as they did back then. Why so little intellectual progress?

Here’s what I’ve come up with:

It’s not about “the arguments.” You have to be stuck in an awfully tight box to think this election is about the policy debate as carried on in places like OTE. Paul Krugman, myself, and others are surely right about, say, the negative impact of austere fiscal policy on still weak economies or the need for patience at the Federal Reserve. But this election is anything but a referendum on those debates.

It’s a midterm in the middle of a second term of an incumbent president with a low approval rating. The math in such cases is just plain unforgiving: under such circumstances, the president’s party loses seats. It’s thus wrong to conclude that “we”—purveyors of fact-based arguments—are “getting crushed.”

At the same time, it does beg the question: so what are we in the analysis business up to? What’s our value-added? Entertaining like-minded readers? I’ve actually never shied from preaching to the choir…the choir should have the best hymnal to sing from. But really, it’s worth engaging in a bit of self-evaluation in terms of penetration and effectiveness. If a key evaluative criteria is improving the quality, accuracy, and factual content of the policy debate, I fear we would not score very high.

In at least one place where it is about the arguments, the case for fact-based-analysis is looking pretty good. On the other hand, one place where it looks like factual policy analysis may be playing a determinant role is in the Kansas gubernatorial election. As economic history predicted, aggressive, supply-side tax cuts there that were supposed to lead to all sorts of great trickle-down growth there have in fact just led to reduced revenues, a credit downgrade, and cuts to local education. And partisans on both sides of the aisle have noticed.

When politics are broken, you disengage or vote against the status quo. Though I noted the unforgiving historical statistics above, I do not want to leave the impression that the outcomes of the midterms is preordained and there’s no point in analyzing any of it. Probably “throw-the-bums-out” is as good as any shorthand for capturing the mood of the electorate, many of whom are understandably fed up with gridlock in the face of the persistent problems of narrowly shared growth, slack job markets, and stagnant economic mobility that’s increasingly threatened by high and rising inequality.

Here at OTE, I write a lot about such market failures. But government failure is just as serious. Moreover, the failure of government to enact and implement useful economic policies in recent years is by no means a sole function of administrative incompetence or feckless bureaucrats. It is a strategy.

When the electorate is convinced that government doesn’t work, whether it’s a website that actually didn’t work (at first) or a Recovery Act that despite stiff opposition, worked well, it strengthens the narrative of the YOYOs. They’re the “you’re-on-your-owners”—a group I’ve written about over the years.

The YOYOs are the folks calling for less government without regard for the challenges we face, like climate, an aging demographic, explosive financial markets, all of which require government solutions. They’re the privatizers, the always-cut-never-increase tax advocates, the “we can’t afford social insurance” crowd. Their extreme wing would default on the public debt. They stand against “Obamacare”—very much a government solution to a market failure—as it distinctly embodies the “we’re-in-this-together” (WITT) ethic they diametrically oppose.

[Progressive economist Dean Baker adds an important nuance to this construct. It’s not that many in the YOYO political class disdain economic policy. It’s that they use such policy to enrich themselves and their donors as opposed to the broader public, including patent, trade, and anti-union policies. In other words, they’re not really enamored of market outcomes either.]

So while I readily admit government failure—you’d have to swimming in de’Nile not to see that in contemporary politics—it’s essential to recognize that such failure is neither an accident nor an immutable act of nature. It’s a tactic that can be reversed.

In fact, it must be reversed if we’re going to correct market failures, the most important of which is the long-term failure of the economy to create the quantity and quality of jobs needed to reconnect growth to the living standards of the majority.

So, regardless of Tuesday’s outcomes, I’ll keep up the good fight. I will, however, be doing a bit less of it here at OTE over the next few months. Why’s that? Am I backing down in the face of harsh personal evaluations re value added and effectiveness?

Hell, no! To the contrary, I’ll be posting less frequently here because I’m writing a book: An Economics for our Time that will lay out a policy agenda designed to reconnect economic growth with broadly shared prosperity. In fact, the previous few paragraphs come from the intro chapter.

In other words, I’m not backing down, I’m doubling down. So stay tuned…

Reprinted with permission from jaredbernsteinblog.com