What with the Peter Diamond withdrawal yesterday, the Washington Post polling results on the economy out today, and the fact that the policies that would help the economy in the short run are locked in a trunk at the bottom of the ocean, it's hard not to feel like we're stuck in a bad place and there's nothing we can do about it.
Of course, such defeatism is not the stuff we are made of here at OTE. But let's not leave the current depressing airspace too quickly.
The Diamond withdrawal is neither unexpected nor the end of the world, but as Ezra Klein pointed out this AM (see his Wonkbook discussion of my pal Austan G's decision to go back to the University of Chicago -- will they let him back in the economics faculty lounge?), it's emblematic of a bigger problem that we can't get anywhere on the needed policy actions to boost jobs.
Why are we here?
One reason is that powerful people have decided that too many voters don't believe that what's needed -- temporary spending to offset the persistent demand shortfall -- actually works.
You can blame those powerful people for a) not fighting hard enough, b) not pushing a big enough stimulus in the first place, c) overselling the package they (ok, we) came up with, d) failing to effectively tout its benefits, e) not just doing what's right regardless of electoral opinion... and you'd have some merit on all points.
But there's also this argument I recently came across. It's a framing discussion, much of which sounded right to me, suggesting that traditional ways in which Democrats talk about Keynesian measures no longer resonate the way they used to.
I think this diagnosis is important. When I/Krugman/Romer/DeLong, etc. say "there's a lot more government should do right now to target job creation," too many people hear "there's a lot of new ways politicians can waste your hard-earned, much-needed money on their pet projects which only gets in the way of the private market's vast job-creation potential."
If that's true -- and yes, no small part of this is self-inflicted by Democrats who agree too readily with the above -- what do we do about it? I found the analysis long on diagnosis and short on prescription, but this 'graf caught my attention:
On the issue of jobs and unemployment, for example, a typical statement from a person of this kind would be something like the following.
'Well, you know, I can't see any evidence that the stimulus really worked and I don't think just making phony leaf-raking jobs is a real solution. But I also think there must be some way the government can get people back to work and I don't think just laying off state employees or giving rich people lower taxes is the answer either.'
Common sense ideas that I believe most people share: how do we get out of this mess if we're going to whack away at schools? And surely we need to fix stuff that's falling apart. And you know what: I kinda like the security of knowing there's a guaranteed pension out there (Social Security) and health coverage I can depend on (Medicare). And don't tell me "sorry, we can't afford that" while you want to cut taxes for the one group that's actually been doing the best lately -- the wealthiest among us.
If such sentiments don't map onto Keynesian stimulus writ large, they do map onto:
- Another round of fiscal relief for states;
- Infrastructure investments;
- Protecting entitlements;
- Balance between revenues and spending cuts in budget negotiations.
I'm skeptical of framing debates because they seem to suggest that if you frame things the right way, you'll win, when of course, life is more complicated. Power often trumps frames, for one.
But I'm not ready to go gentle into that good night without a fight. So instead of depression, I recommend common sense, fueled by a little bit of genuine anger about how screwed up our economic policy debate has become.
This post originally appeared at Jared Bernstein's On The Economy blog.