Economics 101 still not sinking in

Updated
 
Economics 101 still not sinking in
Economics 101 still not sinking in

White House Senior Adviser Dan Pfeiffer talked to reporters yesterday, and shared an argument that President Obama has repeated many times: “You don’t want to balance the budget for the purposes of simply balancing the budget.” That’s plainly true – even a rudimentary understanding of the basics suggests balanced budgets shouldn’t be a goal unto themselves. There needs to be an underlying economic purpose to the fiscal policy.

Rory Cooper, the communications director for House Majority Leader Eric Cantor (R-Va.), despite a fiscal argument that’s gone on for quite a long time, is still confused (via Matt Yglesias).

I don’t understand what Cooper doesn’t understand, but let’s try to clarify matters a bit.

The country doesn’t want to reduce the debt just for the sake of reducing the debt. That’s not “White House logic,” that’s just logic. I realize Republicans are going through a post-policy phase, but even conservatives generally concede the ontological point – they want to reduce the debt to prevent inflation; they want to lower the deficit to reduce interest payments on the debt, etc. No serious person argues, “Debt reduction is great because it’s debt reduction.”

Cooper adds, “You don’t want to balance your checkbook just for the sake of balancing your checkbook.” As a matter of economic policy, this is gibberish – as Beverly Mann asked, “Balancing your checkbook? What does balancing your checkbook even have to do with anything other than making sure you have enough money into your checking account to cover the purchases and bills you’re currently using that checking account to pay?”

Let’s give Cooper the benefit of the doubt, however, and assume he’s using “checkbook” as a shorthand for your overall personal finances. Does this help make his observation more sensible? Actually, no, it makes the argument slightly worse.

Look, I realize there’s a political appeal to the notion that Americans don’t run deficits so their government shouldn’t run deficits, but it’s ridiculous because most Americans run deficits all the time. When Americans take out a mortgage, they are, to use Rory Cooper’s metaphor, failing to “balance their checkbook.” When they take out student loans, they’re taking on significant debts. When they finance a car purchase, they’re spending money they don’t currently have. When they take out a loan to start a small business, they’re choosing to be in the red.

By Rory Cooper’s logic, Americans routinely say, “I don’t own a home, I don’t own a car, I didn’t go to college, and I can’t start a small business, but that’s fine because at least my checkbook is balanced – and there’s nothing wrong with balancing my checkbook for the sake of balancing my checkbook.”

It amazes me that after all of the recent debates, Republicans in positions of authority still don’t understand this.

But, fine, let’s say Republicans will never understand this and there’s no point in trying to explain it to them. They believe balanced budgets are their own reward, and it’s such an important goal, that its value should be self-evident.

If, however, that’s the case, I have two questions: (1) how does the Majority Leader’s office explain the entirety of the Bush/Cheney era; and (2) if balanced budgets are wonderful, why won’t Cantor consider new revenues to make them happen?

Defecit Reduction, Debt, Budget, Budgets, Debt Reduction and Deficit Reduction

Economics 101 still not sinking in

Updated