The Reckoning

Less Wrong than Right

jobless spaniards

Unemployed workers wait outside a government job center in Madrid.

Photograph by Dani Pozo/AFP/Getty Images

Inevitably, there will be too-ing and fro-ing about Floyd Norris’ piece in The New York Times today, comparing the EU (and its austerity bent macroeconomic policies) unfavorably to the US. The piece veers too far into polemics for the News pages - (are there such things as “News” pages anymore? I’m assuming this is a column, right, or Norris couldn’t have said “as of now, there can be little doubt that the American government handled the problems of the last year far better than did its European counterparts).” Regardless, the case for giving the “least bad macroeconomic policy” award to America is compelling. If you skip the story completely and go straight to the graphics that accompany it, flesh is added to Norris’ claims. Stock prices and a metric of confidence among purchasing managers won’t convince a German chancellor of anything, but the unemployment figures - and more importantly, the upward trend in Europe compared to the US, can’t be denied. The austerity prescription applied by German Chancellor Angela Merkel and British Prime Minister David Cameron is a disaster, and they’ll pay for it with their reputations (if not at the polls).
Strangely, though, the Times leaves out the more powerful story, which is in GDP growth, where the gap is widening.   Even if the US can’t make hard decisions, it has managed - almost accidentally - to avoid doing the worst things since 2008. Doing the right thing - stimulating the economy in the short-term until sustained growth returned, then putting in a place a real reform of entitlements and other spending to get control of the long-term fiscal picture - certainly would have been better. The moment for that is past - we’ve suffered through the tepid recovery we deserve, frankly. And such a bold move simply isn’t possible as long as the GOP’s internal civil war rages and the  ‘no to everything’ Tea Party has upper hand.
Again, it was last summer’s ridiculous debt debate and downgrade that so thoroughly discredited the current GOP caucus, which is so paralyzed that it couldn’t seize the historic opportunity put forward by Obama to restructure US Social Security, Medicare and Medicaid trust funds - a move that would have proven the validity party’s decades long argument that US entitlements as unsustainable. But let’s get back to what is, not what might have been. As Norris notes, and as many smart people have been saying for a long time (and, not to include myself in that company, but me too), at least our paralyzed system has prevented the imposition of radical austerity, which is the true road to a double-dip and a guaranteed way of hastening the relative decline of the country. So, again, we’ve been less wrong than right, but at least we’ve prevented the Right from leading us down Europe’s road. Or, at least until now. Sadly, Mitt Romney’s primary promises on macroeconomics promise to take us down that very road. Let’s hope the Etch-a-Sketch is working.