Pesky Uncles, Brothers-in-Law, Etc…Thanksgiving 2012 Edition

http://jaredbernsteinblog.com/pesky-uncles-brothers-in-law-etc-thanksgiving-2012-edition/

Enjoy this yearly post from Jared Bernstein – how to defend yourself against those pesky right wing relatives. Here’s an excerpt:

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“Don’t you get it!?  Our debts are in the trillions!  What kind of family could run their affairs like that?  Certainly not this one or any other responsible family I know of.”

Oooh…careful here.  She’s comin’ right attcha with the homespun aphorism about government needing to tighten its belt just like everyone else—this framing is likely to get a lot of heads nodding around the table.  It sounds right…but it’s way wrong.  So you’d better start by getting on their page.

“That makes a lot of sense, Auntie Teabag, and I’m with you 100% that when the economy is back on track and people’s paychecks are rising again, the government needs to tighten its belt, just like you said, and start getting rid of those deficits.  But the problem is this: if everyone’s tightening their belt at the same time, the economy will do much worse, people will be stuck without jobs and with no help at all.”

In fact, it’s really the opposite of where Auntie is: when families tighten, the government needs to expand.  And if that means a larger budget deficit that’s okay, as long—and folks might like this point—as it’s temporary.  I can’t stress this last point enough.  (It doesn’t help you here that politicians of all stripes, including the President, recite this damaging mantra.)

“You know what really hurts our deficits, Auntie?  Not stuff like the Recovery Act—an $800 billion belt loosener by the feds.  That’s over now—after adding millions of jobs and helping a lot of families do a little better over the downturn—and its and contributing absolutely nothing to the increase in the debt.  It’s the stuff that keeps going but isn’t paid for, like those Bush tax cuts!”

You win this argument not by denying the government ever needs to tighten its belt but by stressing the dynamics that have been understood by economists since Keynes (though many are trying hard to forget them today): fiscal policy loosens when the private economy is slack and tightens when it’s strong.