The midterm elections this week went pretty much as early polls expected: Big Republican wins in the House, some Republican gains in the Senate, and lots of attention to the Tea Partiers. The Pundits and Political People (Krugman calls them “the Very Serious People”), the Washington, D.C. people who deem to tell us what we think even though they have no clue what life is like outside Washington/NYC, in the lower 90% of the income distribution, or to not have a job, are telling us what “it all means”. Unfortunately I think they’re missing a lot of stories. One of the big stories is that while yes, the people who voted went strongly for Republicans and relatively anti-incumbent, but there really weren’t that many people voting. Many stayed home which isn’t surprising given how Obama has largely given up on a progressive agenda – the healthcare reform bill looked exactly like what Republican Romney did in Massachusetts, the financial reform/regulation bill is toothless and largely written by bankers, the stimulus bill was too small by 1/2, reducing unemployment abandoned as a goal, and bankers given a free ride.
I interpret the results not as an endorsement of Tea Party/Republican platforms, but instead as pure rejection of Obama’s weak, let’s do Republican/Bush-lite policies. Those independent voters that voted, voted against the present regime. The Democrats stayed home and didn’t vote. It’s definitely not an endorsement of the economic soundness of the one-liner economics policies proposed by Tea Partiers/Republicans. The voters are going on emotion and what today’s condition is – not knowledge or analysis. Unfortunately, there’s a lot of ignorance and prejudice involved too – things like perceptions that Germany has done better by pursuing austerity policies (it’s neither done better nor pursued pure austerity), or that the debt must be paid off. I turn the podium to Brad Delong and Paul Krugman:
A plurality of voters want to see a new economic stimulus bill–called a stimulus–to create jobs. Even 18% of Republicans and 32% of independents think a new job-creating stimulus bill should be Congress’s highest priority. Yet is Congress going to pass one? No. Is the Treasury leveraging up its TARP money and using it to stimulate the economy? No. The Federal Reserve–well, the forecasts are that the Federal Reserve’s quantitative easing programs may add between 0.2% and 0.5% to economic growth next year, although I do not see how the estimates can be so high unless the program has a large effect on inflation expectations.
This is an absolutely remarkable government that we have. And an absolutely remarkable political class.
Paul Krugman takes on the Very Serious People:
The Strange Death of Fiscal Policy – NYTimes.com: One clear result of the midterms is that we won’t have anything like a further round of stimulus. And this, in turn, means that the narrative all the Very Serious People will tell is that fiscal policy was tried, it failed, and that’s that.
But the real facts don’t at all support the conventional wisdom.
Actually, let me focus on an international comparison. You often hear the US experience contrasted with Germany: America, we’re told, went for Keynesian policies, while Germany chose austerity, and Germany did better.
But as far as GDP is concerned, Germany did not, in fact, do better.
This is, I think, the most amazing thing I hear as I wander around talking to the necktie-wearing class: they genuinely do think that real GDP in Germany fell less than real GDP in America–and I cannot figure out where this belief cam from.
Paul goes on:
Yes, Germany did better on employment — but this reflects policies that American conservatives surely don’t support, including employment subsidies, strong unions, and rules making it difficult to fire workers.
And what may be even more surprising: if we look at actual government purchases of goods and services, as opposed to transfer payments (many of them just payments from the federal government to states), Germany was more Keynesian than the United States:
So, it’s an amazing thing: Obama and company have managed to convince people that big government failed, without actually delivering big government.