David Brooks is Always Wrong — NPR Edition, Part Two.
Back in Part One, we covered one of David Brooks’ many transgressions as a financial pundit, his claim, repeated last Friday on NPR’s “All Things Considered” that the new health care law is a budget buster.
I called it an error. It is more precise to term it a lie, as the best available data, stuff that Mr. Brooks cannot fail to have encountered — CBO estimates and other, less formally constrained estimates — all support what proponents of the law have said, that the reform is mildly deficit reducing over the next decade, with the potential, at least, for major savings to come in later years.
But now, let’s shift to a wider frame. In that same NPR appearance, Mr. Brooks offered a corollary of the presumed budget busting nature of health care reform: a familiar, ritual claim that portrays current deficits or deficit trends as inherently destructive, unsurvivable. Brooks complained in the piece that if the deficit did remain at a projected 90% of GDP level by the end of the decade, that would be a disaster.
First, the American experience with deficit levels in that range does not suggest disaster. Since the start of World War II, US deficits as a percentage of GDP topped at over 120% in the late 1940s (after the war, as the US was rebuilding Europe and ramping up military expenditure at the onset of the Cold and Korean Wars. As I recall, most folks thought the 1950s were a reasonably successful time in US history, at least as far as economic growth and the creation of a thriving middle class went.
You can see a similar dynamic in the chart of Great Britain’s national debt as a percentage of GDP. Twice in the modern period, Britain’s debt rose to more than two and a half times GDP. The timing of the second such peak is probably easy to guess; it correlates with the combined burdens of World War One, the Great Depression, and The Great War, The Sequel demanded all the resources the British could bring to bear and more, engendering debt levels that touched the 200 percent mark in the early ’20s, never went below about 120 percent before rocketing up to over 250 percent in the late 1940s. The other similar spike also came in the context of extended conflict — the long-century of war that Britain waged from the late seventeenth century through the defeat of Napoleon in 1815. British government debt climbed to over 100 percent of GDP in 1750 or so, and topped out above 250 percent shortly after Napoleon met his Waterloo in 1815.*
What is all this history doing here? Because of what must be obvious already to the readers of this blog.
Think what happened in Britain’s nineteenth century. Think what happened in the US during the ’50s and 60s.
Observe the fact that Britain and the US both managed to bring their debt levels down as a fraction of GDP after their rises to historic highs and the US did it again in the 1990s after twelve years of GOP transfer payments from the middle class to the rich once again unhinged the budget.
And last, for a quick, back of the envelope correction to current hankie clutching by Mr. Brooks et al., consider this from Paul Krugman.
The shorter of that already brief post: cutting away at the debt incurred in our current attempt to use Keynesian methods to return from recession will require only modest shifts in either revenue or expenditure (or, of course, of both). Same deal as in the fifties and early sixties — or rather a less draconiann one than that which that famous socialist, Dwight Eisenhower achieved with his 90% highest marginal tax rate.
In other words, this is yet one more case of the GOP and its useful-idiot allies like Mr. Brooks inventing facts to advance a purely political calculation.
Pay no attention to the real world, they say, nor the record of historical experience. Listen instead to the mewling and puking of the GOP deficit babies until the cry “we’re doomed! doomed!” comes to be seen as fact.
But in making decisions about what the government should or should not attempt to do, reality does matter. And here the story is clear: deficits — even ones much higher than Mr Brooks has said he fears — do not imply in and of themselves extended periods of economic hardship.
What’s more: why you borrow matters.
Certainly, there is certainly spending that is truly wasteful, in the sense that it adds little to GDP as a return on government borrowing. (See the quote from Bilmes and Stiglitz* about half way down the post at the second link; I’d link to the Harper’s original, but it’s behind a subscription wall.)
But the lesson of historic rises in debt levels and their return to lower percentages in the US and elsewhere over the last century and before is that debt properly employed is not just acceptable, but remains a critical tool to foster both economic growth and social strength. (Once again: Keynes, much?)
And on that point, health care reform clearly falls into the realm of policy that forms part of the long term context of economic growth (and by extension, healthy government revenues, which then constrain the expansion of a public deficit).
Why? Because, as David Brooks could have discovered had only read his own newspaper, the social contract matters. All he had to do was to check out — and grasp –some of the coverage from the exemplary David Leonhardt, for one. (Leonhardt remains one of the most significant reasons one still has to read the New York Times.)
Consider this one, on the significance of health care reform on innovation.
This is not to suggest that Mr. Leonhardt, as good a reporter as he is, is some gold standard of judgment on economic policy. But his work and that of many people who actually know things about fiscal policy and health care economics have noticed that the particular form of a nation’s health care system can have enormous consequence for seemingly completely unhealth-related sectors of the economy.
For jsut one example: the social safety net helps in difficult-to-quantify ways because, it turns out, it is when people feel secure in their basic needs that they accept more risks. They leave bad jobs to seek better ones; they invest in their own education; they, as Leonhardt details, are more willing to gamble on their own vision as entrepeneurs.
It may be difficult to quantify, or rather to predict the degree to which such easing of care will add to GDP, and hence increase government revenues, and hence to reduce the scale of government borrowing, but the underlying concept is just not that hard to grasp. The idea that you will be more adventurous economically f you know that you or your kid won’t lack for access to health care if something goes wrongis beginning to penetrate the mass media in such distant locations as the Fort Worth Star-Telegram. Apparently, the news has yet to reach the more hypoxic floors of the Great Grey Lady (formerly) of 43rd St.
Update: Via Brad DeLong, see Mark Thoma saying the same thing, only better.
From that thought, let me hand the next step of the argument over to old friend Tim Ferris, who in his recent book, The Science of Liberty notes that Democrats have consistently achieved a better economic growth outcome through that party’s commitment to a market system with a social network and a regulatory framework, compared with the GOP’s pursuit of policies that underregulate the market and undermine — at least confidence in — the social safety net.
Arguing from a classically liberal viewpoint Ferris reports what is available to anyone (are you paying attention, Mr. Brooks?) (No. SASQ — ed.) with access to Teh Google, that economic growth is much better maintained by Democratic adminstrations and policies than by the GOP lip-service he pays so readily to the icons of budget puritanism.
Specifically, Ferris writes,
Party politics may be a crude metric, but the United States in the past half century has experienced faster GDP growth, lower unemployment, and higher corporate profits during Democratic than during Republican administrations. The stock markets performed better, too, with annualized returns on investment averaging almost 9 percent when Democrats were in office against less than 1 percent for the Republicans. (The Science of Liberty, p. 25. Emphasis added.)
The details of what parts of the two competing approaches to governance actually make the difference are (a) enormously complex and subject to debate and (b) beyond the scope of this blog post. But the key point is, or should be obvious. Deficit spending in itself is not the driver of outcomes. It’s what you do with the money, and whether you address critical social/economic needs with your borrowing that counts.*
Which means: the general claim of deficit apocalypse is bullsh!t, a right wing mantra now being pushed to counter Democratic efforts to solve some of the problems that eight years (and most of the last thirty, in fact) of often criminal misrule have left behind.
In that context, health care reform is more than a moral victory, a statement by our society that tens of thousands of people per year should not die for lack of insurance.
Health care reform is more than mildly deficit reducing, a small down payment on the much larger reform that could both enhance the quality and reduce the cost of care by creating a national body of knowledge about best practices whilst paying for care rather than procedures.
Rather, or on top of those public goods, health care reform as just enacted is one of a number of critical steps towards creating the economic context for the next sustained epoch of growth. A society whose members gain a greater share of numbers three and four of Franklin Delano Roosevelt’s iconic freedoms is one that will be far better placed to prosper (and thus shrink deficits as a percentage of GDP) than one in which sclerotic institutions and an ever less flexible labor force constrain every attempt to come up with the Next Big Thing.**
In that context, I guess the only remaining question is why David Brooks — and his too-many allies on the right — so hate America that they’d rather see a budget balanced on the ill-health of the nation instead of a society betting on its own members to create a richer future.
*All this is not to say that medical care cost inflation isn’t a serious problem in the medium to long term. It is. But (a) the problem is worse without health care reform than with it; and (b) the real significance of health care reform is that it creates the context for further reform. Clearly the proof will be in the pudding, but several next steps are obvious, and the new law contains several elements of cost-control mechanisms and the capacity to perform policy experiments
**And of course — if you take Ferris’s historical analysis seriously, and I do, then the first two of Roosevelt’s four freedoms are equally important to the formation of a creative and scientifically innovative society.
Images: Maria Fyodorovna, “The Miser,” 1890
Great Depression photograph, courtesy of the Franklin Roosevelt Library and Museum,”Public Health nursing made available through child welfare services.”
Thomas Eakins, “The Agnew Clinic,” 1889.