E.J. Dionne has a column that gives me a chance to sound off on something I've been wondering about:
The central issue in American politics now is whether the country should reverse a three-decade-long trend of rising inequality in incomes and wealth.
[...] Do we want to be a moderately more equal country or not? This is the question Obama has put before the nation. Let's debate it without the distracting rhetorical sideshows designed to obscure the stakes in the coming battle.
I've been thinking a bit about how this questions applies to the fiscal stimulus debate. My fairly unsophisticated reading is that the original debate focused more on questions about "averting disaster" and "unlocking prosperity" -- we wanted to halt a slide in growth and then reassume its march -- than it did on questions about fairness and equality. But answering questions about fairness and equality is essential to justifying the stimulus.
Here's why: A couple of weeks ago the CBO released a report (pdf) on the long-run macroeconomic implications of the bill. The CBO found that "in the short run the stimulus legislation would raise GDP and increase employment," but also found that "[i]n contrast to its positive near-term macroeconomic effects, the legislation would reduce output slightly in the long run." (The CBO bends over backwards to make clear that these conclusions are tentative and speculative and based on assumptions that others might not share. But this is nonetheless what it concludes.)
So how do we justify a bill that might be good for GDP in the short run but bad for GDP in the long? Well, there are a few options. First, our present-value calculations might conclude that a unit of reassurance about the present is worth more than a unit of reassurance about the future, just as we might conclude that a dollar in 2009 is worth more than a dollar in 2090. (Hence, interest rates.)
But a more compelling argument is that the bill is redistributive (at least in a way I like). There are more important measures of national economic health than GDP, and a world in which millions of additional people are employed for many years seems preferable to a world in which national output is a couple of percentage points higher ten years from now. It isn't worth thinking about the stimulus as a measure designed solely and purely to stimulate growth: if growth is lower, it will be in the hope that America is be a more equal place.
This is more or less the same logic behind
progressive taxation -- no one (except maybe Grover Norquist) really
suggests that tax fairness always takes a back seat to maximizing
growth -- and it's not something to be ashamed about in the context of
fiscal stimulus. My sense is that a lot of liberals are uneasy about
defending fiscal stimulus in these terms. In Dionne's words, I think they're obscuring the stakes.