What the Beltway Gets Wrong About the Economy

What the Beltway Gets Wrong About the Economy

What the Beltway Gets Wrong About the Economy

Our debt isn’t the problem. 

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At the Washington Post, columnist Dana Milbank wants President Obama to deal with the “entitlement crisis”:

And that leads to the falsehood. Despite his claim that “both parties have laid out their policies on the table,” Obama has made no serious proposal to fix the runaway entitlement programs that threaten to swamp the government’s finances. […]

Nothing in Obama’s speech came close to a proposal to fix the debt problem; he dealt with that only at the end of the speech — largely by complaining about Republicans’ refusal to consider higher taxes on the wealthy.

You could write a decent-sized column dealing with the details of what Milbank gets wrong. For starters, there isn’t an “entitlement” problem as much as there is a “healthcare” problem; private and public healthcare spending is growing at an unsustainable rate. The GOP plan, as articulated by Paul Ryan, is to off-load the cost of insurance to consumers. This would save federal money, but do nothing to arrest the overall growth in healthcare costs.

Obamacare, on the other hand, will reduce the overall growth in healthcare costs. Milbank dismisses this—“His cuts in the rate of growth amount to just a few percentage points”—but this is a significant reduction in healthcare spending that is unmatched by anything offered by the GOP. Indeed, pace Milbank, the GOP hasn’t actually offered anything to deal with entitlements or debt; when Obama accused Republicans of running on the failed agenda of the last ten years, he was absolutely right.

With all of that said, Milbank is also wrong on the big picture. If there’s a threat to our long-term prosperity, it isn’t debt; it’s widespread joblessness and immiseration. Unlike the debt crisis—which is mostly theoretical—our cyclical unemployment will become a structural problem if we don’t do something to jumpstart the economy. And on that score, the Republican Party has nothing to offer the country. Mitt Romney doesn’t have a plan to create jobs as much as he has a plan to score political points. His actual agenda—tax cuts, spending cuts, and deregulation—will worsen the short-term picture and cause more economic pain. By contrast, Obama has the helpfully named American Jobs Act, which would create 1.9 million jobs if implemented in full, and lower the unemployment rate by a full percentage point. When you consider that the public is near-universally concerned with job creation, it’s clear that this—and not some chimerical “Grand Bargain”—is what the administration should be focused on.

Of course, I don’t expect Milbank—or most pundits—to understand this. By virtue of its isolation, the Beltway is nothing but myopic when it comes to unemployment. This destructive attitude is what leads them to constantly bleat about the debt, despite the fact that most Americans could care less. If he loses re-election, Obama’s willingness to listen to these people—which defined most of last year—will have been the move that doomed his presidency.

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