Planning Ahead is Good But Unlikely

There’s a lot going on in Derek Thompson’s post on liberal reaction to the Simpson-Bowles report some of which I agree with and some of which I disagree with. But I wanted to clarify on the specific part where he talks about me. Namely, when I say that pre-emptive fiscal adjustment is unlikely I meant precisely that: It’s unlikely, not undesirable.

As Tim Fernholz wrote yesterday:

It’s worth noting that the dynamics here continue to favor conservatives; simply put, the longer we delay making sustainable budgeting decisions, the harder it becomes to make them, increasing the likelihood that we will one day face calamity, and austerity. “The concern from the progressive perspective is that if we wait until we have a gun to our head … at that point we’re unlikely to get progressive solutions,” CAP’s Michael Ettlinger told me last year when I wrote about progressive efforts to get ahead of the deficit debate. It makes getting these issues right today even more of a priority.

No surprise, I agree with Ettlinger.

But as I say, I don’t think it’s realistic. The current level of hubub around the idea of doing preemptive fiscal adjustment largely reflects the fact that Pete Peterson has spent a lot of money pushing the idea of preemptive fiscal adjustment to the top of the public agenda (see Dave Weigel on this topic). Pete Peterson is both a wealthy man and a generous one, and wealthy generous people have an enormous ability to shape the agenda in Washington DC. But agenda-shaping and legislation-passing are two separate things. Peterson can’t repeal the rules of politics. Given the number of veto points in the American political system, large change is always unlikely. Given a problem on which it’s viable to delay action, politicians will prefer to delay. It is possible to delay action on fiscal adjustment. And a complete fiscal adjustment would involve multiple large changes. Ergo, it’s unlikely to happen.

This is two bad for two reasons. First, it’s bad for the reasons Ettlinger points two. Second, I think it’s genuinely a waste of the money of a public-spirited person. In addition to the deficit work, Peterson money supports Joseph Gagnon’s work on monetary policy. Had Peterson devoted the scale of resources to putting monetary issues on the agenda that he’s devoted to putting pre-emptive fiscal adjustment on the agenda, I think we would have seen much more progress toward good monetary policy and essentially the same fiscal policy outcome. That would be a higher-growth world, with less unemployment and—among other things—a smaller budget deficit.