Scarcity Came to Town

Jeff Madrick, the author most recently of Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (Knopf), exchanges questions and ideas with Thomas Byrne Edsall, whose book The Age of Austerity: How Scarcity Will Remake American Politics (Doubleday) is out this week.

Madrick: Your book places the current extreme partisanship in its critical economic context. There are cultural and religious conflicts in America, but it is economic scarcity that underlies much of our political paralysis. Is that so—scarcity lately more than culture? And scarcity has tended to favor conservatives?

Edsall: Scarcity trumps culture, but it would be a mistake to view culture and the economy as inhabiting discrete spheres. Diminishing resources tend to push people in a conservative direction by increasing pressure to protect one’s own interests while simultaneously lessening generosity of spirit. Scarcity sharpens survival instincts, leading to a dog-eat-dog worldview that stresses a distinction between the “undeserving” and “deserving” poor, at the expense of structural analyses of poverty. 

A belief that the pie is shrinking has led to the conclusion in Washington that the debt and deficit must be reduced. If income is shrinking, cut expenses: It’s a debate inherently favorable to conservatism, which has long held the goal of shrinking the size of government (a commitment that generally ignores defense spending to focus on domestic programs). 

In terms of hot-button cultural issues that dovetail with economic issues, among Republican primary voters, immigration appears to have become a litmus test equal to, or more powerful than, abortion. In addition to conservative anger at immigrants’ use of taxpayer-financed government services, and the cultural flashpoint of language, there is a conviction among many low-skilled, less-well-educated workers—not unjustified by a number of National Bureau of Economic Research studies—that these workers are bearing the brunt of the costs of immigration in terms of lost jobs. Some of the Republican Party’s strongest gains—gains crucial to their victories—have been among whites who are hit hardest by immigrants willing to work long hours at low wages. Just ask a former union Iowa meatpacker for his or her assessment of the issues. 

Madrick: But have you accepted too readily the idea that scarcity and the need for austerity are with us indefinitely-—or are even truly with us? You recognize that wages have been flat for a few decades and that anti-tax forces have been at work at least since the 1980s. (I’d argue before). Yet you sometimes accept from the likes of William Gale [co-director of the Tax Policy Center] or Alice Rivlin [Office of Management and Budget director under Bill Clinton] arguments that America now rather suddenly faces a time of austerity, so cutting entitlements and public investment will be necessary. Do you believe this? 

Edsall: I do not think the issue of debt should be dismissed as a conservative bugaboo. The country is on a path toward record-setting ratios of debt to gross domestic product, exceeding those reached during World War II. That said, the imposition of debt reduction and other austerity policies at this moment, with unemployment at 9 percent, is certain to extend the duration of hardship for millions. 

The policymaking hurdles facing liberals and Democrats are exceptionally high. There is a strong economic case to be made for additional stimulus spending. But politically, the public has become wary of government spending to solve problems. In terms of Social Security, there are such options as raising the ceiling on income subject to the payroll tax, raising the tax rate, raising the retirement age (though this could prove brutal to manual workers), and other hard choices. 

We do not live in an ideal world. We live in a world with powerful political constraints on the scope of possible action. There is also a broader question: Have technology gains allowing automation at home and the export of more and better-paying jobs abroad limited the ability of government policy to lower unemployment rates? As you state, these issues are decades old. It is, I believe, the current demographic tsunami of 80 million aging baby boomers along with record numbers of those unable to thrive in a hyper-competitive global economy that are together exacerbating anxiety about entitlements.

Madrick: We are almost the lowest-taxed of all rich nations. Can’t the right-wing myth of austerity be reversed by a political movement arguing more truthfully that we can raise taxes, pay our bills, invest in ourselves, and restore a fair measure of prosperity? 

Edsall: The U.S. continues to be among the world’s most affluent countries, and I am sympathetic to your argument but pessimistic about its prospects. Raising taxes and cutting spending—arguably necessary to reduce debt and deficit—could entail a lowered standard of living for those affected. Lowering the standard of living triggers a powerful emotional affect—“loss aversion”—that can generate political furor. 

On November 1, Colorado voters rejected by a margin of nearly 2 to 1 a proposal to raise income and sales taxes by relatively modest amounts (from 4.63 percent to 5 percent for income and corporate rates, and from 2.9 percent to 3 percent on the sales tax) in order to invest $2.9 billion in K-12 schools and public colleges and universities. This, even though few would disagree that better-quality education is needed for long-range prosperity or to improve graduates’ prospects. Colorado voters cast their “no” ballots just days after the state’s governor released a budget calling for significant cuts for public schools, colleges, and universities. In 1984, Walter F. Mondale proudly proclaimed that he would be honest with the electorate and tell them taxes would have to be raised. He lost in a landslide. 

Madrick: As you document well, the president joined ranks early with the Republicans in making government spending the overriding challenge. (Of course, jobs were the problem—as he discovered only months ago.) Wasn’t this an enormous political error? Perhaps if he’d done otherwise there would be no paralyzing age of austerity but rather a sensible approach to jobs, long-term health-care reform, and higher taxes.

Edsall: The economy tanked, in September 2008, to a level virtually no one had anticipated. It would be easy to catalog the strategic and tactical mistakes of the Obama administration as it tackled the meltdown. But the fact is, Obama was substantively persuaded that the size of the national debt and deficit were unsustainable. There was a consensus among mainstream economists on this point: that the fiscal health, indeed the viability, of the United States depended on bringing the debt under control. The Republican Party handed off a fiscal nightmare and then adopted a strategy of consistent opposition. If Obama had been better able to recognize the political intentions of his partisan adversaries, he might have handled the situation more effectively. In retrospect, his early decision to place public emphasis on the deficit was maladroit. But I don’t believe that a focus on jobs, health care, or higher taxes would have been sufficient to address the immensity of the economic ruin that, in 2009, threatened the world. 

Madrick: What about the media’s role? Paul Ryan was hailed in the media for his courage in presenting a comprehensive plan. Some in the media even seemed to believe that when he got the Congressional Budget Office to assess the plan, it was like a sign of seriousness. Of course, it was not. Once Obama joined with Republicans in making spending his principal target, the media seemed incapable of giving credibility to other views. 

Edsall: I believe the media—like the political class, and the entire stratum of policy experts—felt itself to be out of its depth in accurately analyzing the global economic crisis of 2008 and 2009. Insofar as the nonpartisan media aims to present as unbiased a view of events as possible, there simply was no “objective” diagnosis or universally agreed-upon set of corrective actions to present to the public. The advantage in a situation of incomprehension and chaos goes to the partisan media, which can fall back on prior ideological commitments.

Madrick: In your chapter on the moral underpinnings of partisanship, it almost seems as if discipline-oriented and inherently compassionate Americans are permanent types. My own sense, as outlined in Age of Greed, is that there was a major attitude shift beginning in the 1970s from a pro--government society of community interests to an anti--government one of private interests. Large numbers of bleeding hearts must have turned into disciplinarians who believed the poor got what they deserved. If conservatives and liberals have such deep, almost genealogical differences, how does one explain the shift? 

Edsall: There has been a steady trend in America over the past half-century toward a culture of self-expression and self--fulfillment. Communal values of self--sacrifice, virtue, courage, honor, and a host of traits associated with the ideal of selflessness have been eroded. This movement is, not surprisingly, reflected in our politics, where notions of solidarity and the “brotherhood of man” no longer compel broad respect. You clearly are addressing related issues in Age of Greed. I would argue that the right and left have competing moral codes and that each side believes its own moral code to be superior to that of the other. It is the intensity of belief on each side that makes partisan conflict so difficult to resolve. I will be working on expanding this argument in the near future.

Jeff Madrick is a senior fellow at the Roosevelt Institute and the Schwartz Center for Economic Policy Analysis at the New School and the editor of Challenge magazine. Thomas Byrne Edsall holds the Pulitzer-Moore Chair at the Columbia University Graduate School of Journalism and writes an online political column for The New York Times