A year ago, I made the decision to switch from studying history to evolutionary biology. I spent the entire summer weighing my options and considering the benefits of both degrees. Part of what I found appealing about biology, and science in general, is its absolute reliance on evidence; arguments from authority are never allowed. Instead, undergraduates sit around a conference table for two hours ripping apart the works of the greatest evolutionary biologists and anthropologists of the past century; we study a contentious subject. This is why we find it impossible to take creationists seriously, or climate change deniers, or anti-vacciners; they have no evidence.
I’ve watched the recent debates over our economic policies for the next few years with great dismay. I hear repeatedly that we should not be passing on more debt to our children (meaning me I suppose). Perhaps that sentiment would seem sincere if the very same people hadn’t already ensured that we won’t get around to paying off current deficit spending until my children’s time, or maybe their children. The majority of the current deficit over the next decade comes from the Bush presidency and the Republican Congress that paid for nothing. This is a fact; the numbers are straightforward enough.
But what dismays me the most is not the insincerity, but the fact that the very people who claim to be looking out for my interests are the ones most actively engaged in undermining them. It is, of course, impossible to take congressional Republicans seriously when they talk of fiscal austerity as their justification for blocking unemployment benefits; their very next move has been to fight for a cut in the estate tax. Not to mention the fact that Republicans always preach about cutting wasteful government spending without actually specifying what programs they will cut. Rather, I’m talking about the “conservative” Democrats who are arguing for fiscal austerity.
The argument goes like this: fiscal austerity is a good thing because we say so. End of argument. No data, no evidence, no historical precedent.
The argument against fiscal austerity can be boiled down to this: Hoover in 1932, Roosevelt in 1937, and the Weimar Republic from 1930 to 1932. Pretty simple, right?
By 1932, the financial crisis was largely over, which is basically the point we reached at the end of last summer. Fiscal austerity gave us the Depression.
In 1937, President Roosevelt felt that there had been enough of an economic recovery to balance the budget; he cut spending and raised taxes, as Ireland has and most of the G20 has pledged to do. Roosevelt’s decision led to higher unemployment and the loss of any progress out of the Depression. Not surprisingly, Ireland currently has 13.7% unemployment and cannot find investors specifically because their policy of fiscal austerity is seen as too risky.
And in Germany, unemployment was 30% by 1932. (The US peaked at 25% at about the same time due to President Hoover’s policies).
E. O. Wilson, Harvard’s great evolutionary biologist, wrote a book about a decade ago entitled “Consilience.” This was the presentation of his argument that all human knowledge, from the natural sciences to the social sciences to the humanities, can be united. Much as chemistry stands on physics and biology stands on chemistry, he argued that the social sciences and humanities stand on biology.
Whether he’s right or not is not the issue at the moment (maybe I’ll write about that in the future). What’s relevant is his criticism of the social sciences. Specifically, economics.
Wilson is a gentle old man; the archetype of the kindly old grandfather. His criticisms of the social sciences were about as close to scathing as he will ever come. The specific criticism was that so much of economics relied on what he termed “folk psychology.” In other words, it relied on “common sense” and not data and evidence. As has become clear, classical economics was one such piece of folk psychology; there’s a reason why behavioral economics has been on the rise since the Recession began. Last fall when I heard the economic historian Niall Ferguson say “Classical economics is dead,” I thought the era of folk psychology was over.
Current deficit spending will have little impact on long-term deficits and will not harm our recovery. On Wednesday Doug Elmendorf, the director of the CBO, reiterated this point, which has been made most prominently by Paul Krugman (here, here, here and here). In fact, the decrease in stimulus spending will lead to less economic activity, which in turn inevitably leads to lower tax revenues (why do you think our state budget, which was passed this week, included so many major cuts?). There also has yet to be any evidence that we’re risking an inflationary crisis.
The options are pretty straightforward when you stop to consider the evidence: continue stimulus spending in the short term and fight your way out of the recession or follow the Irish down the road to fiscal austerity, high unemployment, no investment, and a worsening Recession. Seems pretty straightforward to me.
So please, consider the evidence before forming an opinion on this. And if not, I would ask that the individuals arguing for austerity stop doing so in the name of their children; you’re not acting on our behalf.