Developments in the vain pursuit of economic certainty

 

xaviersuarezesq@aol.com

It’s Harvard vs. UMass, students vs. teachers, deficit spending vs. balanced budgets, big government vs. the famous saying that “government governs best which governs least.”

It had been a turbulent, contradictory half-century for the science of economics. The cycle of contradiction had begun in the ’60s, when a Republican president, Richard Nixon, had proclaimed that “we are all Keynesians now.” And it had ended on the opposite side of the ideological spectrum when, in 2010, two eminent Harvard economists Carmen Reinhart and Kenneth Rogoff — “R&R” for short — analyzed all the data available for two full centuries in the industrial West and concluded that high deficits are not helpful to economic growth.

When the Harvard professors published their findings — just three years ago — it seemed fairly established that a nation with accumulated debt in the range of 90 percent of GDP, such as the United States now has, must suffer a slowdown in growth.

But the edifice of economic certainty came crashing down, as three young whippersnappers from the University of Massachusetts took the raw data used by the Harvard professors and crunched it carefully, concluding that the professors had left out crucial data and overstated their conclusions.

Suddenly, after three years of academic wars, we are back to where it seems we have always been: in the vain pursuit of economic certainty. We are confused and more than a bit frustrated that economics resembles more an art than a science.

But surely, there are some things we can say with some degree of certainty. Despite the mistakes made by Harvard’s R&R duo, it is fairly well established that a nation with accumulated debt of about 90 percent of GDP must endure a growth slowdown. It is also established that the U.S. economy will never be as the laissez-faire Austrian School theoreticians would like it to be: an unregulated, survival of the fittest, dog-eat-dog competition in which government is relegated to the role of defending the borders and imprisoning the criminals.

Whether we like it or not, our economy is a little more than 50 percent private and a little bit more than 40 percent public. The role of government has increased steadily under both Republican and Democratic administrations, as our national wealth grew to the point that we felt we could guarantee every American a measure of retirement security and basic healthcare, in addition to protection from domestic and foreign foes. Those on the right have to accept that the body politic has evolved to a consensus by which government guarantees a decent standard of living to all its citizens; those on the left have to accept the age-old wisdom that one cannot spend money that is not derived from either one’s own work or the savings of others who are more thrifty.

Both sides of the ideological spectrum should avoid simplistic answers to what continues to be a debate over the proper role of government in the economy. I remember, in that vein, the subliminal suggestion I heard at Harvard’s Kennedy School of Government that the perfect mix of public and private was 50-50. Contrary to that simplistic suggestion is the drumbeat of the far right, which quotes biblical texts to argue that “the poor will always be with us” and concludes from that text that too much income redistribution is a slippery slope to socialism.

Fair enough. But what are fair-minded people to do when the experts cannot agree, and the ideologues sow confusion to push their own narrow agendas? The answer is that we follow our common sense, which derives from our common humanity. Budgets need to be balanced for the simple reason that it is deceptive to not live within our means, saddling future generations for our spending folly. By the same token, all able-bodied citizens need to have a job, all children a decent education, all families a roof over their heads and all citizens access to basic healthcare and old-age income support.

Is that doable in a nation of 300 million people who produce $16 trillion in economic activity — equivalent to more than $50,000 per capita?

You bet.

Xavier L. Suarez is a Miami-Dade County commissioner, representing District 7.

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