Blame It on Conventional Wisdom

I think Megan McArdle and Dan Drezner are a little too close to the real economic policy to get the clear–well, non-technical and hazy–conventional wisdom about balanced budgets, especially among many left-of-center types.  The filtered down CW, let over from the Clinton years, is that Democrats are the inheritors of the fiscal responsibility mantle, a notion cemented by overturing Ronald Reagan’s structural deficits in the late 90s. This was fairly clear in almost every Democratic speech innvolving economic policy in the 2004 and 2006 elections.

But the convential wisdom always lags behind the actual debates in the policy wonk trenches.  Several months ago, Brad DeLong and Paul Krugman both argued that Rubinomic budget balancing merely enabled irresponsible Republican policies and a right-wing class war that lead to greater inequality.  Krugman’s summed up his advice to the incoming Democratic Congress thusly:

The answer, I now think, is to spend the money — while taking great care to ensure that it is spent well, not squandered — and let the deficit be. By spending money well, Democrats can both improve Americans’ lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president.

McArdle and Drezner miss this, I think, because they are too knowledgeable. While not necessarily agreeing, they’re savvy enough to know that Democrats don’t want to take their current short term gains and argue for fiscal strictures, especially in light of increasing populist sentiment.  The mistake, however, is to make their informed opinions representative of the average political observer.