Tuesday, June 14, 2011
Here's another great encounter in the Fox green room.
I went over to Fox yesterday to do “Cavuto” and while waiting in the green room I saw my friend Bob Beckel and another guy who I thought at first was former White House Budget Director, Robert Orszag. Believing it was Orszag I thought to myself, “Here goes, I’m gonna be doing battle with this guy.” That’s because Orszag is a noted deficit hawk.
Just as I started gathering my thoughts for a debate with a Orszag I heard Beckel say, “Hey Mike, I’d like to introduce you to Senator John Barroso.” I was relieved to find out that the guy was not Orszag, but then I realized that Barroso was a conservative Republican Senator from Wyoming so if we ended up having a conversation it would go pretty much the same way.
Beckel said that although Barroso was a Conservative, “he was one of us,” meaning that he was open minded and willing to listen to both sides of the argument.
“That’s good,” I thought. Actually, Borrosso is a very educated guy. He’s a physician and a surgeon and as such probably believes in the scientific method; had a good understanding of math and was capable of rational thought and judicious reasoning.
I decided to get the ball rolling and strike up a discussion with the guy. I figured, what could I lose? I’ve had many of these “convos” with loads of others who had far less brains than Barroso and besides, it was a good way to sharpen my MMT debating skills.
I opened with a simple question. I asked him if he could explain the GOP’s position on the economy.
“Correct me if I’m wrong,” I said, “but the Republican plan is to cut spending significantly, right?”
“Yes,” he answered, “anywhere from $2 trillion to $4 trillion.”
Actually, Paul Ryan’s plan calls for spending cuts of $6 trillion, but I thought I could present my case well enough with the numbers he threw out. Moreover, Obama himself said he’d do $4 trillion so, presumably, a deal could get done at that number. I’d go with that.
So I said, “Okay, Senator, let’s say you agree to cut $4 trillion over the next 10 years. That equates to $400 billion taken out of the economy every year for the next 10 years, correct?”
He nodded his head.
“Using current GDP of $14.5 trillion, that means shrinking the economy by 3% each year for the next 10 years,” I explained.
Actually it’s more because each year as the economy shrinks, that fixed, $400 billion reduction in spending equates to a larger and larger slice of GDP.
“So, Senator,” I went on, “the GOP plan would shrink the economy by 30% or more, roughly equivalent to what we saw during the Great Depression. Can you explain to me, sir, how that results in greater job creation and more prosperity for all?”
He looked at me completely dumbfounded. Seriously.
I saw that he seemed to grasp my example and my numbers and his face almost looked a bit worried as if to suggest that maybe it wasn’t such a good plan after all. You could see his mind going over the math.
At that point I asked him, “Do you know what makes up our economy? I mean, what is our Gross Domestic Product comprised of?”
I just figured a guy who’s making economic policy should know what the economy is, right?
He gestured to me as if to say, go ahead and please explain it.
“Well, there’s personal consumption,” I said. “That’s everything households spend money on . That’s the biggest part. Then there’s government spending and investment, which is everything the government spends money on. By the way, that also happens to be the second biggest component, nearly two times as big as business investment. Then there’s business investment and finally, there’s net exports, which is almost always negative because we run trade deficits.”
Once again I posed the question, “Senator, how can you shrink the second biggest component in the economy by such a huge amount and expect to create jobs and grow the economy?”
At that point I could see he lost all his logical arguments, so he fell back on the tried and true response of all Deficit Terrorists and hit me with, “So you’re one of those Keynesians who thinks it’s okay to just borrow and spend forever?”
That’s what they do. When all else fails, throw the labels: Keynesian, Socialist, Communist. I knew at that point there was no sense in proceeding any further. Cognitive dissonance had set in and his otherwise rational, scientific mind was stymied. There was no way he was having any of this. He shook his head and looked at me with incredulity. I was the crazy Keynesian.