Getting People Employed Does Not Equal Getting The Economy Back To Full Capacity

Tim Carney is not happy with the debate over the unemployment insurance (UI) debate. He cites a study finding that UI benefits account for “most of the persistently high unemployment after the Great Recession.” And while the scale of the effect is crazy — I’ll hand it over to Danny Vinnick to explain why — the raw fact that there would be some disincentive effect is perfectly reasonable. UI benefits essentially pay people for not working, so of course they’re going to be a bit more inclined to not work. Tim does a reasonable job of laying out how this happens on the individual level, and to his credit he characterizes it as economic rationality rather than laziness.

But then Tim throws out this at the end:

Liberals dismiss the disincentive effects [of unemployment insurance] today, arguing there just aren’t jobs out there. Maybe the jobs aren’t there because lengthy unemployment insurance is killing these jobs. This is a complex debate. It would be nice if we could have it.

This confuses what we mean when we talk about jobs. “Job creation,” “employment,” or the Bureau of Labor Statistics’ monthly job reports all mean the number of actual hires. That’s what the study Tim cites is referring to as well. But when we liberals talk about how there just aren’t enough jobs “out there,” we’re talking about BLS’ JOLTS data. That measures job openings — the amount of jobs in their untapped potentiality, as opposed to the number of jobs people have actually been hired for. It was one job available for every 2.9 people looking, at last count. The disincentive effects of unemployment insurance can drive down the number of hires, but not the number of raw job openings.

Employers create a job opening for one simple reason: they think it will increase their profits even after the additional expense of putting the new hire on the payroll is accounted for. What creates that circumstance of potential profit is untapped demand, pure and simple. If there’s not enough demand, the new hire won’t result in enough new sales, no matter how virtuous a worker she is. You can’t sell to customers who aren’t buying.

Generating enough demand throughout the economy to create jobs for everyone who wants one is an irreducibly ecological question. You cannot boil it down to the hard work and initiative of one person taking one particular gig. Individual agency is irrelevant here. And while there are lots of ways to boost demand, they all boil down to either increasing inflation or taking money from rich people to give to to poor people — moves Tim and his conservative cohorts are roundly opposed to in nearly all instances.

At any rate, if we didn’t boost demand but kept UI, we’d get more or less get the situation we’re in now. If we didn’t boost demand and didn’t keep UI, then yes, we’d get a slight uptick in people taking the available jobs more quickly. But they’d still be taking those jobs in a terrible economy in which wages are depressed and jobs are scarce. UI benefits have an unusually high mutliplier, and if they’re financed by taxes on the wealthy or by borrowing, the economic drag from the revenue collection will be virtually zero. So in terms of boosting demand, moving from people spending their UI benefits to spending their income from newly acquired shitty jobs would basically be a wash. So the “one job for every 2.9 workers” ratio wouldn’t change. And once that one job was filled, the other 1.9 workers would be left high and dry. Most likely, they’d just drop out of the labor force entirely, leaving the economy as a whole poorer for decades.

We do not want people to simply take what jobs are available in a terrible economy more quickly. We want the economy to be not terrible. Tim’s article and the entire conservative position on UI benefits operate by obfuscating this basic distinction.

Meanwhile, if we boosted demand but got rid of UI, we’d get way more employment than we have now, precisely because there’d be more jobs available for everyone to snatch up. The 1-to-2.9 ratio would even out. But if we boosted demand and kept UI, we’d still get way more employment than now, because the supply of jobs would go up relative to the supply of labor, which would drive up wages, making a job more attractive to the vast majority of workers than staying on benefits. Tim worries this second effect on wages is good for the employed but bad for the unemployed. But that only holds if you assume the terrible economy and the 1-to-2.9 ratio is the new unescapable normal. (Most likely because you’re ideologically opposed to the policies that would prevent them from becoming the new normal.)

In short, how much demand the economy has to work with, and thus how much it can produce, is everything. All the presence or absence of UI does is determine how much human suffering occurs in the interim. With all due respect to Tim, his concern about “tradeoffs” is a giant non sequitur. There’s no legitimate debate to be had here. What Tim actually wants is a circumstance in which conservatives’ deep emotional investment in believing the universe does not work the way it works is nonetheless treated as worthy of respect by people who actually understand the economics of the thing. There are a lot of things I could call that circumstance, but a “debate” isn’t one of them.


Thoughts On A More Effective And Egalitarian Monetary Policy

Here’s Tim Carney, tracking the genuinely interesting meeting-of-the-minds Wall Street and the Left arrived at in supporting Janet Yellen for Fed Chair.

The reason for the former’s enthusiasm is pretty straight forward: Yellen is a big fan of quantitative easing. That’s the relatively new form of unconventional monetary stimulus the current Fed Chair, Ben Bernanke, and his supporters have used to try to boost the economy. They’ve already cut short-term interest rates to zero through conventional monetary policy, so that can’t go any further — the infamous “zero lower bound.” So with quantitative easing, the Fed creates new money, then injects it into the economy by buying up both U.S. Treasuries and other instruments on the financial markets, like mortgage-backed securities, in an effort to move long-term interest rates and inflation expectations.

“Wall Street loves quantitative easing much more than it dislikes regulation,” wrote Yellen critic John Berlau of the free-market Competitive Enterprise Institute.

Republican investor Stanley Druckenmiller sounded a similar note: “This is fantastic for every rich person,” he said of quantitative easing. The Fed’s buying binge drives up demand for stocks and bonds, thus boosting the price of these financial assets. “Who owns assets?” Druckenmiller continued. “The rich, the billionaires.”

This critique of quantitative easing — that it inordinately benefits the rich — is hardly new. What interests me here is you really only ever see it deployed as an argument for not doing quantitative easing period. But that doesn’t follow! This critique has nothing to do with the basic macroeconomics of the matter, which say we’ve suffered an aggregate demand collapse and are teetering on the edge of a deflationary spiral, and thus the economy needs a big injection of new money. All the “it helps rich” critique implies is that, hey, maybe we should find some way to get the money into the economy other than buying up stocks and bonds.

Which is something I’m genuinely curious about. What are our alternatives? Well, the wonky ideal would be through direct cash giveaways. The Fed should literally just start cutting Americans checks. This would be the proverbial “helicopter drop,” properly understood. Steve Randy Waldman put forward a pretty slick version of how this could work a while back: whenever the Fed wants to inject money into the economy, it could just deposit it into every American’s bank account. When it wants to take money out, it could just coordinate temporary tax hikes with Congress.

Whither the injection of new money?

Whither the injection of new money?

I can see some possible problems with this. For one thing, roughly one quarter of Americans carry out some, or even all of their financial business without a bank account. These are the people who would need those stimulative Fed deposits the most, yet they’re also the hardest to get those deposits to in practical terms. I’d also worry about the political efficacy of tightening monetary policy by hiking taxes. That seems like a quick way to make everyone hate the Fed, and to make tight monetary policy even harder to carry out politically than it already is. (That said, I’m in agreement with Waldman and much of the blogosphere that insufficient monetary tightening has been the least of the Fed’s problems for the last few decades.)

At any rate, it’s certainly the cleanest and simplest proposal I’ve seen. The thing to remember is that the central bank isn’t really a “bank” in the popular sense. It’s more of a ballast chamber for the money supply. Right now it sucks money in and pumps it out in the form of bought and sold financial instruments. But there’s no reason it couldn’t do the same with direct cash transfers.

A less radical proposal, built more on existing policy, could leave conventional monetary policy’s buying and selling of government bonds unchanged, but turn to direct cash transfers whenever the zero lower bound looms. Essentially, replace quantitative easing with temporary boosts in social safety net spending. Congress could write language establishing a menu of programs that rely on giving people cash directly — TANF, unemployment insurance, Social Security, the earned income tax credit, the child tax credit, and so on — and then the Fed just decides how much extra cash it wants to inject and when, and spending levels on those programs would rise accordingly. If we ever established a universal basic income (and I definitely think we should) it could be added onto the menu.

It wouldn’t be perfect — you’d still be choosing Wall Street as the entry point for money creation under conventional operations — but I think it would be a big improvement over the status quo.

Now, contra the “it inordinately benefits the rich” argument, Scott Sumner has argued that where the money gets injected doesn’t have distortionary effects on distribution. But it does seem to me (and I admit we’re at the far outer limits of my policy acumen here) that his argument only works as long as the money actually circulates fully through the economy. Which gets us to Carney’s other point: the Fed has increased the money supply by about $2.7 trillion since the 2008 recession, but there’s been no corresponding increase in inflation, and the economy remains middling. So where’d all that money go?

Here’s one clue: Banks are holding $2.3 trillion in reserves — compared to less than a trillion in 2008. Also, corporations, feeling cautious these days, are sitting on record piles of cash, according to the Bureau of Economic Analysis.

This makes sense, considering the mechanism of QE: The Fed buys Treasuries from banks. But gun-shy banks don’t lend it so it sits on their books instead of entering the real economy, where it could cause job growth, inflation or both.

This is a slightly different problem that what Sumner was responding to. Not that quantitative easing amounts to Wall Street cronyism, but that economically privileged recipients of the new money are the least likely to push it out into the broader economy, precisely because they’re the least likely to feel the pinch in a downturn. Recipients of social safety net spending, on the other hand, are the most likely to feel that pinch. So why not make them the entry point for the new money?

Lastly, Joseph Weisenthal raised another suggestion, that corporate and bank cash hoarding simply shows the Fed hasn’t raised inflation expectations enough. Monetary policy simply remains too tight. Strictly speaking, I think this is correct. As Milton Friedman pointed out, nominal GDP growth and inflation are the two things by which monetary policy should be measured. Both remain quite low, which suggests policy is too tight as opposed to too loose.

There’s a solid case that the Fed’s policies so far, while failing to boost the economy out of its torpor, have effectively put a floor under it and prevented things from getting any worse. I’m also persuaded that a four percent inflation target would be vastly preferable to the Fed’s current target of two percent.

So I do think we could get more economic stimulus if the Fed went even bigger with its money creation. And given the current menu of options and political realities, that’s almost certainly the best course of action.

But I also wonder if we could be getting “looser” monetary policy by changing its structure as well as its size or ostensible targets. If every last dollar the Fed created was immediately getting pushed into circulation by its recipient, as opposed to piling up in corporate books and bank reserves, could we be getting more bang for the buck?

You Can’t Talk Honest Budgets Without Acknowledging the Politics of Depressions

Reihan Salam dubs Ryan’s budget the “put up or shut up” budget, in that it forces confrontations with the unspoken unpleasantries that would accompany either the Democrats preferred spending or the Republicans preferred cuts:

[A] March 2012 report from the Tax Policy Center by Eric Toder, Jim Nunns, and Joseph Rosenberg examines the top marginal tax rates we’d need to bring debt to sustainable levels without significantly altering the federal government’s spending trajectory and they are strikingly high.  This is part of why a number of neoliberals, including Matt Yglesias and Josh Barro, have argued that we need significant tax increases on middle-income households: the spending cuts we’d otherwise need to achieve fiscal balance are in their view unacceptable…

Democrats declare Ryan’s proposed spending cuts unacceptable without acknowledging that broad-based tax increases are the most realistic way of avoiding them. Republicans, meanwhile, have not generally thought through the impact of (in particular) the Medicaid cuts envisioned in the Ryan budget.

The math of this is correct. I’m firmly in the Yglesias camp on this. You can’t make the kind of government I’d prefer fiscally sustainable without hiking taxes on the middle class.

However, you also can’t talk about this stuff without acknowledging the unique political environment of an economic depression. Americans are freaked out by the deficit in the abstract. But they don’t want their taxes hiked — reasonable, given that we’re in a depression — and they don’t want their government support cut — also reasonable, given that we’re in a depression. Politically, this should lead everyone to a pretty straightforward policy response: Don’t cut the deficit!

Happily, that response is fully consistent with Keynesianism and textbook macroeconomics. You don’t reduce deficits during economic depressions, through sending cuts or tax increases, because this sucks demand out of an already struggling economy. In fact, in the short run, you increase deficits through new spending to help drive the economy back to its prior level of output. Once the economy is back on its feet, then you reduce the deficit.

With robust economic growth, the tax hikes or spending cuts needed to reduce the deficit become much less politically fraught. People tend to feel more secure in their circumstances, which makes them more tolerant of higher tax rates or lessened government support. I think this point is woefully under-appreciated. Depressions don’t just make deficits harder to close on a policy level, they make them harder to close on a sociological level as well. Conversely, getting back to robust growth lessens the hurdles on both fronts.

This should reemphasize what a godawful tragedy not getting a sufficiently large fiscal stimulus actually was. (Or sufficiently large monetary stimulus, for that matter.) We pumped enough demand into the economy to prevent a full-scale meltdown, but not enough to boost us back out. That left us limping along in a prolonged period of high unemployment, thus low revenue, thus expanded deficits. It also left us limping along through a prolonged period in which most Americans are already on the ropes, and thus vociferously opposed to any of the steps necessary to close the deficit. So both good politics and good policy converge on just not cutting the deficit right now.

Unfortunately, the Republican Party has made such an agreement all but impossible. While no politician ever suffered at the polls for increasing the deficit, fears of runaway deficits operate as a stalking horse in the public’s mind for a bad economy. So in a depression, demagoguing the deficit becomes a very effective short-term political tactic. And now that the Republicans have demagogued the deficit, they can’t very well turn around and agree to a policy program that blows it up over the short term, and they’ve mad it much harder for the Democrats to do so as well.

One other point: Your average European country not only has a broader, more regressive tax system than American — it also has a much more generous and expansive social safety net as well. I take that as evidence of an implicit deal required to satisfy your average populace of western voters. Low and middle income voters only tolerate significant tax burdens if those burdens are in equilibrium with generous government support programs. The kind of tax system American conservatives prefer has to be balanced against the kind of social safety net American liberals prefer, for political sustainability as well as fiscal sustainability. Right now America has neither.

You could argue that this is good reason to reduce both the tax burden and the size of government concurrently. But I think it’s pretty clear that the free market, absent significant government intervention, creates circumstances and distributions most Americans find utterly unacceptable. And we’re already pushing that boundary of the voters’ tolerance on that front.

I Don’t Think Charles Blahous Understands the CBO’s Models or the Politics of Medicare

One of the key assumptions in the Congressional Budget Office’s model — upon which it based its conclusion that the Affordable Care Act will reduce the deficit — is that the depletion of Medicare’s trust fund will be ignored and Congress will simply continue spending to maintain Medicare’s benefits. One of the key assumptions in Charles Blahous’ new study — which says the CBO flubbed it and the ACA will actually worsen the deficit — is that this depletion will most certainly not be ignored. From a follow up defense Blahous wrote of his study, which I think best encapsulates his logic on this point:

The historical evidence is overwhelming that Congressional behavior is heavily influenced by Social Security and Medicare solvency determinations. Specifically, Congress is much less likely to enact cost-containment measures in either program when projected insolvency is more distant.

Supporters of the ACA have elsewhere made clear that they agree the ACA will extend the Medicare Trust Fund’s solvency, protect its spending authority, lessen the risk of near-term benefit reductions, and mitigate the urgency of further Medicare reforms. Examples include David Cutler’s public policy memo, various Administration announcements, and Congressional Dear Colleagues.

These and countless other statements contradict the theory—on which the scorekeeping convention depends—that the extension of Medicare solvency is a budgetary non-event that leaves Congress just as likely to enact the same amount of further Medicare cost constraints as before the ACA was passed.

What this doesn’t answer is the question of why this is so. Does Blahous really think voters, and thus Congress, are concerned with the trust fund qua the trust fund? Of course they aren’t — neither the vast majority of voters nor legislators are policy wonks. What concerns them is whether Medicare’s benefits will keep coming as they always have. Voters and politicians are concerned with the insolvency of the trust fund only to the extent they think it will stop Medicare from buying retirees’ health care. “Trust fund solvency” is a stalking horse for “continuation of benefits.”

CBO assumes that when the chips are down, Congress will break the link between the trust fund and Medicare benefits. It will let the trust fund die, and continue funding Medicare out of general revenue. This shift would occur sometime in the next decade or two. And yes, I’m sure as news reports came filtering out that Medicare’s trust fund was going insolvent, there would be a bit of panic. But as soon as voters realized their Medicare benefits were still coming, the issue’s political potency would utterly vanish. To claim otherwise is to claim American politics values an abstraction (the solvency of the trust funds) over a concrete reality (whether Medicare benefits keep coming). Does anyone doubt me on this point?

This leads to a profound irony in Blahous’ dismissal of CBO’s model. One of conservatives’ biggest critiques of the ACA is that Congress lacks the fiscal discipline to maintain some of the spending and tax changes the law calls for. They cite such things as the Sustainable Growth Rate, which passed in 1997 and was supposed to cut Medicare payment rates, but which Congress has postponed every year afterward. Fair enough. But the fiscal discipline required to honor current law, and slash Medicare benefits in conjunction with the depletion of the trust fund, would dwarf the discipline required to adhere to the ACA or the SGR. Which is precisely why CBO assumes Congress will display no such discipline, and just keep spending to maintain Medicare.

This is important, because it helps illuminate what may be Blahous’ key logical error — and the error of the rest of the ACA critics crying “double counting.” Here’s Blahous explaining double counting in the appendix of his study:

[I]magine a law that cuts Medicare HI payments by $1 while also spending $1 on a new health program. The $1 Medicare HI spending cut extends the solvency of the Medicare HI Trust Fund, thereby allowing Medicare HI to spend an additional $1 at a later date. The $1 of near-term Medicare savings thus results in an additional $1 of later Medicare spending. Thus, if the law also spends $1 on a new health program, then altogether the law would permit $2 in total new spending while enacting only $1 in savings. On the whole, such a law would increase spending and worsen federal deficits. The case is similar with the ACA.

This misses one absolutely critical detail: CBO assumes up front that all Medicare spending will be honored, so that additional $1 of later Medicare spending is already built into its model. It’s already accounted for that $1 of promised future spending with commensurately higher future deficits. So that $1 is already in the baseline against which CBO measured the effects of health care reform. When the ACA finds $1 of additional savings and enacts $1 of additional spending, those latter two dollars balance each other out. $1 of new savings, $1 of new spending, $1 of future spending, and $1 of future deficits. “Double counting” or no, the CBO’s math adds up. Throw in the other bits of new revenue the ACA pulls in, and you have a net reduction in the government’s deficits.

One last way to look at it: Consider the government’s finances before the ACA passed. The Medicare trust fund is predicted to go insolvent in the next decade, and the CBO’s unified budget model is predicting large future deficits and debt. Now imagine that to shore up Medicare, the government decides to pass a hike in the payroll tax. What happens?

First, the solvency of the trust fund is extended, because new bonds are issued. But this is also new revenue, so it also improves the budget outlook under the CBO’s model. No one, I think, will protest this logic, nor claim there is anything untoward going on here. But it is effectively “double counting” as Blahous and the ACA’s critics have defined it. Conversely, the same thing happens if you cut Medicare’s benefits rather than hiking the payroll tax. It makes the bonds already in the trust fund go further, which extends its solvency. At the same time, you’ve reduced the government’s overall level of spending, so its deficits shrink.

In point of fact, this second scenario is precisely what the ACA did. It cut Medicare’s payment rates, which improved both the trust fund’s solvency and the budget outlook. From there, the ACA instituted new spending to help people buy insurance on the exchanges. This had no effect on the trust fund as it wasn’t under the aegis of Medicare, but it did worsen the budget outlook again. Finally, the ACA found new revenue outside of Medicare — the excise tax, new fees, new penalties, etc. — which once again improved the budget outlook.

So, the first step improved both the trust fund’s solvency and shrunk the deficit. The second step expanded the deficit again, but didn’t effect the trust fund. The third step also didn’t effect the fund, but did shrink the deficit again. Add up the net effect of these three steps — first cuts, then spending, then revenue — and the CBO’s unified budget outlook shows a slightly smaller deficit in the first decade, and a much smaller deficit in the second decade, than we had before health care reform was enacted.

As Paul N. Van de Water points out at the Center on Budget and Policy Priorities, these kinds of Medicare savings have been enacted several times in the past, were “double counted” each time — including by Republicans — and no one ever batted an eye. The only difference this time around is that the savings happen to reside in the same package of legislation as a new entitlement conservatives happen to loath. The conceptual complexities of the trust fund gave them an opening to play silly games with accounting logic, and man did they all leap at the opportunity.

Is It Time to Force a Clean Debt Ceiling Hike?

Even though passage of Boehner’s plan is looking increasingly unlikely, I realize the most likely fallback is Boehner cobbling together some cross-pollination of his plan with Reid’s plan. Then that passes through the House with a coalition of Democrats and more moderate Republicans, Reid gets it through the Senate, Obama puts pen to paper, and it’s a done deal. Essentially, not much different from what we would’ve gotten had Boehner’s plan passed the House, and then gone through the inevitable renegotiation in order to clear the Senate. (Although Ezra Klein has broached the possibility that Boehner moves to the right.)

As Klein has observed, today’s House vote was really a referendum on John Boehner himself, and how much credibility he has with his caucus. He’d have to lose Republicans no matter what in order to reach an accord with the Senate, but today’s vote would at least prove he has his party corralled.

Well, it turns out he doesn’t have his party corralled. At all. So assuming some miraculous eleventh-and-a-half hour recovery isn’t in the works, here’s the question: Even with his preferred plan, unsullied by comprise, Boehner wasn’t able to get quite enough Republicans together. Presumably, more than a few of those Republicans voting “yes” would’ve preferred to vote “no,” but didn’t want to be the last holdout. So once he starts moving left to collect votes from the other side of the aisle, I doubt it’s going to be a one-to-one trade off between Democrats and Republicans. It’s going to be more like a cascade effect, as more and more Republicans suddenly feel free to bail, forcing Boehner to acquire ever more Democrats and thus move ever further left.

So where does this end? How many Republicans does he lose? A third of his initial “yes” votes? Half? Two thirds? And once Boehner starts dealing, how much will the Democrats demand? More specifically, would they go so far as to demand a clean debt ceiling hike?

This was the White House’s original preferred route. And I know some Democrats in the House are floating the idea. It seems to me that once Boehner’s credibility with his own caucus starts unraveling, the Democrats could demand a clean bill as the price of cooperation. Force Boenher into working with their caucus, and whatever small number of moderate Republicans he can bring along. Obama could force the issue as well, declare that time has run out on putting together a complicated deal, and tell the legislature to get a simple one-sentence clean debt ceiling hike to his desk ASAP. (Though I doubt he’d do this.)

Am I off with here? Is this a serious possibility? Too much damage has probably already been done to avoid a market freakout should we take this route. But it’s the route that should’ve been taken to begin with, and it will save the country from a whole lot of stupid and destructive cuts.

Maybe “Starve the Beast” Just Requires a Lot More Patience and Nihilism Than Anyone Anticipated

Grover Norquist just attempted to defend his infamous “no tax hikes ever” pledge on the grounds that it forces government to focus on cutting spending — the old “starve the beast” theory of right-wing governance. Conor Frierdersdorf is having none of it:

In fact, it is more important than ever to be rid of The Pledge, because it has been a colossal failure.  Does anyone think that fiscal conservatives should be happier with the state of our nation’s finances now than they were when the pledge began 25 years ago? Does anyone still harbor the illusion that “starve the beast” is an effective method of shrinking the federal government?

Frierdersdorf quotes Kevin Williamson making essentially the same argument in National Review, and I know Bruce Bartlett has sounded this note as well. But I think it proves less than Conor and the other critics of “starve the beast” think it proves.

Obviously, we’ve demonstrated that using growing deficits to force spending cuts does not work over short time horizons. I think all sane and responsible people who initially bought into “starve the beast” did so on the assumption it would play out relatively quickly. A few years at most.

But what about long time horizons? What if starve the beast does work, but it just takes 25 to 30 years of mounting deficits and fiscal dysfunction before our political and civic culture finally swallows the cuts necessary to balance the government’s budget? Consider this latest fiasco over the debt ceiling increase. The Republicans and their Tea Party base may very well fail to gut the welfare state with whatever deal is finally struck, but I think it’s fair to say they’ve come within striking distance of that goal. Certainly closer than they’ve been at any other point in the last 25 years. (A prospect which, as a dedicated lefty, I find horrifying and infuriating.)

Now, obviously, intentionally mounting up debt for a quarter century in the name of imposing your preferred ideological vision is irresponsible to the point of nihilism. But this gets us to Friedersdorf’s more important oversight — namely, his belief that the American Right actually gives a damn about fiscal responsibility:

What Norquist doesn’t understand or won’t admit is that deficit spending is worse than a tax increase, because you’ve got to pay for it eventually anyway, with interest. Meanwhile, you’ve created in the public mind the illusion that the level of government services they’re consuming is cheaper and less burdensome than is in fact the case. If you hold the line on taxes but not the deficit, you’re making big government more palatable.

In terms of policy, as well as maintaining a healthy and self-aware civic/political culture, this is all perfectly accurate. But here’s the thing: Even if the public were receiving the full negative reinforcement of appropriate tax levels, as well as the positive reinforcement of popular government programs, the equilibrium we’d settle on would still be a bigger government than the Right is willing to tolerate. American voters remain incorrigibly resolute in their approval of the welfare state.

A conservative like Frierdersdorf (or Bruce Bartlett, Andrew Sullivan, etc.) could probably live with that. As far as I can tell, they support in moral terms — or at least do not obsessively oppose — what big government tries to do. But they also fear big government’s capacity to wreck the country’s economy. Their beef is based mainly on concerns with fiscal sustainability, so of course they’re going to oppose methods of shrinking government which themselves threaten or hold hostage the country’s fiscal health — such as 25 years of starve the beast, or risking economic cataclysm by not raising the debt ceiling.

And yet here we are, with a solid majority of the American Right and the conservative movement happily embracing both strategies. Which I really do think rules out the possibility that they care about fiscal responsibility. Maybe,maybe, most of them are so confused about economics, policy and history that they honestly think even a welfare state as modestly sized as America’s is completely economically unsustainable. But I find that hard to believe. Rather, if you simply listen to how they actually talk, they really are that obsessively opposed to big government. Or, rather, to the things for which you need a big government. The purpose and nature of the welfare state, whether on the European scale or the American scale, offends them as a matter of morality, of principle, and of ideology. And they feel this so strongly that they’re quite comfortable taking the nihilistic, scorched earth approach to shrinking government — fiscal sustainability be damned.