Except in the most extreme circumstances, increasing government spending on infrastructure would be a very good idea. We are living in the most extreme circumstances.
One of the early trial balloons from the Trump transition team involves a (very vague) suggestion that the country engage in a large rebuilding program for roads, bridges, airports, and so on. This idea comports with Trump’s statements during the campaign – which is itself remarkable, given how many of his promises have been dropped so quickly.
Shortly after the election, House Democratic leader Nancy Pelosi announced that her party would enthusiastically work with the new president to enact a large public works program. I can see why she said so, but following through on that announcement would be a colossal mistake, unless the Democrats can get something very important in return.
In a column in the very near future, I will explain why spending on public infrastructure is, in principle, such a good idea. But before doing so, it is more important to understand why even the best ideas are now subject to perverse new political realities.
To dispose of a simple point first, I am not merely saying that Democrats should oppose an infrastructure plan that looks like an invitation to corruption at the expense of taxpayers. There are plenty of indications that Trump indeed would set up his plan as a windfall for Wall Street, with very little actual increase in public investment.
Even so, it would be too easy to say merely that Democrats should oppose a bill because it would fail to deliver a critically needed benefit to workers. They should obviously do so, but my point here is different: Even if Trump offers to work with Democrats on a bill that would actually be good public policy as a matter of economics, the Democrats should not necessarily sign on.
This counterintuitive argument ultimately relies on the question of what the Democrats risk, both to themselves politically and to the country in the long run, by going along with a Trump infrastructure plan.
As I will argue below, the Democrats could offer Trump a deal that would allow them to support infrastructure spending, a deal that would involve the protection of voting rights. Before I get to that argument, however, it is essential to address some important preliminary matters.
Who Will Be Blamed for a Fiscal Crisis?
Shortly after Election Day, the senior economics correspondent for The New York Times argued that “The Trump Administration Could Test Whether Deficits Help the Economy.” This ought to be good news.
Indeed, it might be possible to argue that the success of a massive infrastructure spending plan would validate what Keynesian economists (like me) have been saying for decades: Borrowing money to spend on valuable, productive investments is good for the economy.
The problem is that increased infrastructure spending under Trump will happen at the same time that Republicans will be gleefully passing the huge, regressive tax cut that Trump promised them during the campaign.
Why is that a problem, or even relevant? After all, is it not still good to repair and modernize the nation’s infrastructure, notwithstanding anything else that the government might do? Why forgo a good policy merely because we are also likely to adopt bad policies?
If infrastructure spending goes up while huge regressive tax cuts also go into effect, we are going to be running two huge economic experiments simultaneously. Both will result in significant increases in deficits and debt, but their effects on the economy will be diametrically opposite.
After all, even though conservatives have long insisted otherwise, Keynesian economists most definitely do not say that borrowing money is always and everywhere a good idea. Just as there are good reasons to borrow money, there are also very bad reasons.
Tax cuts for the rich are the worst possible reason to increase federal borrowing. We know from decades of experience that trickle-down economics does not work, and the result of more such tax cuts will inevitably be to increase inequality while undercutting the government’s ability to address the nation’s priorities.
Most importantly, it is quite possible that the amounts of borrowing needed for a serious infrastructure plan, when added to the borrowing required to pay for the Republicans’ regressive tax cut, could actually lead to the fiscal crisis that Paul Ryan has been predicting for his entire adult life.
What then? Will liberals be able to say, “Keynesian economics says that infrastructure spending is good, while regressive tax cuts are bad, so our position is validated”? They can try, but it is much more likely that a conventional wisdom will emerge that says that big spending is always wasteful and dangerous, while tax cuts are always a good idea. Spending will take the blame.
Why am I so certain that the conversation will take that turn? Because in Washington, even supposedly neutral economics reporters seem to believe at the DNA level that it is good and right to criticize government spending. (See “entitlements.”)
Therefore, the Democrats will have exactly one shot at a big public spending program under Trump. If they allow that to happen when Trump’s tax cuts are increasing debt to the point where it truly becomes problematic, then Democrats will not only be blamed for any ensuing crisis but they will have allowed government spending to be permanently discredited. There will be no next time.
Who Gets Blamed When Things Go Wrong (and Right)?
Beyond the specific blame/credit game that would arise from spending increases and tax cuts, there is the further question of who wins and loses elections because of the effects of economic policies.
The Democrats have apparently been considering the possibility of trying to work with Trump and then take political credit when things start to go well. They seem to think that they could argue: “We got the economy going by supporting the big infrastructure bill, bringing back jobs and prosperity to America. Democrats in 2018!”
This, however, is a serious misreading of how credit and blame are apportioned in Washington. As Jonathan Chait explained recently, the one thing we now know with certainty is that voters reward the party of the president when they think that things are going well, and they turn to the other party when they are unhappy.
This is obviously what happened in 2008, when Democrats swept the elections in the midst of the worst economic crisis since the Great Recession (and when the Iraq war had become a political liability). In 2010, even though it was congressional Republicans (and a few conservative Democrats) who had prevented the government’s economic policy response from being more effective, the voters punished Democrats harshly.
With a brief respite in 2012, when Barack Obama was able to win reelection with some evidence of coattails, the results in 2014 and now in 2016 clearly fit this pattern. Republicans succeeded in making Obama’s presidency appear (to barely enough voters in some swing states) to be a failure.
Thus, as Chait argues, if the Democrats think that they can run in 2018 on the economic benefits that would flow from infrastructure spending – and there would definitely be benefits – they will be sadly mistaken.
This is, of course, an incredibly cynical argument. Moreover, it is seriously uncomfortable for anyone with a conscience to argue that the only way for a party to behave while in the minority is to hope for the country’s failure.
As disturbing as that idea might be, it is now also sadly true. In the context of the politics of the judiciary, Dahlia Lithwick recently made a similar argument: “But for all that I have railed against destructive partisanship directed at fragile courts, I am persuaded now that the only way to answer nihilism is with nihilism of our own.”
But would it not be disastrous for the opposition party if voters could look at that party’s obstruction and blame them for the president’s failures?
I guess the most authoritative answer to that question could be provided by Senate Majority Leader Mitch McConnell and Speaker of the House Paul Ryan. They and their party certainly seem to have avoided the public’s wrath, even though they quite openly spent eight years trying to make the country worse off for their own political gain.
The bottom line is that, if things go well, Trump and the Republicans will say that they deserve the credit. And if things go badly, those negative results will be used as proof that “big government is the problem.”
The Time and Place for Principled Stands
As I noted above, during Barack Obama’s presidency, the Republican Party has been unanimous in blocking everything that might have made matters better for people in the country, and they have blamed Obama for the relatively (but by no means completely) disappointing outcomes.
By far the most extreme example of Republicans’ blind obstructionism was in their repeated threats to refuse to increase the debt limit, in an effort to force the president to default on the obligations of the United States. Republicans were threatening to prevent the president from carrying out the very laws that they themselves had passed, but no matter. Hypocrisy was in fashion.
What were Republicans trying to accomplish? They said that they wanted to reduce federal spending and pay down the debt.
The problem is that they did not really care about those things. During George W. Bush’s presidency, they increased spending and cut taxes. During the Obama years, they refused to accept even ten dollars of spending cuts for every one dollar of increased taxes. This is not a party that can be taken seriously when it comes to fiscal issues.
During those stare-downs between the president and his opponents, I joined many others in denouncing the Republicans’ tactics as “hostage taking.” They were trying to force the president to do something that he otherwise would be neither willing nor legally able to do by holding the threat of a global economic collapse over his head (and everyone else’s, too).
But that does not mean that a party should never be willing to impose a short-term cost in pursuit of a long-term goal. The Republicans’ debt-ceiling stance was wrong not because it never makes sense to play hardball. It was wrong because their goal was economically incoherent, and the costs that they were willing to impose on everyone were insanely high.
Similarly, when the Republicans decided to shut down the government in 2013 in order to try to cut funding for Planned Parenthood, their supposedly principled stand had nothing to do with abortion and everything to do with attacking the government for the sake of attacking the government.
But whether or not one thinks that the Republicans’ cost-benefit calculation was appropriately balanced, the point is that the Democrats should now be willing to draw some lines in the sand. They should be able to say that they will not join in on some policy proposals, even some proposals that they would not otherwise oppose.
Remember that this is all in the context of a world where anti-spending arch-conservatives still hold sway in Congress. If Trump needs Democrats’ votes to pass his infrastructure plan, Democrats should ask for something in return.
Would Trump’s supporters respond positively? Probably not. They would surely say that Democrats are being petulant and should not need an inducement to sign onto a good policy agenda.
But that too would remind us of the bad old days of debt ceiling standoffs. Each time, Democrats were saying, “Why do we need to induce you Republicans to do what’s necessary to avoid a global economic crisis? You should want the same outcome that we want!”
Democrats can offer a two-part response when they are asked that question. They can first argue that what they are refusing to do (spend on infrastructure) will impose an economic cost, but not a catastrophic one. Second, they can ask for something in return that truly matters.
Voting Rights As the Democrats’ Last Stand
The Democrats should, therefore, offer Trump a simple deal: We will give you the votes you need to pass a serious infrastructure spending program, if you will agree to work to stop all of the ways in which Republicans have been rigging elections.
This is a matter of political survival for the Democrats, but it also flips the public relations back in their favor. Rather than saying, “We refuse to help rebuild the nation’s infrastructure,” they would instead be able to say, “Modernized infrastructure is good, and free and fair elections are even better. Why can’t we agree to have both?”
Indeed, there is no reason that the Democrats could not make this basic deal the central principle of their loyal opposition. “Do you want our help on something? OK, let’s talk about gerrymandering.” “Republicans are refusing to pass another one of your priorities? Time to talk about voter registration.”
I have no illusions that Republicans will go along with this. And because much of what Democrats really need requires legislation, even an enthusiastic response from Trump (whose election was, in the end, arguably the result of voter suppression) might not get the Democrats everything that they need. (At the very least, however, Democrats could get Trump to veto any attempts by Republicans to gut the Voting Rights Act and other civil rights laws.)
Even so, the Democrats could do worse than standing up for democracy and for principles like one-person-one-vote. If they want to have a future as a viable party (at the national and state levels), they have to find a way to stop Trump and the Republicans from turning future elections into shams.
The Democrats do not have many points of leverage, and they need to think about how best to use whatever political capital they can muster. Resisting their own extinction, while defending the founding principles of our democracy, seems like a good way start.
