Struggles over public policy take place on two levels – the day-to-day conflict over specific policies (should tax cuts be extended and for whom, whether we should balance the budget or stimulate) and the larger, often somewhat subterranean debates over the political economy of the country.
Behind debates (largely within the Democratic Party, given the Republican Party’s commitment to universal obstruction) over whether to “stimulate now, and cut later” or “cut now and cut later” is a division over what kind of economic order we want to have. The Stimulus Caucus broadly supports an economic order marked by more attention to unemployment levels, economic growth, and investments in infrastructure and human capital. The Pain Brigade by contrast supports an economic order marked by more attention to the profits of the financial sector, and maintaining weak regulations and low taxes on financial corporations, financial executives, and stockholders, and which is more comfortable with high levels of unemployment – as long as it means low inflation and low interest rates.
However, as much as I side with the Stimulus Caucus, I feel compelled to point out that their basic model of “stimulate now, cut later” is marked with a serious flaw: stimulating back to the pre-crash economy isn’t good enough, because the pre-crash economy has serious long-term problems that require permanent solutions.