There are no libertarians in foxholes, it turns out. And Republicans won’t be able to unwind their endorsements of deficit spending.
FROM THE WASHINGTON POST | MARCH 25, 2020
The federal government is gearing up to pass an emergency stimulus bill that will start at $2 trillion but will probably end up being only the first of many; states are aggressively rolling out measures such a rent abatements, loan forgiveness and mortgage moratoriums. The sheer urgency of the new coronavirus and its damage are overpowering free markets, shuttering businesses and triggering responses that only four weeks ago looked impractical, naive and socialist. Now, they are essential.
Sen. Bernie Sanders (I-Vt.) won’t become president. He won’t even get the Democratic Party nomination. But in one of the many upending aspects of this pandemic, his ideas — that every American must have basic economic security, that we are a rich nation able to foot the bill for guaranteed safety nets, including affordable access to health care, that students should not have to take on untenable debt loads to get degrees and that large corporations must do a better job protecting the wages and employment of their workers — are not just mainstream in the age of the coronavirus but embraced across the political spectrum as necessities. “Even someone like me, the most conservative and fiscally conscious senator in the country, is willing to spend federal dollars to help millions of workers,” said the libertarian Sen. Rand Paul (R-Ky.) (who has tested positive for the virus) this week. Tom Cotton (R-Ark.), one of the most ideologically conservative senators, added that “Our government at every level has to take responsibility for caring for our people and caring for their health and their material well-being as well.” Never underestimate the ability of politicians to change tunes with changing circumstances, but it will be hard to walk back from these unequivocal shifts.
At the end of last week, the House and the Senate were discussing an $800 billion bill; by the end of the weekend, that figure was $1.5 billion. By the end of Monday, the House led by Speaker Nancy Pelosi had upped that to $1.5 trillion. Given that, as Treasury Secretary Steven Mnuchin warned, we are facing an unimaginable unemployment spike to as much as 20 percent with 10 million to 15 million more people unemployed by the end of May (barring the unlikely event that we all, as President Trump hopes, get back to work after Easter), this is likely not to be the end of the stimulus spending but the beginning.
Once you have given trillions of dollars in direct aid and loans not, as in 2008-2009, to big banks or auto companies but directly to people, small businesses and the health-care system, it will be mighty hard to argue in the future that such spending can’t be done, that it will bankrupt the United States, that it will trigger massive inflation or spook the bond market, as conservatives and libertarians have argued for generations.
The only correlate for the radical change in the relationship between government and society in U.S. history is the 1930s. When the crisis of the Great Depression erupted in 1929, it took almost four years before the federal government (or state governments for that matter) shifted from its stance of letting the economic cycle play itself out. Andrew Mellon, treasury secretary at the time, infamously said about the millions thrown out of work, “They deserved it,” and when asked what should be done, quipped, “liquidate labor, liquidate stocks, liquidate the farmers … purge the rottenness out of the system.” President Herbert Hoover saw his role as convening expertise and providing some backstop to businesses, as well as closing the United States economically to a Europe that he believed was the source of the economic infection. By 1933, the results of the moralistic laissez-faire were disastrous.
When Franklin Roosevelt was elected, he at first did not plan on expansive government spending, but within months of becoming president, his administration sprang into action to intervene and spend to a degree that had never been contemplated before. Even then, while expanding government spending to 20 percent of the overall economy, many — including John Maynard Keynes who had been an advocate all along of government intervention — believed that the government was not spending enough. The fact that the Great Depression stretched on and on may have vindicated that view.
Similar debates revolved around government spending in 2008-2009, with policymakers revisiting the lessons of the Great Depression but ultimately spending far less than what might have been needed to provide a real cushion as the unemployment rate skyrocketed into the spring of 2009. Hence the view, widely shared by working-class America, that government response to the Great Recession was to bail out the banks and not the people.
Now look at what is happening today. The United States — along with nearly every country in the world reeling from the economic shutdown in the face of the public health crisis that the virus presents — is about to authorize the largest spending bill, including in wartime, with the bulk going to individuals and small businesses and not to companies. It will not be enough, but the fact that this imperative has been recognized on all sides of the partisan divide will itself change the political landscape, perhaps permanently. The New Deal created new political coalitions that remained entrenched for decades. We could be in for the same.
It’s possible, of course — some might say likely — that once this crisis passes, the Republican Party, either in power or in opposition, will revert to form. It will demand fiscal discipline and write off the bout of spending as a unique, emergency measure. For sure, some will, just as pockets of resistance to the New Deal remained entrenched for decades. But once you have said, as Cotton did, that government is responsible for the health and well-being of all citizens, it will be hard to put that communitarian genie back in a free-market, libertarian bottle
The wave of spending, which will almost certainly reopen the question of structural safety nets for health care and expanded unemployment insurance, will mark the ascendancy of views that were marginal a month ago and decimate the entire spectrum of libertarians to tea party Republicans. You can’t, as libertarians such as Mellon have been doing, make a moral hazard argument about the spending; no one’s bad behavior is being rewarded in this wave of spending, other than the behavior of being alive and hence susceptible to a coronavirus. You can’t argue that much higher levels of government spending are untenable; and you certainly will not be able to argue with any coherence that public health is not an imperative and that a national system of guaranteed health care is not an issue of national and personal security.
Sanders has seeded his ideas into the political mainstream. The idea that government must provide an unequivocal and strong safety net, with income and health at its core, is now and will be the new governing creed.