In his 1962 commencement address at Yale -- where he observed that he now had “the best of both worlds: a Harvard education and a Yale degree” -- John Kennedy became the first president to openly defend the deficit spending his predecessors had pursued to counter economic downturns.
“The great enemy of truth,” he said, “is not the lie—deliberate,
contrived, and dishonest—but the myth—persistent, persuasive and unrealistic.” He argued that “mythology distracts us everywhere—in government as in business, in politics as in economics, in foreign affairs as in domestic affairs.”
The speech offered a preview of the transformative 1960s. It has new relevance as a charter for our own time—when another young president, confronting an unprecedented range of crises, works to overcome myths as persistent as those that threatened
progress half a century ago.
One of the most stubborn is what Kennedy denounced at Yale—the notion that deficits are always evil and the balanced budget an inherent public good. This myth is now constantly exploited by do-nothing opponents of Obama’s recovery plan. On Sunday, George Stephanopoulos read a viewer’s complaint to Treasury Secretary Tim Geithner: “How do you justify printing money out of thin air?” Isn’t the inevitable consequence “hyperinflation?” Geithner calmly rebuked the cliché by pointing to the Federal Reserve’s capacity to counter inflation by raising interest rates once the economy is back on track. After all, cutting spending now would accelerate, not reverse, the downturn, and trigger a spiral of declining federal revenues that could leave budget balancing out of reach no matter how deeply we cut.
This is elementary economics. However, Republicans, who are either blinded by ideology or cynically clear-sighted about the political dividends of a prolonged recession, robotically call for deficit reduction anyway. They propagate two contradictory myths—that deficit spending failed during the New Deal and, as Bush pollster Matthew Dowd alleges, that FDR’s early gains against unemployment came after he slashed the federal budget.
In reality, Roosevelt increased spending overall by 40 percent from 1933 to 1934, and the deficit by nearly a third. In the first five years of the New Deal, the gross domestic product rose more than 40 percent. The New Deal faltered not when FDR disdained conservative advice on deficits, but only when he briefly followed it. After Roosevelt drastically cut the deficit in his 1937 budget, the economy promptly tanked. When FDR reversed course, the economy turned around.
Barack Obama first confounded the anti-deficit mythology with the passage of the stimulus bill -- despite nearly unanimous Republican opposition. It’s likely that his budget, too, will pass largely intact as he skillfully deals with the “moderate” Democrats reflexively drawn to balanced budget mythology. The final product will include health care reform as the President slays another myth—that this complex issue must be postponed in favor of a single-minded focus on the economy. As New York Times columnist Paul Krugman—hardly an uncritical fan of the administration— points out, dealing with health care’s soaring costs is essential to long-term economic recovery.
Congress will approve the Obama budget through a process known as “reconciliation,” which requires only majority support in the Senate. Thus, it can’t be blocked by filibuster. This likelihood has led to the propagation of a new myth: that it’s unfair or unwise to enact a major initiative in this manner. This claim is risibly transparent coming from the same Republicans who used reconciliation repeatedly during the Reagan and Bush years. Their crocodile tears about Senate process are as opportunistic as their jeremiads about the national debt, which doubled as they rubber-stamped George W. Bush’s reckless spending.
Mythology will succumb once more this week at the G-20 summit in London. Conservatives are already celebrating the anti-Obama outburst of Mirek Topolanek, the hitherto obscure Czech Prime Minister and temporary President of the European Union (rendered even more temporary in his own country after his government lost a vote of confidence in the Czech Parliament). He’s a right-wing ideologue who denounced the Obama stimulus as “the road to Hell”—to the consternation of more sensible European colleagues.
In 1933, FDR blew up a London economic summit that sought to set fixed currency exchange rates, a virtual return to the gold standard that would have hobbled his economic strategy. This time, the British government agrees with the American approach and actually led the way during Bush’s waning months. Obama also retains his commanding popularity across Europe. He will leave the G-20 summit with his economic policy whole and with some measure of consensus, at least on financial reform. He will
then visit Prague, where I predict he will receive an overwhelmingly positive reception.
It’s amusing to watch unilateralist Republicans invoke European opinion to shore up their opposition to an American President. But perceptive conservatives are also beginning to fret that Obama just might be succeeding. George Will has opined that economic recovery won’t be due to Obama’s policy – a preemptive myth in the making.
Great presidents must combat myths, no matter how persistent. FDR beat back his own yearning to return to a balanced budget. JFK explicitly repudiated that enduring orthodoxy, thereby pointing the way to the prosperity of the 1960s. Ronald Reagan, a self-proclaimed hard-liner, ultimately repudiated his long-held conviction that we could not make peace with the Soviets, and he defied the all-but-universal belief in the permanence of the Soviet Union.
Like them, Obama has chosen a path less traveled. After fewer than 100 days, there is reason to believe he has marked a way forward for America and, very possibly, to his own greatness in the presidency.