The Federal Reserve announced last week that it would launch no new stimulus programs to jump-start the economy, and editors at The Washington Post applauded Edward DeMarco, acting director of the Federal Housing Finance Agency, for refusing to refinance mortgages for struggling homeowners.
Though the proposed refinancing program would have provided relief for Americans desperate to keep their homes while providing a small stimulus by allowing them to spend more of their incomes in the American economy, DeMarco said the program may have ended up costing taxpayers some money. “Not much, but some,” New York magazine reports.
DeMarco’s response is another example of deficit hawkery—the refusal to spend money to save or make money based on the idea that reducing government spending and debt, rather than public suffering, is the first duty of public officials.
Deficit hawks, at least in the U.S. Congress and Washington’s lobbying community, are not a part of that public. For them, there is no recession. So why should they give a damn?
The Post’s thumbs-up editorial of DeMarco endorsed the reasoning that only a relief program that could be assured to cost the taxpayers nothing was worthwhile. It concluded, “with signs multiplying that the housing market may be finally bottoming out without this additional stimulus, perpetuating this particular battle does not strike us as the best use of the secretary’s time.”
There are signs we’ve hit bottom. Nothing to worry about here. Why risk the possibility of a small outlay merely to provide relief to hundreds of thousands of desperate people? This is such a perfect statement of the way the American elite has approached the economic crisis. They concede that it is a problem. But there are other problems, you know.
It’s important to respond to arguments on intellectual terms and not merely to analyze their motives. Yet it is impossible to understand these positions without putting them in socioeconomic context. Here are a few salient facts: The political scientist Larry Bartels has found (and measured) that members of Congress respond much more strongly to the preferences of their affluent constituents than their poor ones. And for affluent people, there is essentially no recession.