Republicans Seem to Be Out of Economic Ideas ? Here Are Two Suggestions

If you think about thrift as a moral quality, it’s easy to understand why Republicans have gotten things so wrong in terms of macro-economic policy over the last few years. Austerity, after all, has a folksy and intuitive appeal, the idea being that you can’t cure debt with more debt. No household could – and why shouldn’t the government be run like a stable household, never borrowing what it can’t repay quickly and easily? Of course, we know why not: Keynes explained the reason in his General Theory, and pretty much every modern leader who has tried to fight rising debt with austerity since then, from Herbert Hoover to the modern technocrats of Greece and Italy, has failed. The Germans, like many American conservatives, are still enamored of austerity. It appeals their sense of thrift and fairness; but having spent time recently in Germany, I can see that, as in the U.S., this approach has also become a moral issue. The fact that so many European nations are trying to cut public spending all at once is clearly the reason that Europe is now officially in the longest recession since the creation of the Eurozone. But belief in austerity persists because there’s a certain grim moral justice in the idea that debtor nations should pay for their crimes with deep, painful forced cuts. (MORE: The Mystery of the Incredible Shrinking Budget Deficit) Justice aside, austerity is a failed economic concept, a realization that is having major short-term ramifications in Europe (as I’ll be exploring in more detail in an upcoming TIME magazine story). But it may also have a longer-term impact on the 2014 Congressional and 2016 presidential elections in the U.S. For some time now, conservative economic policy has revolved around two tideas: the supposed need to slash government budgets in order to cut the deficit, and the notion that tax cuts will spur growth (a.k.a., trickle down economics). But as we’ve seen in headlines over the last week, the deficit is coming down fast, not because of cuts, but

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