The Economics of Bill Richardson

My problem with Bill Richardson is that he's a pro-growth Democrat.

This should not be taken to mean that I'm anti-growth: I hereby pledge to never support a presidential candidate who runs on a platform of economic contraction. (I'm objectively anti-contraction!) That said, it's hard to swallow a Democrat who continually implies that vast swaths of the party hew to an anti-growth platform. It's even harder when that Democrat refuses to name names.

And Richardson refuses to name names. I interviewed Richardson by phone as he drove through rural New Hampshire, his cell phone crackling in and out as his caravan snaked through the mountains. (Full transcript here.) We were talking about his support for a balanced budget amendment -- more about that in a second -- when Richardson trotted out his "look, I'm a pro-growth Democrat" line. He says this a lot, and I've always found it curious. "Can you name some anti-growth Democrats?" I asked. "No," Richardson replied. "I'm not going to do that. But I know some." Well, could he tell me what part of the Democratic Party, or strain of progressive economic thinking, he considered anti-growth? "I'm not going to specify," he said.

Here's the good news: I no longer think Richardson is an economic conservative. I was misled by his support for a balanced budget amendment, his attempts to contrast himself with anti-growth politicians, and his constant comments that "The Democratic Party, our first solution is to tax, but I'm not of that school." In our interview, he shredded the implications of every one of those comments, often to the point of incoherence. He stipulated that his balanced budget amendment wouldn't apply during recessions or war and would allow him to better preserve our safety net; he admitted that current tax revenues are insufficient and would have to be increased; and he refused his opportunity to attack some visible strain of economic thinking in the party.

Rather, Richardson is an economic opportunist. He's adopted the conservative's rhetorical critique of liberal economic thought in order to distinguish himself from the other candidates, most of whom are responding to this moment of mortgage crises and insecurity with a forthrightly progressive vision. Richardson's vision, which ticks off the same checkboxes as all the other candidates (crumbling infrastructure, rising college debt, 45 million uninsured, Social Security under attack, etc.), comes couched in a superficial critique of anti-growth Democrats he won't name and a strain of economic thought he won't specify.

Worse, the policies that Richardson is backing, and the political promises he's implying, actually are anti-growth. Richardson might want to carve out enough exemptions in his balanced budget amendment to render it essentially meaningless, but his emphasis on an end to red nevertheless narrows his ability to run deficits. "I have to [balance budgets] as a governor," he said, "and my economy is in good shape. So I just believe that fiscal discipline -- when you have a balanced a budget you get good results. You get enough funds for domestic programs because your economy is moving in the right direction."

But that's not the general experience in the states. Safety net programs are countercyclical in nature: When the economy goes down, the need for them expands. So at the exact moment that government revenues drop, more people sign up for, say, Medicaid. The states can't afford this, so they cut Medicaid. In times of economic duress, if you're unable to deficit-spend, programs for the poor are generally the first to experience cuts.

Richardson promises that his balanced budget amendment wouldn't apply during a recession, though. That may obviate the problem, or his political need to keep a near-balanced budget in light of his promises and rhetoric may still constrain his options. Even in the more optimistic scenario, however, it's still not clear that deficit reduction is "pro-growth."

Last April, Nobel Prize-winning economist Joseph Stiglitz appeared at the Economic Policy Institute to give a talk entitled "Getting Beyond Balanced Budget Mania and Addressing the Nation's Needs," in which he argued against the simplistic view -- held by Republicans as well as some Democrats -- that a balanced budget necessarily accelerates growth. "Consider a company," Stiglitz said. "You would never say, 'Oh, this company is borrowing a lot, and therefore, it is a bad company.' You would always say what is it borrowing for? Is it for investment? You want to look at both its assets and its liabilities. You want to look at its balance sheet …Well, when we talk about the deficit, we're talking about only one part of that balance sheet. We're talking about what's happening to the liabilities, what [the company] owes, but not to what it's spending the money on."

In other words, to pay down each dollar of the deficit, the government has to spend a dollar. To spend a dollar improving health care, or invest in green energy, or fund Pell grants, also costs a dollar. And there are a limited number of dollars. The question is where those dollars would do the most good -- where their expected returns would be, in short, more than a dollar. Spending $90 billion to reform and universalize health care may do more to accelerate economic growth than spending $120 billion to reduce the deficit.

Richardson tries to have it both ways. He also boasts a thoughtful, if unambitious, universal health-care plan (which we discussed at length in the interview) and impressive proposals for cutting carbon emissions and investing in renewable energy. But to pay down the deficit, Richardson would, in reality, have to sacrifice some of that proposed spending, and to keep it balanced he would be hamstrung in increasing spending in those areas. And those sacrifices may indeed prove anti-growth.

The pity of it all is that Richardson doesn't need to offer these sops to fiscal conservatism. The electorate is overwhelmingly anxious about the state of the economy, exhausted by years of tax cuts and untrammeled corporate capitalism, and desirous of significant new social investment. These rhetorical capitulations may have been necessary in 1992, when Democrats were mistrusted as economic stewards, but they're not necessary today, and serve only to harm progressive priorities and enable the right wing's attacks against unnamed fiscal drunks.

At the end of the day, I believe that Richardson is pro-growth. After our interview, I even believe that his view of the economy is basically progressive. But his rhetoric isn't good for the Democrats, progressivism, or even a future Richardson presidency. He could be more pro-growth if he were only willing to be less anti-deficit.

Click here to read a transcript of Ezra Klein's conversation with Bill Richardson.