The Politico article referenced earlier in the week, headlined “crafting a boom economy,” presents the conclusion that positive policy actions on taxes, energy, immigration, spending, and trade could lead to an all-out economic “boom” (link).
I can be persuaded on this “grand bargain” thesis as long as spending cuts protect those with below-median incomes. This is not only the moral, civilized thing to do, it makes a certain economic sense, too, in the sense that a social safety net helps put a bottom below aggregate levels of spending. The existence of a safety social net is no doubt what helped keep the joblessness of 2007-2009 far below the levels of the Great Depression, not by creating jobs per se but by maintaining a higher level of aggregate spending in the economy, making other jobs more tenable. The difference between the stories we hear from the Great Depression, and the recession we just went through, is that many of our grandparents ceased being consumers at all; their amazing stories revolve around the way they made due. Today, there are government institutions making sure that during downturns economically affected people maintain themselves as consumers, whether through food stamps, unemployment insurance, tax credits, and so on. Those who kept jobs through the downturn are lucky those who didn’t had access to these institutions, because they made everybody’s job more tenable. To be sure, the best argument for a safety social net is probably the moral one. But there is an economic argument, too.
So, while I can be persuaded about this “grand bargain” if it is an investment in US domestic capitalism, my main worry is whether many of the spending cuts being talked about are pro-growth or economically counter-productive.