How left and right can unite to save the U.S. economy
December 20th, 2013
10:30 AM ET

How left and right can unite to save the U.S. economy

By Justin Talbot Zorn, Special to CNN

Editor’s note: Justin Talbot Zorn is a Public Service Fellow at Harvard's Kennedy School and has served as legislative director to two Democratic members of Congress.  He researched long-term planning in government as a Fulbright Scholar in Singapore. The views expressed are his own.

There’s been an intriguing development in this otherwise dreary political year: the emergence of a serious multi-issue alliance between progressive Democrats and Tea Party Republicans.  On big issues ranging from NSA spying and Syria to Farm Subsidies and Too-Big-To-Fail Banks, unlikely left-libertarian coalitions have shifted the balance of power in Washington.

Still, on the single issue that most animates Rand Paul’s army of Tea Party acolytes —the Fed’s loose money policies known as Quantitative Easing (QE)—there’s been little or no cross-party love.  While some progressives have sought more transparency at the Federal Reserve, the left’s understandable preference has been to boost employment and wages through Fed-fueled consumer demand rather than to worry about any long-term imbalances caused by abnormally low interest rates.

This could change.

With the Senate confirmation vote on Fed-nominee Janet Yellen fast approaching, leading Republican economist Martin Feldstein penned a New York Times op-ed laying out a game-plan for conservatives who desperately want to rid the world of QE:   Drop the resistance to jobs-oriented fiscal policy.  He's right.  If Congress could pass an employment-focused, deficit-neutral, long-term fiscal plan, the Federal Reserve would be free to end QE quickly.  Both left and right would have something to celebrate.

The reasons the Tea Party opposes QE—the Fed’s practice of buying up mortgage-backed securities, Treasury bills, and other types of bonds to lower interest rates and stimulate the economy—are well documented.  Most libertarians and conservatives believe that the Fed’s policies are causing investors to take excessive risks and inflate the value of stocks, land, homes, and all sorts of other commodities.

Yet there are also some Progressive reasons to be wary of QE.  With debt-strapped families and small businesses unable to make much good use of cheap borrowing, the biggest gains from QE have gone to large corporations (many of which have used funds to engage in job-killing mergers and acquisitions) and the already-well-off who benefit from a booming stock market.  QE is, in other words, more regressive than other forms of stimulus.

From a deeper progressive standpoint, QE is a measly Band-Aid on serious economic wounds.  By focusing on increasing the money supply rather than directly making investments in needed low-carbon infrastructure, research and education to promote innovation, skills for workers displaced by technology and trade, and other long-term priorities, QE is promoting what the economist Jeffrey Sachs has called “crude Keynesianism.”  It may ease some of today's economic problems, but it doesn't put us on the path to sustainable growth and employment.

Still, with more than 11 million officially unemployed, millions more forced out of the job market, and Congress making things much worse through austerity policies like the Budget Control Act, progressives have no choice but to support QE.  The Fed is not only using its most potent tool to deal with unemployment–it's quite simply the only powerful actor in Washington that's doing anything to stimulate the economy.

This need not be the case.  If QE truly is "treason"—as Rick Perry told Iowa Republicans to thunderous applause during the 2012 primary—the GOP should be willing to strike a bargain to stop it.  Building on last week's bipartisan budget deal, conservatives should agree to deficit-neutral long-term fiscal package that includes serious investments in infrastructure and skills in order to boost employment and wages.  From the Congressional Progressive Caucus's "Back to Work Budget" to President Obama's American Jobs Act, there are plenty of proposals that are fully paid-for and projected to reduce unemployment to the point that the Fed could cease its unprecedented actions.

If this sounds like a tall order for a group that was elected partly as backlash to the 2009 stimulus, you're right.  It is.  But, as the significant Tea Party support for last week's sequester-softening budget deal demonstrates, even some hardline conservatives are coming to realize that expansionary austerity was just a dream.  Moreover, as Feldstein, Reagan's former top economic adviser, points out, an infrastructure-focused deal today could reflect lessons learned from 2009: It'd be better to take a year or two to prepare for the right kind of spending rather than use the lack of "shovel ready" projects as an excuse for inaction or low-impact spending.  There are still plenty of easy options—like a national infrastructure bank—that could significantly boost employment without seriously upsetting the small government sensibilities of the GOP base.

Wednesday’s announcement by outgoing Chair Ben Bernanke that the central bank will slow the pace of bond buying ever-so-slightly in January is a signal that Fed governors are willing to rethink QE when job numbers improve significantly.  But—unless we get back to employment-focused fiscal policy—such improvement is still a long way off.   With QE-advocate Janet Yellen likely to be confirmed by the Senate any day now, we can expect to hear more from Tea Party politicians about how the Fed’s easy money is "ineffective" and "destructive" and how the Republican Party has an obligation to stop it. The power is in their hands.

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Topics: Economy • United States

soundoff (21 Responses)
  1. rightospeak

    How about bringing back off shored jobs ? This article is just more of mambo jumbo that does not address the fundamental issues of the US economy. Read " How the Economy Was Lost" by Paul Craig Roberts and then write articles. For speaking the truth on the state of US economy Dr. Roberts have been demonized, called names on the internet by ignoramuses in a similar way that Ron Paul was demonized for speaking the truth. The media has become a cesspool in which the truth is buried and anyone that dares to disagree is thrown a bunch of the cesspool contents.

    December 20, 2013 at 10:50 am | Reply
    • j. von hettlingen

      Rand Paul and his Tea Party acolytes have a dislike for big business. They opposed strongly the car and financial industry bailouts in 2008.

      December 25, 2013 at 10:15 am | Reply
      • j. von hettlingen

        They would hardly support Jeffrey Sachs' “crude Keynesianism", as borrowing money to create jobs were poison to America's economy, as they fear the coming generations would have to shoulder the debts.

        December 25, 2013 at 10:16 am |
  2. brocephus

    I think congressional teapartiers have taken enough of a hit to their image that they are prepared to make good on some of their populist and anti-crony capitalist screeds (if only to confirm their legitimacy as active legislators). Concerning exactly how much they'd be willing to make large concessions (like the funding of massive infrastructure projects), I remain understandably pessimistic....

    December 20, 2013 at 11:41 am | Reply
  3. orfeo101

    Why in the world would we want the Left and Right to unite? The Big Government world view must be defeated and discarded as Big Government is the problem. Apparently I'm not alone according to the latest Gallup Poll suggesting 72% see Government as the largest threat to the country.
    Atlas Shrugged.... Read it... If you don't see the reality after that...you're likely hopeless and a doomed passenger on the train...

    December 20, 2013 at 12:58 pm | Reply
    • brocephus

      Zorn explicitly states the groups in question are the PROGRESSIVE and LIBERTARIAN factions of their respective parties. They are at odds with the establishment of each of their parties (BIG GOVT). One group is keen on Rand and the other... ehh... notsomuch. Regarding populism and taking a stance against CORPORATE wellfare, however, the two factions have the opportunity to truly work across the aisle.

      December 20, 2013 at 7:08 pm | Reply
  4. joe anon 1

    the economy for the left and right is wall st and corp execs and the pentagon minus the vets.

    so

    the economy is just great

    December 20, 2013 at 3:10 pm | Reply
  5. joe anon 1

    forgot –

    israel will get its unfair, undeserved, strongarmed share of u.s. tax dollars.

    so

    its economy will do ok.

    December 20, 2013 at 3:11 pm | Reply
    • Joseph McCarthy

      And don't forget the Pentagon and all of those who make money off of all these obscene wars that we're currently in, joe. Once you take these unsavory war profiteers out of the equation, this economy may start to prosper again.

      December 20, 2013 at 4:35 pm | Reply
  6. rightospeak

    A Chinese nucleus is turned to the White House

    December 20, 2013 at 5:21 pm | Reply
  7. W. H. Armstead, Jr.

    Thanks also a LOT and a LUMP to Cnn for reporting that this i of Mr. Justin Zorn's said accounts about the way how Left and Right can unite to save the economy here in the US of A now recounts also that in short, there's been but recounts also that such coalitions also have and yet STILL recounts also that unhappily, there's also been but recounts also that this also COULD change and recounts also that Feldman wrote i in the " 'Times' " which recounts also that this has also such a said GAMEPLAN for Tea Party opponents of QE: His said account recounts also as well that the latter wrote i which STILL advises also that they SHOULD DUMP the resisting to said type of policy for which QE WOULD advocate also for it for LOTS of people, among others, for others and even for us, too....

    December 21, 2013 at 1:28 pm | Reply
  8. JAL

    Global economy in 2014: March of the Bulls.

    December 21, 2013 at 3:25 pm | Reply
  9. banasy©

    The Tea Party will fade as soon as Obama leaves office. And if a Republican does get elected in 2016 to replace Obama, the government will grow again, just like it always does under a GOP presidency.

    The "smaller government" advocacy is curiously silent whenever a GOP president is in house. Deficits don't matter. Spending is hidden from budgets.

    Same as it ever was.

    December 21, 2013 at 3:54 pm | Reply
    • Joseph McCarthy

      "The Tea Party fading", banasy? That's highly unlikely, given all the idiots there are from coast to coast. These are the same people who usually vote for the Republicans in the first place!

      December 21, 2013 at 4:00 pm | Reply
    • Tea4You502

      If the GOP wins the presidency, I think you will change your mind about either the GOP or the Tea Party. You think the Tea Party was somehow inspired by President Obama...you will see that.is false. The Tea Party formed in opposition to the GOP establishment and its fiscal irresponsibility. We expect this from Democrats but there needs to be a party that is equally passionate against overspending to achieve political balance and restraint.

      December 22, 2013 at 5:43 pm | Reply
      • banasy©

        No. I didn't say that the TP was "inspired" by Obama. What I said is that they will fade when Obama leaves office.
        As every GOP presidency has seen massive expansion of government, I find it curious that when the GOP are in office, the ones decrying big government are curiously silent.
        As I stated.
        I am aware that the TP supposedly formed in the late stages of Bush 's presidency, but the question remains: if they were against GOP spending, why did they align themselves WITH the GOP?

        I don't think that anything will change if the GOP were to retake the WH. If history is any indicator, the status quo will remain in place.

        And before partisan fingers start wagging at me, I am a registered Independent.

        December 23, 2013 at 12:18 pm |
  10. thomas1

    With all do respect, Dems and Republicans have done enough. Witness the citizen hostility. US will be a disaster zone in fewer than six months.

    December 23, 2013 at 10:58 pm | Reply
  11. chrissy

    One thing is very certain, WHOEVER gets elected next must be very strong and INSIST on an audit of the Federal Reserve!!!

    December 25, 2013 at 7:01 pm | Reply

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