Republican Economics Is Increasingly About Virtue Signaling
Infrastructure gets a pass because it doesn't occupy a place in the culture war
I feel slightly weird about writing a “Booo, Republicans!” piece right after 17 Republican Senators voted to advance a $1 trillion infrastructure bill, $550 billion of which is new spending. I'd have spent more, but I'll give them some credit for not being blindly obstructionist. Say what you will about runaway partisanship, but this country can still, sometimes, with great effort, summon a two-thirds majority to agree that bridge collapses are bad.
But I think something’s gone unnoticed in this debate that I’d like to highlight. The GOP doesn’t know who they are right now; if they were a ninth grader, they’d be in the wearing-a-fedora-and-suspenders phase of their identity search -- just tragically, hopelessly lost. The only thing holding together the shotgun marriage between business Republicans and populist Republicans is disdain for liberals. And I think something’s been folded into the debate surrounding the infrastructure bill and Democrats’ $3.5 trillion budget blueprint that shows that populists are putting their stamp on Republican economic priorities.
If we think about the roots of conservative economic thought -- and I promise that I’m going somewhere with this, so please bear with me -- it’s centered around the idea that less government involvement in the economy is usually better. That used to be a radical idea. Most of human history has not been democratic governments levying progressive taxes to fund a social safety net; most of human history has been autocrats squeezing as much as they can out of whomever they can in order to fund lavish, self-glorifying bullshit. Louis XV had a special elevator chair built so that he could visit his mistresses without having to climb one flight of stairs. Next time you’re grumbling about taxes, remember that at least your money isn’t being used to give a portly monarch easier access to his coterie of prostitutes.
The idea that the market generally allocates money more efficiently than the government is sometimes represented in numbers. These numbers are “multipliers”, in econ-speak. Government spending is sometimes given a “negative” multiplier, which would represent money being taken away from efficient private sector use and allocated to a government boondoggle. Obviously, this happens sometimes; the military regime in Myanmar moved their capital to the middle of nowhere for reasons that some believe might have been related to astrology. There is now a 20-lane highway feeding Myanmar’s capital, where basically nobody lives. For the visual learners out there, here’s what a negative multiplier looks like:
But government projects can also have positive multipliers. Sometimes you need the government to step in and fund something that benefits everyone but that nobody wants to fund by themselves. The military is a classic example; we all benefit from security, but nobody would fund an army privately (actually, Elon Musk might, but I don’t think we want that). The security benefit from having a military isn’t just “it’s good that the Nazis didn’t win,” it’s also “Hobbesian chaos is bad for business.” Which it definitely is; if someone wanted me to invest in an idea they pitched as “Chipotle, but for Syria”, I’d be a polite “no”, because of the chaos. And also because of Qdoba -- the market is saturated -- but mostly because of the chaos.
Business Republicans sometimes agree to fund infrastructure projects because they believe the projects have a positive multiplier. And sure enough, the Chamber of Commerce -- the Taliban of free market ideology -- is a major backer of the infrastructure deal. We should probably view well-allocated infrastructure money less as government spending and more as government investment. And that may sound like bullshit, kind of like an online university trying to convince you to take out $100,000 in loans to “invest in yourself”, but it’s true. If it wasn’t, you wouldn’t get these Chamber of Commerce people who name their pets after Austrian School economists to back a $1 trillion spending bill.
When Moody’s Analytics did an analysis of the proposal that became the infrastructure deal, they calculated the multiplier of infrastructure projects at about 1.5. That’s very good; it means that for every dollar we put in, we get about $1.50 back. And you can quibble with that number; after all, economics is called “the dismal science”, but the “science” part is debatable. Nonetheless, many people feel that this spending will boost the economy in the long run. And that’s why you can get 17 Republicans to agree to a spending bill, which is like getting 17 toddlers to agree to attend a Kennedy Center retrospective on the work of Philip Roth.
HOWEVER: Those 17 Republicans would like you to know that they support the infrastructure bill BUT NOT the social spending in the $3.5 trillion budget blueprint Democrats are trying to advance. They are crystal clear on that point. Here are a few quotes from key players in the negotiation, and remember: These Senators voted for the infrastructure bill.
Rob Portman: “The infrastructure bill has nothing to do with the reckless tax-and-spend extravaganza that [Nancy Pelosi] is talking about…”
Bill Cassidy: “The [infrastructure plan] is good for the United States of America.” ... “Now, the 3.5 trillion, if [Democrats] want to go there on a strict party line vote, fueling inflation, making people more dependent upon the government, they can address that.”
Lindsey Graham: “I want to be able to tell people in South Carolina: I’m for this, I’m not for that.”
“A three and half billion dollar ‘infrastructure’ package that has nothing to do with infrastructure, that is a tax-and-spend dream of the socialist left -- if it takes me not showing up to stop that, I will do it.”
(when asked if he would really leave Washington to deny Democrats a quorum in the Senate) “Hell yeah I would leave!”
Wow: A public H-bomb from Lindsey Graham. This spending bill has given that repressed Southern gentleman the vapors! But it’s worth wondering: Why? What’s so radically different about the two bills? Why is the spending so qualitatively different that it needed to be split into two bills at all, with Republicans tepidly supporting the first and hating the second with the power of a trillion nuclear bombs?
There are differences between the two bills. The infrastructure bill will be paid for with cuts and reappropriations from other parts of the budget, while the reconciliation bill (which is still in the works) will include new taxes on corporations and the wealthy. And then there’s the size: 3.5 is, according to my research, bigger than 1. For what it’s worth, the Republican talking point about inflation is largely disingenuous,1 so that’s not a difference between the two. Ultimately, the cleavage is arbitrary: We’ve got one pile of stuff labeled “infrastructure” and another pile labeled “not infrastructure”, which seems like it makes sense, but it’s a bit like sorting your socks into piles labeled “respectful” and “blasphemous”. That’s certainly a system. But is it a logical system?
Which brings me to the key point: Much of the social spending in the reconciliation bill has a positive multiplier, just like infrastructure. The same Moody’s analysis of several types of spending that gave infrastructure a multiplier of 1.5 awarded the highest multiplier to -- drum roll please -- food stamps. Second-highest? Unemployment insurance benefits. Some types of social spending can be justified using the exact same logic used to justify infrastructure spending, namely: It’s money that promotes long-term growth. It’s not spending, it’s investment.
Republicans can get behind this logic when the investment is in highways, rail lines, and wastewater systems. But they balk when the investment is in people. Perversely, they’re more willing to spend money on a bridge with a multiplier of 1.5 than a hungry child with a multiplier of 1.6. And I’d like to emphasize just how much I’m making this argument on purely economic grounds; I shouldn’t need to argue against the concept of starving children by saying “allow me to draw your attention to the latest analysis from Moody’s Analytics.” I sound like a robot programmed by a villain in a Dickens novel. But even if we agreed that hungry children don’t matter -- and even my liberal ass doesn’t believe Republicans actually think that -- there’s a strong case to be made that it’s in our economic interest to invest in people so that they become more productive.
But economic arguments don’t persuade Republicans the way they used to. This is the populist era of the GOP; this is the era in which everything gets reduced to a Manichean culture war battle. Republican politicians need to constantly reassure their Fox News-addled supporters that they’re on the “good” side; that is, they have to virtue signal. Social spending is anathema to some conservatives because they imagine that it would give money to “undeserving” people: beatniks, loafers, and promiscuous single moms. And I’m not someone who believes that all Republicans are racist, but it would be naïve to deny that there’s a racial element to much of this. Politicians who want to keep the support of the Republican base have to demonstrate that they would never -- never ever, not in a million years! -- support something as frivolous as spending that allows kids in high-poverty areas get free school lunch in the summer. Even if there’s a strong economic argument for investing that money.
There are plenty of good-ol’-fashioned bad reasons to oppose social spending. Maybe you’re a Grover Norquist-type anti-tax ideologue, or maybe you’ve been in a coma for 20 years and think that a better way to spur growth is through cuts to the top marginal tax rate. There are also, I should mention, actual good arguments to be made against spending, such as the fact that not all spending spurs growth, so we have to pick our spots. I haven’t heard any recent arguments from Republicans along those lines. I mostly hear fist-pounding polemics about how it’ll be a cold day in hell before they vote for Biden’s dastardly plan to transfer money to poor and middle-class families. Which is a shame, because the multiplier on some of those families is sky-high.
Here’s why I’m calling these arguments “disingenuous” instead of just “off-base” or “probably misguided”. There were legitimate inflationary concerns around the $1.9 trillion Covid relief bill that passed in March. That bill borrowed money so that it could be injected into the economy immediately -- the stimulating effect was the entire point. A bill like that is qualitatively different from the bills that are being proposed, and Republicans like Graham and Toomey know that, and if they don’t, then they should be immediately removed from leadership positions on economic issues. The big difference is that the infrastructure bill and the reconciliation bill, unlike the Covid bill, will be paid for. Or, at least, they’re supposed to be. The infrastructure deal that was just reached has revenue sources in it, and Senate rules actually require the reconciliation bill to be budget-neutral after ten years. Which is to say: We’re not adding new money to the economy, we’re just shifting money around. Economic growth should come from increased productivity, which shouldn’t be inflationary.
Of course, if the bills aren’t actually paid for, if they rely on large-scale accounting gimmicks and we have to borrow money to fund them, then that changes the equation as far as inflation is concerned.
For what it’s worth, Larry Summers, who has become the mouthpiece for inflationary concerns and whom Republicans love to quote, draws a distinction between different types of spending. He recently said ““The investments on which Biden is focused are essential to the future of the country. The focus should be on those investments like infrastructure that will increase economic supply potential. Inflation fears should shape economic policies but it would be tragic if they stopped us from making urgently needed public investments.”