Former Bush advisor and Harvard economics professor Gregory Mankiw has some fantastic advice for President Obama if he wishes to work together with Republicans. He encourages him to focus on marginal tax rates rather than tax credits, to spread opportunity rather than spread the wealth, and to “have a beer with a Republican at least once a week.”
But one recommendation in particular caught my eye: Focus on the long run. In doing so, Mankiw brings up a very interesting piece of history.
“Charles L. Schultze, chief economist for former President Carter had a simple test for telling a conservative economist from a liberal one. Ask each to fill in the blanks in this sentence with the words “long” and “short”: Take care of the ________ run and the _______ run will take care of itself.”
The point is that conservatives tend to focus on the short run, while liberals tend to focus on the short run.
To me this seems like a surprising indictment from a liberal economist like Schultze. Schultze, after all, was one of the architects and directors of Lyndon Johnson’s Great Society that gave us Medicaid and Medicare. These two programs are no doubt helpful to current generations – providing healthcare benefits that far exceed the amount an average earner pays into the programs. Yet they are proving disastrous in the long term. The CBO says these two programs will be the primary drivers of our national deficit in the coming decades. The economics behind the two entitlements has become so flawed that it is an inevitability that taxes will have to be raised or benefits lowered in order to keep them afloat.
The history of our federal government is fraught with such stories. So either liberals are wrong, in that taking care of the short run doesn’t mean that the long run will take care of itself. Or our government is not built to understand the short run. That is to say, it is incapable of stopping at the precise point at which economic policy benefits today without hurting tomorrow. The impetus for such overreach has a simple beginning – politicians desire to get reelected. Overpromising benefits to today’s voters at the expense of the next generation makes for an easy cost-benefit analysis if the goal is reelection.
Either outcome – that the liberal economic philosophy is wrong, or simply doesn’t work in practice – leads to some very bad results. Indeed we’re seeing the problems of liberal myopia firsthand. The near-trillion dollar stimulus, designed to boost employment in the short term, has accomplished little else beyond increasing debt in the long term. Healthcare reform, whose goal is to increase insurance coverage in the short term, does nothing to control costs in the long term. Not to mention Democrats’ complete abdication of responsibility for reforming an entitlement system structure that will eventually push our nation towards default.
We, as young adults, must begin to ask ourselves which economic policy we favor. The liberals’ short term approach, or the conservatives’ long term approach. As you make that choice, remember that we are the long term . We are the ones whose future will bear the burden of today’s economic decisions. That can come in many forms – higher taxes, reduced benefits, a higher deficit, and ultimately a smaller economy with fewer opportunities.
The short term has done an exceptionally good job of looking after itself. It’s time we as young adults, begin looking after the long term.
by Brandon Greife, Political Director of the College Republican National Committee