Bloomberg’s Joe Weisenthal notes that economic policy-makers have a willingness to accept economic pain that is not paralleled by a willingness to accept political pain.
Economic policymakers frequently talk about the necessity of “pain” or perhaps “medicine” — biophysical metaphors that imply some kind of initial discomfort in order to get to a place of health. That’s the story in the US with the rate hikes. Yes the expectation is that some people will lose their jobs in the fight against inflation, but Fed officials say it’s necessary to bring about price stability, and ultimately help restore growth and balance.
That being said, there’s another kind of pain that gets less attention, but which may be more relevant when thinking about how crises come to an end.
That’s the pain or discomfort of policymakers when they’re forced to do something genuinely unappealing to them. So for example during the Great Financial Crisis, TARP was a crucial moment. But politicians hate voting to bail out banks. In the euro area crisis, a crucial moment was when Mario Draghi created an implicit sovereign debt for all euro nations. This type of debt backstop was seen as a true political red line that couldn’t be crossed, and yet Draghi was eventually forced to do it.
There’s a similar factor at work in domestic politics: Every time something is going wrong for the Biden administration or congressional Democrats, it’s a sign that we need what they’ve wanted to do for a long time even more. Circumstances never seem to require Democrats to trim their sails; every twist and turn in the nation’s life, particularly in terms of economics, just further reinforces why they must get their way.
High inflation, which we insisted was transitory, just won’t go away? That’s just more evidence that we need another big-spending bill, renamed the “Inflation Reduction Act.”
Record-high gasoline prices? That’s why we need more wind farms, tax benefits for solar panels, and electric-vehicle mandates!
The Iranian regime is getting even more aggressive, targeting American citizens on American soil? That’s why we need to try even harder to restore the Iranian nuclear deal!
The pandemic is over? That’s why we need to give student-loan recipients $10,000 in debt forgiveness!
There’s no sequence of events that can spur Biden or his allies to say, “well, we would have liked to enact policy X, but based on the course of events, this clearly isn’t the right time.” When the news is good, it means it is time to enact the rest of their agenda. When the news is bad, it means it is time to enact the rest of their agenda.