Don't Worry Be Happy Conservatism

Eric Cantor thinks everyone should chill out.

GOP Whip Eric Cantor thinks his party can retake the House in next year's midterm elections -- and accused Democrats like Rahm Emanuel of "overreacting" to the economic crisis by embarking on a federal spending spree.

The Virginia Republican, speaking to reporters at the Christian Science Monitor breakfast Thursday morning, praised Rush Limbaugh for his "ideas" and for avoiding the Democratic error of "overreacting, if you will, which this town often does, to crisis. ... Rahm Emanuel said, 'We're not going to miss the opportunity to take advantage of this crisis because we're going to do all the things we couldn't get done before."

I think Steve Benen is largely right. Regardless of the specific context of Cantor's remarks, he is broadly saying that the biggest worry at a time of massive unemployment and financial turmoil is that policymakers do too much. Therefore doing nothing, by contrast, is seen as a greater virtue than doing something. I just don't think that the 669,000 people tossed out of work and onto unemployment last week would agree.

This can be seen with the jockeying-for-position conservative governors who want to reject stimulus money to look "tough":

WINNSBORO, S.C. -- By Friday, South Carolina Gov. Mark Sanford must decide whether to accept $700 million of federal stimulus money that he considers wasteful, or risk the wrath of residents in a state with the nation's second-highest unemployment rate.

Mr. Sanford's dilemma underscores the web of fault lines running through Republican and conservative circles, especially in the South. Mississippi Gov. Haley Barbour, Alaska Gov. Sarah Palin and Louisiana Gov. Bobby Jindal are among a handful of GOP governors who have protested at least some of the federal stimulus money. In response, some lawmakers in Alaska and Louisiana have promised to request the federal money even if their governors don't [...]

And as South Carolina's unemployment rate rose to 11% in February, second only to Michigan, even his supporters have expressed dismay.

"I'm real disappointed in the governor that he's doing what he's doing for political reasons, apparently," said Lexington County Sheriff James Metts, a Republican who echoed the rising indignation among the governor's core base of conservative voters. "We have programs that are being cut, school teachers being cut, jobs being lost by the thousand across the state."

Jimmy Ray Douglas agreed. The 66-year-old owner of Carolina Furniture Co. whose donations to the national Republican Party earned him Christmas cards from former President George W. Bush, said: "We need every cent we can get in South Carolina."

Cantor and Sanford aren't simply expressing an unpopular opinion, but the wrong one. Economic stimulus, in historical terms, works. Aggressive government intervention does disrupt and stave off economic crises.

The best takedown of Ms. (Amity) Shlaes’s thesis came from Eric Rauchway, a historian, who pointed out that her favorite statistic did not count people employed by New Deal programs to be employed. Excluding the effects of the medicine, the patient is as sick as ever!

When Roosevelt stuck to a stimulus program, unemployment fell markedly, and the biggest stimulus of all — World War II — did the rest. It’s true that economic models say the economy shouldn’t work this way. When resources are sitting idle, businesses should find a way to use them profitably. But they often don’t.

People become irrationally pessimistic during a downturn. They are driven by what Keynes called animal spirits. Only government can typically change the dynamic.

Could the government spending eventually lead to inflation and crippling debts? Absolutely. But the mistakes of the last 80 years have gone in the other direction. During the Great Depression, Japan’s lost decade, the Asian financial crisis and even the last 18 months, governments didn’t act aggressively enough. Deflation and lack of growth ended up being the real risks.

The Obama Administration is playing a game of chicken with these GOP governors, arguing that they cannot be bailed out by their legislatures, and that they must request stimulus funding in order to receive it. Sanford and his pals wanted to look tough on stimulus without passing the effects on to their constituents. Obama's team shut off that option. So they must have the courage to tell their citizens they refused help for them. After all, they can just relay that they don't want to overreact.