Why Georgia matters

January 5, 2021

Senate Majority Leader Mitch McConnell arrives at the U.S. Capitol in Washington on Jan. 3.Stefani Reynolds for The New York Times

By Paul Krugman

Opinion Columnist

Two Senate seats in Georgia are on the line today, and with them control of the Senate. I have no idea what, if any, effect The Phone Call will have on the outcome. But what’s really on the line?

Clearly, this election isn’t about what the two Republicans are trying to make it about. No, their opponents Jon Ossoff and Raphael Warnock aren’t Marxists or socialists of any kind. And the truth is that even if Democrats win both races, they won’t have the votes for an expansive progressive agenda: The deciding senator will be West Virginia’s Joe Manchin, and I don’t think even Republicans could portray him as a Marxist (although on second thought I could be wrong about that.)

But if Democrats do take those seats, they will control the Senate’s agenda — and perhaps even more important, Mitch McConnell won’t. This will have major economic implications.

I’m not very worried about the next year or two. As I wrote last week, this isn’t like the aftermath of the 2008 financial crisis, when an overstretched private sector needed extended support from deficit spending, and Republican-enforced austerity took a serious toll on recovery. I expect a rapid short-term economic rebound once we have widespread vaccination, even without new fiscal stimulus.

Continue reading the main story

There is, however, a longer-term need for a big increase in public investment, for multiple reasons. It would help sustain the economy beyond the vaccination bounce; it would help repair our decaying infrastructure; and it could be an important part of a climate strategy.

How should we pay for this surge in public investment? We actually don’t need to pay for it at all. Even before the pandemic we were an economy awash with more savings than the private sector wanted to invest, so that the government could borrow money very cheaply. In effect, markets have been begging Washington to borrow even more, and it would be good for everyone if Congress obliged and used the money to invest in the future.

And the politics look good, too. Polls suggest strong support for a major infrastructure bill, and this support extends to red as well as blue states. Infrastructure spending would surely pass the House, and would probably pass the Senate with bipartisan support if it ever reached the floor.

But in that case, why didn’t Donald Trump ever deliver the infrastructure legislation he promised on the campaign trail? Why did “It’s infrastructure week” become a running gag line?

Continue reading the main story

Part of the answer is sheer incompetence on the part of the outgoing administration. Trump surrounded himself with people who had absolutely no policy chops; they didn’t know enough to legislate themselves out of a wet paper bag. (The one exception was trade policy, where Robert Lighthizer, the protectionist U.S. trade representative, actually knew his way around.) So Trump basically relied on Republicans in Congress to fill in all the details of his policies.

But those Congressional Republicans, Mitch McConnell in particular, didn’t want a big infrastructure bill, even though it would have helped Trump politically. McConnell’s objections probably flowed not from concerns that such a bill wouldn’t work, but from fear that it would — and in working, would help to legitimize an expanded role for government.

And if McConnell wouldn’t let infrastructure come to the floor with a Republican in the White House, he certainly won’t let it get a vote if he’s still majority leader under Joe Biden.

So a few thousand votes one way or the other in those Georgia Senate races could either unlock trillions of dollars in investment in our future, or keep that potential locked up for years to come.

Continue reading the main story

Quick Hits

The O.E.C.D., which supported austerity after 2008, now warns that it would be a really bad idea.

Should we just give people money? Maybe not, if they’re going to put it into Bitcoin.

Adjusted for inflation, government borrowing costs are negative.

But McConnell spent the whole pandemic making sure we didn’t invest.

Feedback
If you’re enjoying what you’re reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week’s newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com.