The Great Debate

Is Mitt Romney the last true believer in austerity?

Nicholas Wapshott

May 24, 2012 11:54 EDT

There is something oddly retro about Mitt Romney. He appears to have sprung from a nostalgic fifties “Hairspray” world where women sported beehives and cars had fins. Nor has his economic thinking kept up with the times. Although he backed Obama’s $787 billion-dollar Keynesian stimulus, as soon as the borrowers’ remorse that sparked the Tea Party took hold, he turned on a dime and embraced austerity and paying off the national debt.

As he declares on his website: “The only recipe for fiscal health and a thriving private economy is a government that spends within its means.” He signed the “cut, cap and balance” pledge that will tie his hands if he makes it to the White House. Not trusting himself, perhaps, to remain fiscally continent, he favors an amendment to the U.S. Constitution, obliging Congress to put balancing the budget before all other measures. He would cap federal spending at 20 percent of GDP, a feat that would entail about $500 billion in cuts. On day one of his presidency, he says he would send Congress a bill that would cut non-security discretionary spending by 5 percent.

His proposed economies include (his estimates in parentheses): repealing Obama’s healthcare plan ($95 billion); privatizing Amtrak ($1.6 billion); reducing federal payments to the National Endowment for the Arts, the Corporation for Public Broadcasting and the Legal Services Corporation ($600 million); eliminating family planning subsidies ($300 million); cutting foreign aid ($100 million); capping Medicaid (more than $100 billion); replacing only half those who leave the federal workforce ($4 billion); ending the Davis-Bacon Act ($11 billion) and paying federal employees lower wages ($47 billion); and that old elusive crowd-pleaser, reducing waste and fraud ($60 billion).

For good measure, he has further manacled himself by putting his name to the Americans for Tax Reform’s pledge that would prevent him raising taxes. If you thought George H.W. Bush’s “Read my lips. No new taxes” was rash, Romney has gone one further. Not only has he solemnly promised not to raise taxes in any circumstances but he will make the George W. tax cuts permanent, end capital gains taxes for those earning less than $200,000, and abolish estate taxes. By now, even Harry Houdini might be excused for feeling a little constricted.

The problem with the draconian austerity package Romney has in mind come January is that it is likely to tip the fragile American recovery into recession, as similar measures have done in Britain and, save Germany, in the euro zone. In the past, Romney has pointed to Europe with distaste, as if it were Soviet Russia. Obama’s public spending, he said, “takes us down a path to becoming more and more like Europe. And Europe doesn’t work in Europe.”

He is right to be wary of Europe’s example, but for the wrong reasons. The fiscally conservative policy of the euro zone, the product of a conservative alliance between German Chancellor Angela Merkel and former French President Nicolas Sarkozy, insists on governments paying down deficits quickly, even though, for countries like Spain, Italy, and Greece, this means perhaps a decade of penny-pinching, high unemployment, low growth and short rations.

The result, as predicted, has been a revolt against austerity at the ballot box and a rise in extreme politics. In recent elections, the Greeks and French have seen small radical parties trounce their moderate rivals, prompting political turmoil that is frightening away investors. So far, 11 European governments have fallen thanks to austerity, the biggest shock being Sarkozy’s ouster by the Socialist François Hollande.

Britain’s austerity experiment is faltering

Nicholas Wapshott

Mar 28, 2012 12:21 EDT

It was the Welsh sage Alan Watkins who remarked that a budget that looked good the day it was delivered to the British Parliament was sure to look terrible a week later, and vice versa. The avalanche of new information dumped by the Treasury is simply too much to grasp at a single sitting, and governments tend to bury bad news in a welter of statistics. And so it proved with finance minister George Osborne’s budget served up last week.

The immediate headlines stressed that rich Brits would pay less income tax – down from 50 percent to 45 percent – but it only took a day before even traditional Conservative cheerleaders like the Daily Mail were condemning Osborne for funding tax breaks for bankers and billionaires by stealing from those living in retirement. The paper’s cover screamed: “Osborne picks the pockets of pensioners.”

Osborne insists he is sticking to his “Plan A” to reduce the public deficit by sharply cutting state spending by 25 percent over the five-year parliament and imposing severe austerity. Because he believes his “Plan A” is on target, all he needed was a touch on the tiller. He therefore designed his budget to be fiscally neutral – that is, for every tax cut there was a corresponding tax increase. He put up tobacco and alcohol duties and sliced a little off corporation tax.

Osborne’s broader economic experiment, however, is fast faltering. If it were a drug trial, doctors would be urgently taking patients off the snake oil and feeding them the placebo. In 2010, he inherited from Gordon Brown’s Labour government a fast-rising recovery in economic growth, but now, after two years, GDP is headed south, and Britain is teetering on the edge of a government-inspired double-dip recession. In the last quarter of last year, GDP shrank by 0.3 percent.

As predicted, “Plan A” is not working. The number of jobless is 2.67 million (8.4 percent) and rising, the highest rate for 17 years, and the cost of paying the unemployed to do nothing is soaring. Inflation is running at 3.7 percent. Most galling of all, no doubt, for Cameron and Osborne, who were rushed into taking drastic measures when Bank of England Governor Mervyn King spooked them into believing the markets would punish them if they did not tackle the deficit right away, the rating agencies Moody’s and Fitch have warned that notwithstanding the debt-reduction efforts, Britain could soon lose its AAA status.

Far from spurring the British economy to greater things, the Cameron coalition’s slash-and-scrimp policies have moved the government sector even deeper into debt. According to the latest Treasury figures, in February the current budget deficit rose to £11.1 billion. Borrowing rose to £15.2 billion. And the net public debt was £995 billion, or 63.1 percent of GDP. Critically for the coalition, even by the Treasury’s optimistic estimates, public-sector net debt as a percentage of GDP will continue to rise for another two years, maxing out at 76.3 percent just in time for Cameron to call a general election.

Debt reduction and austerity may be popular with the financial markets and Austrian economists, but British voters are fast beginning to tire of hard times. Cameron’s cry of “We’re all in this together” sounds a little hollow when he and his multimillionaire colleagues, such as Osborne – 23 of the 29 members of the Cabinet are worth more than $1.6 million – are so conspicuously not consuming the gruel they are feeding the rest of the nation. Cameron took five expensive high-profile family holidays last year, four of them abroad, all dutifully recorded in detail by Fleet Street’s finest.

Ryan’s budget frames 2012 election around Medicare

Christopher Papagianis

Mar 23, 2012 12:26 EDT

This week, House Budget Committee Chairman Paul Ryan released what amounts to the most substantive roadmap for fiscal policy that any Republican is likely to offer in 2012. Many political pundits and policy analysts, especially those on the left, are eager to dig into the details to alert the public about the potential (negative) impacts of a budget that slices off $5 trillion in total federal spending compared with the plan offered by President Obama in February.

Providing 100 pages of budget and policy detail in an election year is considered political suicide by many. Democrats fully intend to use the plan to campaign against Republicans in the fall, hoping to gain an advantage not only in select House or Senate races but also in the presidential contest.

Ryan, though, sees this as the only responsible path forward: So what if his plan won’t get enacted into law this year. Should Ryan’s House colleagues, or the candidates for president, avoid taking a detailed position on our country’s fiscal future? As Ryan explains: “If we simply operate based on political fear, nothing is ever going to get done.”

Keith Hennessey provided a great top-line summary of how Ryan’s budget compares with Obama’s:

• Under the Ryan budget, debt would peak at 77.6 percent of the economy in 2014. Under the President’s budget, debt would peak at 80.4 percent of the economy in that same year.
• The Ryan budget would cause debt to steadily decline to 62.3 percent of GDP by the end of the decade. Under the Obama budget, debt would flatten out by 2018 and end the decade at 76.3 percent of GDP, 14 percentage points higher than under the Ryan budget.
• At the end of 10 years, debt would be declining relative to the economy under the Ryan budget, while it would be flat under the president’s budget.

While most of the Republican candidates for president have signaled support for Ryan’s proposal, Governor Romney’s proposals probably track the closest, particularly in the area of Medicare reform. This is a big deal, since it suggests that the presumptive Republican nominee will be advancing an agenda that also echoes the key policy contrast that Ryan is purposely setting up for November.

For Ryan, Congress not only needs to reign in today’s discretionary spending but it also needs to rise to the challenge of making the hard policy choices that will affect the size and shape of tomorrow’s debt and deficit trajectory. And the number one driver of our long-term debt problem is rising healthcare costs.

Paul Ryan’s weak case for a strong defense

David Callahan

Mar 22, 2012 15:05 EDT

One aspect of Paul Ryan’s new budget that hasn’t drawn much attention is that it is a big love letter to the Pentagon. Ryan rejects the idea that budgetary pressures should have any effect on defense spending, which he argues should be dictated purely by “strategic” calculations. Among other things, the Ryan budget would reverse $55 billion in defense cuts mandated for 2013 by the “trigger” agreed to in last year’s budget ceiling deal – and cut this same amount from domestic programs instead.

Ryan says we shouldn’t worry about military spending, even amid a supposed fiscal emergency, because such outlays are “shrinking as a share of government spending and as a share of the national economy.” America may have a spending problem, Ryan and the House Budget Committee believe, but the Pentagon is not part of that problem: “This category of spending is clearly not driving the unsustainable fiscal trajectory that is threatening the nation’s future.”

That’s strange to hear, since soaring security costs since 9/11 have been a key driver of deficits – accounting for about $1.4 trillion in new debt since 2001 by one widely cited non-partisan estimate. And, looking ahead, it’s hard to see a path to fiscal discipline that doesn’t include sharp cuts to the defense budget, which constitutes over half of all discretionary federal spending.

Ryan is wrong – and misleading – when he argues that defense spending is shrinking. He says that defense as a percentage of GDP has declined from its “Cold War average of 7.5 percent to 4.6 percent today.” What he doesn’t say is that this share is up from the 1990s. Defense spending ranged between 3 percent and 3.4 percent of GDP from 1996 to 2001, according to budget data from the Office of Management and Budget. Likewise, while Ryan says that such spending as a percentage of all federal outlays is down from 25 percent three decades ago to 20 percent today, he doesn’t mention that defense spending constituted just 16 percent of federal outlays in 1999.

It made sense that the Pentagon’s budget rose following 9/11 as the U.S. became embroiled in two land wars, as well as a broader global fight against al Qaeda. But the United States is now out of Iraq and will soon be out of Afghanistan. Moreover, we have made big strides in dismantling al Qaeda and killing Osama bin Laden and other top leaders.

Given these new realities, what is the right level of defense spending going forward? Is there really a case for spending a third more on defense in the next decade than we did in the 1990s, as the House Budget Committee proposes?

The fast track to a balanced budget

Howell E. Jackson

Feb 8, 2012 10:46 EST

The state of the union, fiscally speaking, is perilous. Despite record deficits and dire warnings from Europe as to the consequences of sustained fiscal imbalance, our leaders have been unable to find common ground. The Simpson-Bowles Commission in 2010, the Gang of Six last summer and the misnamed Super Committee of this past fall were all bipartisan efforts to cut through the Gordian knot of budgetary gridlock. And all of them failed. Miserably.

Yet despite these failures, Congress now has the opportunity to move us onto a path toward prompt national consensus on fiscal reform. Congressional leaders are this week debating legislation to extend the payroll tax cut. If they are smart, they will include in that bill a small, but important, provision that grants the winner of the 2012 presidential election something called fast-track authority. This authority would allow the president — whoever he is — to submit fiscal reform legislation for an up-or-down vote in both the House and Senate on Jan. 21, 2013, the day after Inauguration Day. Indeed, fast-track authority would be a worthy quid pro quo for members of Congress reluctant to sign off on extending the payroll tax cut without some assurance of future progress on deficit reduction.

What’s promising about this proposal is not just what fast-track authority might deliver in 2013, but what its very existence could do to the presidential race. With fast-track authority granted, President Obama and his Republican challenger could each be expected to put forward during the presidential race a coherent and credible plan to move toward a balanced budget.

Fast-track authority is not unique to budget debates. It has a long history on Capitol Hill, and gives legislation a prompt and clean vote in both chambers. It thus circumvents the Senate filibuster and procedural maneuverings in the House that can block legislation. In the recent past, fast-track authority has facilitated congressional approval of international trade deals and military base closings — public policy challenges where there was agreement that national action was needed but vested interests were using congressional procedures to inhibit progress.

Our public finances present just this kind of problem. Both sides of the aisle agree that we need to return to a path of fiscal balance. But entrenched interests – on both the left and the right – stymie any sort of balanced package of entitlement reforms and revenue enhancements with procedural roadblocks.  The only way forward is to change the rules of the game.

Here’s how fast-track authority could work in the context of a presidential election campaign:

To bridge the deficit, collect some taxes

David Callahan

Jan 12, 2012 10:52 EST

By David Callahan

The views expressed are his own.

At a time when the U.S. government needs every dollar of revenue it can get, alarm bells should be sounding in Washington about a new IRS study showing that the Treasury is losing a fortune to tax evasion.

The study, released last Friday, found that the government missed out on $385 billion in uncollected taxes in 2006, the most recent year for which the IRS has complete data. If we extrapolate the IRS’s assumption that the U.S. government only collects about 85 percent of total tax liabilities, the revenue lost by the Treasury in the past decade exceeds $3 trillion.

That is serious money–nearly equal to all the new federal debt incurred during the Bush years. And without tougher action against tax cheats, the U.S. government stands to lose trillions more over the next decade.

Many of the biggest tax cheats are wealthy earners. While most working stiffs–the W-2 crowd–get their taxes automatically withheld from their paychecks, business owners and self-employed professionals have lots of ways to cheat. And cheat they do: Unpaid taxes by businesses and corporations accounted for nearly half of the total tax gap in 2006.

These figures only reinforce the public’s view that the U.S. tax system is unfair. According to a poll released last month by the Pew Research Center, 57 percent of Americans said that what bothers them most about taxes is that the wealthy don’t pay their “fair share” (compared with 28 percent who cited the complexity of the system and 14 percent the amount they paid as their top gripe).

Obama’s power grab at the Pentagon

Michael Hastings

Jan 10, 2012 16:10 EST

President Barack Obama’s decision last week to cut the defense budget by $487 billion over the next 10 years was met with cries of derision from his critics (“inexcusable,” said GOP front-runner Mitt Romney) and shrugs of acceptance from his supporters. The reduction’s two headlines: 1. One hundred thousand troops are being chopped from the Marine Corps and Army; 2. The entire U.S. foreign policy focus will begin to shift from the Near East to the Far East (anxieties about China having replaced—or at least settled alongside—our permanently ingrained fears of Middle Eastern terror). The cuts themselves, though, are less significant as fiscal policy than as a statement about President Obama’s relationship with the Pentagon: Barack is taking it over.

That President Obama wasn’t really in charge of the Defense Department might come as something of a shock. He is, after all, the commander in chief. But considering the size of the nation’s defense apparatus, it shouldn’t. The Pentagon has become the 51st state—America’s largest bureaucracy, employing three times more people than the population of Vermont and Wyoming combined. Its capital is the Five-Sided Puzzle Palace, as my journalist friends fondly call it, where 23,000 work daily. Its other residents are the 3.2 million military, intelligence and civilian personnel who live inside its borderless confines around the globe. And since the attacks of September 11th, the influence of the Pentagon’s constituency has grown exponentially, its budget increasing from $295 billion to $549 billion, sucking up some 54 percent of federal tax dollars.

The Pentagon has found plenty of ways to spend all that cash. In 2011, the DoD blew $20.2 billion on air conditioning in Iraq and Afghanistan, equivalent to the entire NASA budget. There are more members of the U.S. military bands—and more sailors on a single aircraft carrier—than in the State Department’s entire foreign service. Up close, the largesse of the Pentagon is hard to miss as well: When top generals visit a country overseas, they often travel in their own private jets, with an entourage of dozens. Top diplomats fly commercial, business–or first-class, if they’re lucky. (Meanwhile, in Foggy Bottom, Secretary of State Hillary Clinton forbade business-class travel for State officials traveling to Afghanistan in 2010, citing budgetary concerns, department officials have told me privately.)

The Pentagon’s unprecedented power and influence turned it into a fierce rival of the White House. And so when President Obama crossed the Potomac last Friday Thursday, he was on a mission to reclaim enemy territory. In an unusual move, he made the budget announcement from within the Pentagon itself. It was something of a triumph that he chose to do it there. Upon arriving in Washington three years ago, Obama had a very different reception from the brass. The building was populated by Republicans. The last three defense secretaries had been with the GOP, and the rank and file were still supporters of the previous administration. They were heavily invested in the Iraq War—a war Obama had called “dumb.” At one of his first meetings in the Pentagon in January 2009, as I recount in my new book The Operators, he met General Stanley McChrystal, who would later confide to his staff that Obama appeared “uncomfortable.” A senior official at the meeting described the president as “intimidated by the crowd.” Months after the meeting, the Pentagon’s leadership would take advantage of this perceived weakness, pushing the president to escalate the war in Afghanistan and tripling the scope of the conflict.

The tension between the president and his generals reached its climax in June 2010 in the weeks after I published a Rolling Stone story exposing the contempt the military leadership had for their civilian counterparts. The president fired McChrystal and replaced him with General David Petraeus (tying Petraeus to the fate of the doomed mission, an association that Petraeus had wanted to avoid, according to McChrystal). Within the next year, Defense Secretary Robert Gates would retire as well (but not before Obama twice overruled his advice—on Libya and the Bin Laden raid) and was replaced by Democratic ally Leon Panetta. Petraeus came home from Kabul in June 2011, and was quickly defrocked and installed at the CIA (preventing the popular general’s potential and oft-rumored run for the presidency, another outcome the White House wanted to avoid). When Petraeus pushed to move troops to eastern Afghanistan, rather than bringing them home, Obama overruled him, prompting General John Allen (the man there now) to admit the president was no longer following the military’s advice. Either by accident or by design, the young president had neutered his formidable opposition. The celebrity generals were gone, a friendly Defense Secretary was in and a string of what were perceived as foreign policy successes had been accomplished.

There were other signs of the president’s new confidence. Tucked into Obama’s defense strategy—which he unveiled the same day as the cuts–was another not-so-subtle rebuke of the military’s much beloved counterinsurgency doctrine, which accounted for much of the $1.2 trillion poured into Iraq and Afghanistan. The new defense strategy called for “limited counterinsurgency”—a concept akin to being “slightly pregnant,” as Wired’s Spencer Ackerman observed. Keeping a reduced counterinsurgency initiative was a sop to the brass who had built their careers on the past decade of war, but not a convincing one. It was a stronger signal that the true lesson of the past decade was to not get involved in nation building debacles. “For the Army’s four stars to suggest Americans should treat the interventions in Iraq and Afghanistan as a rich source of lessons for future war is tantamount to insisting the 1915 Gallipoli Campaign or the 1920 Sunday shoot-up of Irish civilians by British Soldiers at Croke Park in Dublin were successes,” retired Colonel Douglas Macgregor told me in an email. “A smaller defense budget is not only inevitable; it’s a national economic necessity.”  There’s even a possibility that President Obama might double the size of the cuts, taking out a total of $1 trillion. It seems he’s no longer intimidated by the crowd.

Now that the White House has the political power to control its military moves, the question is: Can the administration pull it off in 2012 and beyond? The Pentagon and the president may want to keep the focus on China over the next decade, but there’s going to be serious pressure to get drawn back into other misadventures in the Middle East and Central Asia. Our relationship with Pakistan sometimes feels as if we’re one Times Square bomber away from a serious military retaliation against Islamabad. We’ll have to avoid going to war with Iran, a prospect that, frighteningly, most Republican candidates seem to be rooting for.

We won’t save money by cutting education

David Callahan

Nov 9, 2011 10:28 EST

By David Callahan The views expressed are his own.

Nearly every day, if not every hour, some politician proclaims that taming America’s budget deficit requires “hard choices.” Strangely, though, few talk about perhaps the toughest dilemma facing the supercommittee, and the rest of Congress: How to reconcile the needs of old and young Americans.

Both groups have urgent and growing claims on the public purse. Four million seniors live below the official poverty line and millions more hover just above that line – contrary to the popular image of well-heeled retirees. And because the Baby Boom generation hasn’t saved nearly enough for retirement, such hardship is likely to get worse. Deficit hawks talk about cutting Social Security benefits and limiting Medicaid payments for nursing homes, but the truth is that seniors will need a more generous safety net in coming decades than what the U.S. now has.

Meanwhile, a new report on the “State of Young America” by Demos (where I work), argues that America is way under-investing in the next generation. Too many young people who graduate from our under-funded public schools aren’t ready for college and can’t earn a living in today’s low-wage economy. Those who do go to college often can’t afford to finish their degrees, and debt among college graduates has soared to record levels. Young adults trying to start a family also struggle with sky high costs for childcare, housing, and healthcare. At the same time, median earnings for young adult men with college degrees have barely budged since 1980.

The old and the young both need more help from government, even as public dollars grow scarcer. Squaring this circle, though, is not as impossible as it seems since the fates of the young and old are closely entwined. In particular, affording a strong future safety net for seniors will require that the generations coming up have the education and job skills to be highly productive workers.

In 1965, there were four workers paying into Social Security for every retiree drawing benefits. Today the ratio is 3 to 1. And a few decades from now, there will be just two workers supporting every retiree. If tomorrow’s workers aren’t darn good at creating wealth, entitlements for seniors will really be in trouble. A key way to ensure such productivity is by investing now in education.

This may be an elementary point, but it’s not so obvious as to actually shape public policy. The conservative drive to downsize government makes little distinction between types of public spending. Investments to build the human capital of the next generation are on the chopping block along with spending on the physical capital that is also needed for wealth creation. While conservatives at the national level decry Pell Grants as “welfare” and dream of abolishing the U.S. Department of Education altogether, anti-tax extremism at the state level is starving public universities and driving tuition beyond the reach of many young people.

Mindless tax slogans dominate our debate

Robert Frank

Sep 13, 2011 10:44 EDT

By Robert Frank The opinions expressed are his own.

What do the following slogans have in common?

“All taxation is theft.”

“It’s your money and you know how to spend it better than any bureaucrat in Washington.”

“It’s unjust to tax some people more heavily than others.”

“Taxing the rich kills the geese that lay the golden eggs.”

Although each has been repeated so often by conservatives during recent decades as to have acquired an air of settled truth, each is also either clearly false or conveys no useful information. A more troubling shared feature of these slogans is that they are causing serious harm. Their enthusiastic embrace by Tea Party members and large factions of the Republican Party now threatens to transform the United States economy, once the envy of the world, into an economic backwater.

Tea Party cools as Keynes makes a comeback

Nicholas Wapshott

Aug 30, 2011 12:53 EDT

By Nicholas Wapshott The opinions expressed are his own.

Is the Tea Party running out of steam? I ask because there appears to be growing evidence that the Mad Hatters’ wild ride, culminating in Obama’s defeat last month over the debt ceiling at the hands of the Tea Party in Congress, has slowed to a trot. Exhibit one, the entrails of the most recent Pew poll where there is a startling finding. Just two months ago, those who believed trimming the deficit was the nation’s top priority outnumbered those who wanted more spending “to help the economy recover” by ten percent. Today, the number who advocate more government spending to fix the lackluster economy are neck and neck with those who wish to cut the budget deficit without delay.

Why the shift? Well, it seems that some Americans have changed their minds over the issue that lies at the heart of our politics. Today’s great political debate divides along the lines established eighty years ago by John Maynard Keynes and Friedrich Hayek. In 1932, when one in four Americans was out of work, Keynes suggested a mixture of policies to pump money into the economy to increase demand and get people back into jobs: keep the cost of borrowing cheap so that businesses could expand; invest in public works that directly employs the jobless; and cut taxes to put cash into people’s pockets. Hayek countered that such expansionist policies were unlikely to work and would have unintended consequences. At the very least they would in the long run fuel inflation and, when the government took its foot off the gas, cause businesses artificially boosted by the measures to go bust.

When Obama was elected in November 2008 he faced an economy that was teetering on disaster. His answer was a Keynesian stimulus package that meant plunging the nation even deeper into debt than George W. Bush had left it after bailing out the banks, enacting a huge tax cut and funding two overseas wars. No sooner had Obama adopted a Keynesian remedy than some of his opponents demanded a Hayekian antidote: paying down the debt as soon as possible. This outbreak of electors’ remorse gave rise to the Tea Party whose argument appeared to be that if a family has to pay off its overdrafts and credit card borrowings when it is going bankrupt, surely a nation should do the same. The 2010 midterms saw the election of a wave of Tea Party candidates, most of whom had pledged not to agree to anything that would either raise taxes or fail to address the national deficit. The raising of the debt ceiling, which had always been a routine matter between the two parties, became a pitched battle, with the president having to bow to the Tea Party’s principles or allow America to default on its debts.

But the tide may well have turned. If the trend Pew has spotted is genuine and continuing, what a month ago seemed like Obama’s Waterloo is looking increasingly like the Tea Party’s Chancellorsville. The devil is in the details. Not surprisingly, Democrats still favor spending over cuts by two to one. Nor has the Tea Party shifted: four out of five thought deficit reduction the most important issue in June; the same proportion thinks so today. But moderate Republicans have shifted. While two months ago they divided two to one in favor of cuts over spending, now they divide 55 percent to 40. Independents, too, are on the move. Two months ago they favored deficit reduction by 54 percent to 39; today they are evenly divided.

What has caused such an about-turn in the center ground? Perhaps Americans have been taking a second look at Keynes, though I doubt it. Keynesians are in full retreat, battered and bruised by a savage campaign that has painted them as self-serving spendthrift brigands. Few Keynesians can be found arguing their hero’s corner right now. Perhaps, on closer examination, Americans have concluded that cutting public spending when the economy is teetering on a downturn is a guaranteed way of ensuring a double dip recession. (If you want to see what that looks like, go to London, where a Hayekian experiment is in full swing.) Perhaps an idea that seemed good when discussed around the kitchen table doesn’t sound so great from the mouths of Rick Perry and Michele Bachmann. What exactly is going to be cut? Education? Social Security? The armed forces?

It is rash to invest too much meaning into one set of poll figures. Americans are in an agitated state about jobs and the economy and could easily swing back toward the Tea Party. But if the trend keeps up its momentum, like the demotion of Hurricane Irene to a tropical storm, we may have witnessed the ebbing of a populist movement that for a while caused the nation to batten down the hatches and await an unkind, uncomfortable fate.