This received little attention, but President Obama recently sat down for an interview with Mark Halperin of Time magazine.  The interview didn’t generate anything you might call “newsworthy,” littered as it was with tired exchanges like this one:

Q: “Why not in the first year, if you’re [re-]elected — why not in 2013, go all the way and propose the kind of budget with spending restraints that you’d like to see after four years in office?  Why not do it more quickly?”

A: “Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%.  That is by definition throwing us into recession or depression.  So I’m not going to do that, of course.”

No, of course not.  There isn’t anything surprising about this response, with the President mechanically delivering the Keynesian line.  But it does reinforce something about this election:  that it’s shaping up to be a battle between contrasting visions, Keynesian vs. Austerian, and a referendum on the President’s implementation of his preferred Keynesian approach.  That’s what will make this election so satisfying for anyone interested in economic policy and what makes it a rare occasion for the public to deliver their verdict on the last few years’ worth of Keynesian management, and to decide if they want to move in a different direction.

Except that’s all false.  That’s not what this election is about—not at all.

The exchange quoted above is actually taken from an interview of Republican presidential nominee Mitt Romney.  It’s Romney who is explaining in a matter-of-fact, offhand way that reducing the deficit in the short term would be disastrous for the economy.  It’s Romney embracing the Keynesian argument.

This election may be about optimal tax rates for the wealthy and the long-term size of government (or more accurately, the size of government programs serving the poor), but it is not, as Romney’s unguarded moment demonstrates, about competing visions of short-term macroeconomic management.  Instead, it’s a battle of pretend visions—of economic policy, of the way the political system works, and of fiscal reality.

ARRA, the first stimulus plan (second, if you count the one passed in 2008), was effectively cancelled out by a contraction in state and local budgets.  Even when you look at federal expenditures alone over Obama’s first term, this administration has overseen some of the lowest growth in government spending since Eisenhower.  And all told, if you include all levels of government, as Floyd Norris reports:  “for the first time in 40 years, the government sector of the American economy has shrunk during the first three years of a presidential administration.”

A lot of people are worried about the “fiscal cliff” we’re facing in 2013 (the expiration of a number of tax cuts and temporary spending increases along with the debt limit deal’s sequestration cuts), and they should be:  the Levy Institute’s Strategic Analysis shows how the “current law” baseline for the federal budget will wallop US GDP next year.  But you hear less about the fact that we’ve already entered the 1937 phase of our rehashed historical drama.  Over the past year, we’ve already experienced the largest contraction in real per capita government spending since the end of the Korean War.  Welcome to the fiscal mudslide.

And if you look at direct job creation (which Pavlina Tcherneva argues is closer to the original Keynesian spirit than fiscal pump-priming), reality is even more out of step with what “everyone knows.” What we actually have is not just a lukewarm version of Keynesian policy, but an austere, record-setting reduction of the public workforce.

Obama press secretary Jay Carney picked up the story of the government’s relative frugality and hailed the President for exhibiting “fiscal responsibility.”  But this is an intentionally confused interpretation of both optimal economic policy and the realities of the political system.  First off, an austere fiscal policy at this economic moment, as the administration (and Mitt Romney) knows, is wasteful and deeply irresponsible.  Take a look at the recent collapse of public investment shown in Figure 7 of the Strategic Analysis, and while you do, keep in mind that the federal government is currently able borrow at rates of interest that have reached record lows—so low that the government can borrow for 10 years at negative real rates.

Second, in defense of the President against his press secretary’s unintended slur, recent trends in federal spending do not represent the preferences of this administration.  Recall the American Jobs Act (chiefly infrastructure investment and aid to states to stem the losses of public jobs), as well as numerous other attempts at passing further stimulus.  For the last couple of years, economic policy has been an expression of what congressional Republicans will allow.  And so far, they have been unwilling to support further stimulus, leaving us with a fiscal policy stance that their presidential nominee thinks would be suicidal (if he were President).

So to sum up:  the President’s team is openly embracing what is actually an austerian fiscal policy forced on them by GOP obstruction in Congress, while the Republican nominee’s team continues to argue that the President’s Keynesian approach to fiscal management (which hasn’t been implemented) has failed—an approach, by the way, that their nominee actually supports (or would support, if he were President).  Can’t wait for the debates.

There is a simple model of the way democratic legitimacy works:  the party that wins an election gets to implement their policies and then submits their performance to the judgment of the electorate.  If the electorate approves, the policies continue; if not, the government is replaced and moves in a different direction.  Now, that’s admittedly a naive way of describing the way most elections work, but not so naive as to be worthless.  Voters in the UK will at some point be allowed to decide whether they approve of Prime Minister Cameron’s austerity policies, or whether they’d like to move in a different direction.  How, exactly, would you describe the choice faced by the US electorate come November?