The Keynesian experiment
Ezra Klein
WashPost
It's become common to hear Republicans saying that Democrats' "Keynesian experiment," or in Paul Ryan's case, their "Neo-Keynesian economic experiment," has failed. You'd think that Keynesian economics was a big divide between the parties. But it wasn't and it's not.
In January 2008, George W. Bush signed $152 billion in tax-cut-driven stimulus. As the economy worsened, John McCain proposed $450 billion more in stimulus, this plan driven by a payroll tax cut. Now you've got Mitch Daniels proposing something similar.
The parties disagree on a lot of things, but they don't disagree over the idea that the government should act to increase demand when the economy sags. The theory behind a payroll tax cut (the government increases its deficit in order to get more money to people who can spend it so they will increase demand) and an infrastructure investment (the government increases its deficit in order to get more money to businesses who can spend it) is not theoretical, but practical: Do you think one is more stimulative than the other, and do you think one is more worthwhile than the other? Payroll-tax cut and an extension of unemployment insurance are even closer cousins.
Parties have trouble opposing things mildly. "The stimulus was a sensible idea, but imperfectly structured" is not a great election message. So instead we get sinister-sounding lines like "Neo-Keynesian economic experiment." That's good for convincing the base, and even some other voters, but the problem is that you've then convinced the base and some other voters of more than you've really meant to, and that ties your hands when you come into office and have to embrace some of those policies.
(More here.)
WashPost
It's become common to hear Republicans saying that Democrats' "Keynesian experiment," or in Paul Ryan's case, their "Neo-Keynesian economic experiment," has failed. You'd think that Keynesian economics was a big divide between the parties. But it wasn't and it's not.
In January 2008, George W. Bush signed $152 billion in tax-cut-driven stimulus. As the economy worsened, John McCain proposed $450 billion more in stimulus, this plan driven by a payroll tax cut. Now you've got Mitch Daniels proposing something similar.
The parties disagree on a lot of things, but they don't disagree over the idea that the government should act to increase demand when the economy sags. The theory behind a payroll tax cut (the government increases its deficit in order to get more money to people who can spend it so they will increase demand) and an infrastructure investment (the government increases its deficit in order to get more money to businesses who can spend it) is not theoretical, but practical: Do you think one is more stimulative than the other, and do you think one is more worthwhile than the other? Payroll-tax cut and an extension of unemployment insurance are even closer cousins.
Parties have trouble opposing things mildly. "The stimulus was a sensible idea, but imperfectly structured" is not a great election message. So instead we get sinister-sounding lines like "Neo-Keynesian economic experiment." That's good for convincing the base, and even some other voters, but the problem is that you've then convinced the base and some other voters of more than you've really meant to, and that ties your hands when you come into office and have to embrace some of those policies.
(More here.)
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