Saturday, March 7, 2009

What Would James Tobin Say About Today’s GOP Fiscal Stance?

AP reports:

The top Republican in the House is seizing on the latest spike in unemployment to call for a freeze on government spending and to urge President Barack Obama to veto a $410 billion spending bill. Rep. John Boehner, R-Ohio, said the jump in unemployment to 8.1 percent and the loss of 651,000 jobs in February is a sign of a worsening recession that demands better solutions from both parties. Boehner criticized the spending bill as chocked full of wasteful, pork-barrel projects. The Senate postponed a vote on the bill until Monday amid the criticism. Boehner said he hoped Obama would veto the bill. He urged the president to work with House Republicans to impose a spending freeze until the end of this fiscal year.

Josh Marshall calls this proposal a joke:

I'm not even sure it's fair to say that this is a replay of the disastrous decisions the magnified the Great Depression between 1929 and 1933. It's more a parody of it. When the crisis is a rapid and catastrophic drop off in demand, you handcuff the one force that can create demand (i.e., the federal government) in the throes of the contraction. That's insane.

As the recession during the early 1980’s worsened, one of the calls from certain supply-side types was that we could increase aggregate demand by cutting government spending. In a speech echoing this insane theme by one of the practitioners of a large econometric model of the US economy, James Tobin asked the speaker a simple question. He asks the practitioner to tell the audience the sign of his fiscal policy multiplier. In other words – as Dr. Tobin explained – what would be the predicted effect on output if the model entertained an increase in government spending? The practitioner thought about the question for a moment and replied that the predicted impact on output from an increase in government spending would be positive. To which – Dr. Tobin politely noted that the entire speech made no sense.

Now if Congressman Boehner can point to a credible econometric model of the US economy where the fiscal policy is negative, maybe he can defend his spending freeze proposal. Otherwise, as Josh notes:

DC Republicans are simply not part of the discussion when it comes to repairing the US economy or arresting our slide into deep economic misery. And any reporters who aren't clear about this are just lying to their readers or viewers.


Bruce Webb said...

Well I made this point in my "Pick your Pork" series at AB. I invited AB readers to go through the Stimulus Bill and compile their own lists of pork. As an assist I put up examples from columnist Ruben Navarrette, an editorial at the Columbus Dispatch, plus the Republican Senators own list. Navarrette came up with a total of 0.1% of the bill as it existed, the Dispatch with 0.4%, and even the Senate R's came up with only 2.15% and had to take huge whacks at Homeland Security and the Coast Guard (not normally considered porky by the R's) to get that much.

None of this is being driven by any fiscal principle on the part of the Republicans, it is all just posturing, and while it should be breathtaking seeing the MSM present the poseurs as serious contributers to the policy debate, the track record of the MSM over the last sixteen years has just numbed just about everyone.

TheTrucker said...

Well, well, well..... Do I see some backbone emerging in a professed "liberal"? Low levels of testosterone and jelly filled spines are seminal to the rightard's characterization of the "Liberal". It has long been fashionable for the "Reich" to so characterize anyone of reasonable intellect who might have a capacity for analyses and deliberation. Yet I see that we have a ways to go in that Krugman isn't actually insinuating that the press is playing to the ignorance of the masses. In his latest foray he again "whines" about the unfair coverage as opposed to making the press the butt of off color jokes or outright impugning their ability to separate fact from ideological fiction.

At the same time I am heartened by the learned economics people posting on this and other boards digging in against the Republican loons and their corporate media whores. Sadly, we have not yet found even one Democratic Senator willing to address the real problem. And Harry Reid has got to go.

It is difficult to present any discussion in an even handed manner when one side of the argument is based on religious orthodoxy. No amount of rationality can be employed against true believers in "war" as the only moral means of population control and the longed for destiny of the human race. The reality is that Republican orthodoxy is an outright assault on "economics" and rationality.