Saturday, May 26, 2012

But haven’t we already tried borrowing to stimulate?

Paul Krugman reacts to the following childish insult from The Telegraph:
To his followers, he’s a saint; to his detractors, he’s a false prophet with satanic intent.
The Telegraph does note that Paul’s policy advice is entirely consistent with the writing of British economist Lord Keynes. My title is where this op-ed starts in on its own view of why Keynesian economics might be wrong headed. But let me suggest that the author of this op-ed does not understand Keynesian economics. Keynes was not in favor of the type of long-term fiscal irresponsibility that we have witnessed say in the United States during the Administrations of Ronald Reagan and George W. Bush. Yes I know proponents of the 1981 and 2001 tax cuts could argue that we were not at full employment when these tax cuts were passed. However, the 1981 tax cut was not needed to get us back to full employment. Volcker’s monetary policy – for better or worse (worse in my view) – was the main driving factor for the U.S. economy. And we know George W. Bush pursued a host of fiscal policies that were more long-term in nature and all fiscally irresponsible. If the author of this Telegraph op-ed thinks Lord Keynes would have approved these episodes of fiscal stimulus – I submit he’s very ignorant of the brand of economics that Lord Keynes and economists like Paul Krugman strive to describe.

4 comments:

John Quick said...

"But haven’t we already tried borrowing to stimulate? "

Yes, and brought the economy back from the cliff. So we tried it, and it worked as far as it went.

But as Krugman has pointed out for three years (and I think Keynes wold also were he alive), we didn't stimulate enough. Some more borrowing would have been a good thing, as would raising taxes on the proportion of high income that wasn't going to be spent.

KISSWeb said...

Only a dedicated satanist could declare that someone desperately trying to get people back to work has "satanic intent." These are truly toxic people. The Telegraph editorial people, that is. Or at least if they are not toxic people per se -- you know, they love their wives, children and dogs -- they are under a toxic spell.

John Quick said...

To Kissweb:

It wasn't an insult made by the Telegraph. They were just making an observation about the hysterical opposition to Krugman from the far right, who make the absurd claim that Krugman (and Obama) are consciously trying to destroy the US.

Brenda Rosser said...

Re: "...Volcker’s monetary policy – for better or worse (worse in my view) – was the main driving factor for the U.S. economy. And we know George W. Bush pursued a host of fiscal policies that were more long-term in nature and all fiscally irresponsible...."

Don't you get a strong feeling that these folk had a strong impulse to believe that 'in the long term we're all dead'? So, what the heck...turn on the printing presses..whatever it takes. After all, while the US is still free to print as much money as it likes, it can't print oil.

Maybe the austerity programs in Europe and Middle East are designed to reduce consumption there in order to divvy up a greater share of the world's oil to the US and the US's factory (China)?