The Heritage Foundation’s Brian Reidl explains in National Review that it’s not possible for stimulus to work:

The idea that government spending creates jobs makes sense only if you never ask where the government got the money. It didn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.

So suppose this engineer Henry Ford wants to build a car factory, but he doesn’t have the money it costs to build a car factory, so he borrows the money from a coal dealer named Alexander Malcomson—is that a zero-sum transfer that doesn’t create jobs?

The issue with government stimulus spending, I would say, isn’t that money doesn’t “fall from the sky.” The issue is that we’re not very confident that congressional appropriators can allocate real resources (people, electricity, buildings, steel, etc.) in the most efficient way and prefer to leave this allocative function up to the free market. But how reasonable a concern this is has to be a function of fully-employed the resources are. If unemployment is at 4 percent, then injecting spending into the economy probably is going to mostly involve just shifting things around.

But if unemployment is at 10 percent, office vacancies are sky-high, retail stores are closing their doors, millions who would prefer full-time work are working part time, and capacity utilization is in the dirt then things look different. It’s hard for government planners to outsmart the market in terms of how resources should be employed, but it’s not that hard—having tons of people sitting around doing nothing is not an efficient outcome.

And even within circumstances of depressed output, it’s possible to structure your stimulus in a way that involves as little central planning as possible. You might heavily emphasize measures that basically increase people’s purchasing power and let the market sort out what gets produced—hence the Making Work Pay tax cut, the SNAP increase, the Unemployment Insurance payouts, and the COBRA subsidies. And you can try to simply maintain stability in existing employment—hence the aid to state governments. Then beyond that, you try to take some idle resources and put them to work—hence investments in infrastructure.

I’m generally dubious of analysis that puts a ton of weight on the idea that someone or other has “bad messaging,” but the point Greg Sargent is reporting here is that Congressional Democrats don’t just have bad messaging on national security, they’re literally not developing any message at all to give to members:

One frustrated Dem strategist who works closely with House Dem candidate across the country told me: “We’re behaving like the President has a 30% approval rating. On these issues, Democrats inherently believe no one will believe our arguments.”

The whole post is worth reading, as are Spencer Ackerman’s comments. But let me quote from page 210 of my book:

Consequently, one sees what amounts to an endless repetition of the pathologies of years past: efforts to avoid talking about these issues, and, when forced into a corner, a tendency to want to duck the main issues and quibble around the margins. This reflects a lack of self-confidence, but it also makes it all but impossible to formulate a principled basis for an alternative to conservatism. It’s that lack of a principles-driven framework that makes it so difficult for the Democrats to win. Thus, the cycle reinforces itself and has continued to do so right up to the present day.

That was written in the spring of 2008 and I think it’s still true today. The issue, to be clear, isn’t that Democrats are unprincipled. Rather, the issue is that while conservative foreign policy is undergirded by a clear ideological commitment to violence and nationalism, progressive foreign policy tends to be quite muddled. Liberals are actually most comfortable offering national security arguments when they too can be nationalistic as in the Dubai Ports World gambit or attacking Dan Coates for lobbying on behalf of foreign governments.

It’s actually true that Obama has the edge in polls on national security issues at the moment. But the real gap in both convictions and confidence shows itself at a moment of crisis. Obama backed off his initially sound response to the Russia-Georgia conflict in favor of something more McCainish. And though Obama clearly doesn’t favor a unilateral Israeli military attack on Iran, ask yourself what his administration would really do if Israel launched such an attack?

Lately the “trash and cash” phenomenon whereby GOP members of congress slam the American Recovery and Reinvestment Act and then go back home to their districts to tout local ARRA-funded projects has been getting some attention. Greg Mankiw, offering a great example of the phenomenon I was discussing in my post below, says the critics of this position aren’t making sense:

I don’t know the facts of the case, but the logic of the Democratic position baffles me. It seems perfectly reasonable to believe (1) that increasing government spending is not the best way to promote economic growth in a depressed economy, and (2) that if the government is going to spend gobs of money, those on whom it is spent will benefit. In this case, the right thing for a congressman to do is to oppose the spending plans, but once the spending is inevitable, to try to ensure that the constituents he represents get their share. So what exactly is the problem?

If Mankiw is seriously puzzled about this, then what he needs to do is pay more attention to what it is that’s being said about ARRA. If you want to say “ARRA is helping the economy, but in my opinion it’s not optimal policy, nevertheless I want to see as much of its help as possible go to my constituents” then that would make perfect sense. But that’s not what’s being said about the stimulus. To link to Jon Chait again, the orthodox conservative position is that the Recovery Act is harming the economy.

The backstory here, I think, is that Mankiw is a neo-Keynesian economist. He believes that short-term fiscal stimulus can help a depressed economy and is the appropriate policy under the circumstances. He’s also a Republican Party political operative. And unfortunately for him, congressional Republicans neither backed ARRA nor did they unite around an alternative stimulus policy that was more Mankiw-friendly than ARRA (i.e., overwhelmingly composed of short-term tax cuts). Instead, they united around Jim DeMint’s plan to massively increase the long-term deficit with permanent tax cuts and the view that short-term fiscal stimulus is positively harmful to the growth prospects of a depressed economy.

I think it would be interesting to read what Mankiw thinks about the fact that leading conservative institutions have taken up a view of economic policy that he thinks is wrong. But he prefers not to tackle that subject, which I think is fine. But he doesn’t get to then turn around and pretend that people have offered some different policy objection than the one they’ve actually offered.

(cc photo by patrick kiteley)

Jon Chait zings Reihan Salam for what is I think a pretty common failing among the smarter set of conservative commentators, namely a tendency to dismiss as straw-man characterizations positions that are in fact the mainstream conservative orthodoxy. In this case that includes the assertion that the American Recovery and Reinvestment Act has had no positive impact on the economy. You see something similar with the view that climate change is a made-up conspiracy cooked out of thin air by Al Gore and some UN guys. Or that reducing tax rates is a surefire way to increase revenue.

I wish it were the case that these were straw man views, invented by liberals to make the right-wing look bad. But if you listen to what the most powerful conservative politicians and media figure in the land say, these are the things they offer as the basis of conservative policy on macroeconomic stabilization, on climate and energy, and on the long-term fiscal challenge. Is it nuts? Well, yes it is. But there you have it. If you want to find what counts as a fringe position, you can find tea party leader Richard Mack talking about states’ rights to secession.