by Ryan Avent
Obviously, there’s nothing shocking about a libertarian being upset with the proposed stimulus plan, what with the not liking government and all. It would be surprising if Will Wilkinson weren’t writing things like this:
The economists can duke it out over the possibility of successful fiscal stimulus. But is there any reason based in up-to-date economic theory to believe that this trillion dollar deficit-spending bill is not, as [economist Robert] Barro says, garbage?
In fact, there is, and I’m not sure that a stimulus skeptic should feel too comfortable leaning on Barro, whose response to criticism after an initial salvo against stimulus in the Wall Street Journal was basically to call Paul Krugman an idiot and ignore the many legitimate objections raised in the economics blogosphere. But rather than debate macroeconomics with Will, I’d like to call attention to this:
Like the president, Krugman seems firmly caught in the paradox of countercyclical macroeconomic politics. The intermediate-level textbook theory says that at times like these we need a certain kind of policy to steady the economy’s nerves and lubricate consumption and investment. The economics says we need confidence. But political reality says we need panic. So we try to induce panic so that we can later induce confidence. This seems an extremely awkward and implausible approach, but that doesn’t keep anyone from trying it.
This is just too cute. The paradox of countercyclical macroeconomic politics is only a paradox if you believe that the current recession is the result of equal parts Democratic fear-mongering and facts on the ground. But can any sane person actually believe this? Does anyone really think that Barack Obama’s acknowledgement of economic reality and the op-ed warnings of lefty economists are the things producing this downturn, or perpetuating it, or deepening it? As opposed to, say, the trillions of dollars in lost housing and stock market wealth? Or the effect of a credit crisis on drastically overleveraged firms and consumers? Or, moving beyond initial triggers, the layoffs? Or procyclical budget cuts at the state and local level?
I think that Krugman is more right than Barro on the merits of the argument, and if I were on the fence, this kind of interview wouldn’t tend to push me toward Barro. But what really wouldn’t convince me of anything is the notion that what the economy really needs is for opinion columnists to quit whining about unemployment and output gaps and plunging global demand, as if a zen acceptance that government intervention is futile — whether or not that’s actually the case — would suddenly right our economic wrongs.