"The Hypocrisy of Stimulus Hypocrites"
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.
I got my macro lingo mixed up. Mankiw is a “New Keynesian” rather than a “Neo-Keynesian.” Apologies for the error.