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If Only Milton Were Around…

Will Wilkinson posits that if not for the death of Milton Friedman, hard money views might not have regained their currency on the right and the Federal Reserve might be in better position to deliver monetary stimulus.

Maybe so. That said, it’s not as if the country lacks for Republican Party members who are also well-known Ph.D. economists with views somewhere on the New Keynesian-monetarist axis. Greg Mankiw’s not dead, nor is Martin Feldstein. But these guys and other longtime GOP economic hands have largely been doing the usual Beltway wonk dance of speaking up for Republican positions when they agree with them, and staying quiet when they don’t. You don’t even need to see this as a particularly cynical way of behaving. In Washington, it’s ultimately a question of all power to the politicians. A wonk who insists on picking fights with prominent party leaders just finds himself marginalized. Next thing you know and you’re Bruce Bartlett. It’s arguably more useful to just keep your head down and make sure that if your team takes over they have some sensible people to turn to.

I think it’s especially difficult to be an advocate for monetary stimulus when the party you prefer is out of power. After all, it kind of seems like cheating. Here’s President Obama implementing tax policies you don’t like, health care policies you despise, and environmental policies you deem misguided. This is all stuff that you think will seriously impair jobs and growth over the long-term. Meanwhile, more or less by coincidence a shortfall in aggregate demand has created elevated unemployment and is making him unpopular. If AD stays too low, he’s likely to lose and his policies will be reversed — saving the country from a long-term drag on growth. Alternatively, the Fed could ride to the rescue with five or six years of Reagan-era inflation and ensure that Obama’s policies are entrenched. Sure that would help growth in the short-term, but there’d be a high long-term price to pay. So why contradict the Paul Ryans and Michele Bachmanns of the world when they run around complaining about currency debasement? I’m not sure a living Friedman’s calculus would be that much different.

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