Quoted Out of Context Again
[UPDATE Feb. 13 2:40 PM eastern time: Andrew Sullivan of The Atlantic has done the gentlemanly thing and withdrawn the racism charge. Adam Serwer of The American Prospect has apologized for not taking into account the full context. ]
I am still waiting for word from Vanity Fair and The New York Times.
And the rhetorical response of conservatives to the stimulus plan — which will, it’s worth bearing in mind, cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq — has bordered on the deranged…
It’s “destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs,” said Arnold Kling of the Cato Institute.
I was talking about Henry Paulson’s $700 billion bank bailout, and then I said that we have a new gang of thugs doing the same thing. If you lump together the Paulson bailout, the stimulus, and the Geithner bailout, sooner or later you’re talking about real money.
I also prefaced my remarks by saying, “I think about this like an economist. I feel about it as a father.” And I transitioned to the substance of my remarks by saying, “That’s how I feel. Now back to how I think.” I tried to differentiate between expressing thoughts and voicing anger, and Krugman does not acknowledge that I made that attempt.
Anyway, my guess is the folks at Cato will be happy to have their name in print. So I’ve earned every penny of my salary (which is nothing, but I’m not complaining. I’m what they call an “adjunct scholar”).
But what really hurts is being quoted correctly, by Patriot’s Quill, a blog that I confess I don’t ordinarily read. Unlike the magazine-affiliated bloggers who slimed me based on a misquote, this guy actually had the nerve to read something I wrote.It was an essay called, Some Keynes for Bush. It was written on December 20, 2000, which was when he was President-elect (Bush took office in January of 2001. I suppose if I were a lefty I would put scare quotes around “elect”). The dotcom recession was underway, and I thought it was going to get ugly. I proposed a fiscal stimulus.
One approach that would be congenial to Bush would be a large tax cut. Unfortunately, much of the tax cut that was part of his campaign was “back-loaded,” with the larger cuts occurring farther into the future. If anything, we probably need a more front-loaded tax cut.
In addition, some of the tax cuts most popular with Republicans may not be very stimulative, because they are likely to be saved rather than spent. For example, eliminating the “death tax” is unlikely to unleash much spending. I cannot imagine that the marginal propensity to consume out of inheritances over $700,000 (smaller inheritances are tax-free today) is very high.
An alternative would be to give large grants to state governments–what used to be called general revenue sharing. For example, the Federal government might give each state $1,000 for every person living in that state. This would amount to a $280 billion program.
So, how do you reconcile Kling in 2000 with Kling in 2009?
1. They are actually pretty similar. I proposed a timely, targeted, temporary stimulus then, and I would support one now. Today, I prefer a cut in the employer portion of the payroll tax, because of my “Minsky moment” thesis. I opposed a partisan, pandering permanent policy then (the Bush tax cuts) and I oppose one now (the Pelosi-Reid spending bill).
2. I have changed my views on the trade-off between current unemployment and future indebtedness. Then, I wrote,
if you ask me to choose between a full-employment economy with a budget deficit and a recession economy with a surplus, I would not choose the surplus. The full-employment economy will help to give more work experience to younger people. That will make them more productive later in life. Ultimately, the best hope for dealing with the demographic crunch is higher productivity, not government savings.
Obviously, I take the opposite view today. I think this is primarily because I have become less confident that Keynesianism will work. The economy did not really behave the way I expected that it would in the dotcom recession, and I think that the reason is that labor is no longer homogeneous. See my Lectures in Macroeconomics.
I also am more worried about the long-term fiscal outlook. Relative to where I was in 2000, I am surprised that Bush ran such big deficits (you would think he would have cut spending) and that he did nothing about Social Security or Medicare (other than to add a huge unfunded prescription drug benefit to the latter). Moreover, the financial bailouts are another huge source of indebtedness.
Anyway, I give Patriot’s Quill credit for journalistic accuracy. Clearly, the blogosphere has something to teach Vanity Fair, The American Prospect, and The Atlantic about that subject. (UPDATE: A commenter points out that Andrew Sullivan of The Atlantic has done the gentlemanly thing and withdrawn the racism charge.)