The Sumnerian Missionary

Bryan – could you provide your reasons for thinking that was their real reason for favoring it? It’s not just uncharitable – it seems wildly unfounded.

My impression is that liberals haven’t come over to Sumner’s side analytically – they’ve come over strategically. I’m guessing the same reservations hold on monetary policy at a time like this (I’m certainly still hesitant), but given the paucity of the initial fiscal response and the absolute hopelessness of any more fiscal responses, what else is there to do but hope for monetary policy that is enough to make a difference.

I don’t think liberal economists were ever against monetary policy at any point – they just suggested it was a second-best solution.

Through the warped lens of aggregate demand perhaps monetary policy makes sense. But lets really think about what that really means. In order to raise aggregate demand you end up making the rich richer via the “low rates” subsidy (finance sector, asset owners, etc.) while making the poor eat the resulting inflation. All in hopes that some sliver of the new found wealth of the rich trickles down into jobs that now have lower real wages. This is “growth” that is not worth having and I believe America is finally realizing that. Any theory based on “aggregate demand” is a joke.

J Mann and RGV –

Precisely. I thought it was obvious that this is why liberal economists have reacted the way they have. I’m glad to see I’m not the only one that saw things this way.

Bryan – any reasons at all for thinking it’s a conspiracy theory to make big government? Your assessment is looking more and more paranoid with every commenter. Do you care to elaborate on it at all?

Wow, I thought Bryan was making a low-controversy claim.

The political activity of the last couple of years is very easy to explain under Bryan’s theory. Dems want to spend money, fiscal stimulus gives them cover to do it, so they preach the wonders of fiscal stimulus.

Here’s one summary of where the money went:

http://www.businessinsider.com/obamas-stimulus-spending-2010-9

Try flipping through it and asking how many of them Democrats would have wanted, anyway. It’s all of them, to my reckoning.

Now try the same exercise, but imagining them as a fiscal stimulus. For example, a large chunk went into welfare programs. Welfare is many wonderful things, but it’s hard to see it as inspiring extra economic activity. Rather the opposite. How about all the R&D? R&D has payoffs on a 5-10 year horizon, not the 1-2 that an economic stimulus was supposed to have. How about state aid? Does anyone think that larger states make for a super-charged economy? How about education? Again, maybe in 5-10 years, but in 1-2?

Looking where the money went, I find it very difficult to see it as a fiscal stimulus. I thought everyone did, but according to the comments, I guess not.

I encourage people who take the recession seriously, as something they wished the U.S. feds would work on, to look over what was actually done and see what you think. Don’t just look at the dollar figure and think, spending=stimulus. Look where the money went.

I encourage people who take the recession seriously, as something they wished the U.S. feds would work on, to look over what was actually done and see what you think. Don’t just look at the dollar figure and think, spending=stimulus. Look where the money went.

Daublin – you write as if you’ve never read a Keynesian critique of the stimulus package. There was substantial criticism of the composition of it. There was a lot of criticism that it was essentially filling in holes in state budgets, which should not have been it’s purpose. There were all kinds of critiques along these lines that you seem to completely miss. The perspective has usually been “not great, but better than nothing”. And as far as I can tell, that’s precisely how liberal economists are responding to QE2 too.

Bryan is not saying that liberal economists conspired together. He’s saying that they all wanted government growth individually, because they are liberals. This was pretty obvious at the time with DeLong’s brusk dismissal of Kevin Murphy’s objections to fiscal stimulus.

I can’t find anything to disagree with in Scott’s post, but it has little chance of penetrating the conservative echo chamber. It violates The Golden Rule of Conservatism in the Age of Obama: if liberals want it, conservatives mustn’t. Period.

Whether it’s a health care mandate, tax increases built into Bush-era legislation, a treaty on nuclear armaments reduction, or QE2, if liberals want it, conservatives must reject it at any cost. It doesn’t matter how hypocritical conservatives have to be, or how reasonable their former stances were at the time. If Obama adopts it, it’s doomed. Scott’s post is doomed, even if it is reasonable. It’s sad, but that’s how this new generation of conservatives operates.

@Steve

Did you really just complain that Daubin knew what was really in the bill, and understood why it would never work the way it was being sold to the public by its authors and political supporters, and use _that_ as evidence of him being ill- or uninformed?

@Lord: I think the reason many conservatives don’t like QE2 is the instinctive sense that the economy has a natural tendency to right itself. The guys in charge of economic policy have access to powerful tools and the willingness to use them, but conservatives are deeply skeptical that they understand what to do with them.

Imagine Bernanke et al. as a bunch of ambitious twelve-year-olds at the controls of a 747 (“to make it go up you pull the wheel back!“), and you get the picture. The natural thing to want becomes getting those guys out of the cockpit so they can’t do any more harm.

It couldn’t have just been that people made an analogy to the Great Depression, which was dominated by works projects?

In any case, this doesn’t explain why the largest items in the stimulus proposal were tax breaks, not projects.

I don’t think conservatives were howling for monetary stimulus; if I recall correctly, they were busy warning how inflation is bad, m’kay.