The Bonddad Blog: We're All Keynesians Now: The New Yorker Magazine has a great piece on economic policy in the early years of the administration… by Ryan Lizza and is one terrific piece of journalism…. At this point, it's important to note a big difference in the economic world: there are those who believe that Keynes was correct in his economic analysis, and that Keynes basic ideas have been repeatedly born out by history and data. Then there is the Chicago school of economics who live in a fantasy world…. [H]istory and data clearly show that targeted government spending boosts economic growth. Hence, note the wide swath of people and organizations who supported the idea of stimulus:
- Robert Reich believes it should be $1.2 trillion over two years, but also indicated it could be larger.
- Joe Stiglitz believes it should be $1 trillion over two years.
- Paul Krugman: at least $600 billion in one year
- Jamie Galbraith: $900 billion in one year
- Institute for America's future (signed by Dean Baker, Andy Stern, Leo Gerard, John Sweeney, and others): at least $900 billion
- Marty Feldstein was an early proponent of a spending-only package and currently believes it should be $400 billion in the first year.
- Larry Lindsey, a former Federal Reserve Governor and NEC Director, estimates that $800 billion to $1 trillion is desirable.
- Ken Rogoff (widely respected macroeconomist, former chief economist of the IMF, former McCain adviser): $1 trillion over two years
- Mark Zandi (widely quoted economist, fom1er McCain adviser): at least $600 billion in one year
- Senior Federal Reserve officials appear to be of the view that a plan that well exceeds $600 billion would be desirable.
- Adam Posen (Deputy Director of the Peterson Institute): $500 to $700 billion in one year
- Goldman Sachs: $600 billion in one year
- Open Letter signed by 387 economists including Nobel Laureates Robert Solow, George Akerlof, and Joe Stiglitz on November 19th [note that most economists, including Stiglitz, support higher stimulus numbers today than they did a month ago]: $300 to $400 billion per year….
I should add, I would fully expect some Republicans to now argue that none of the Republicans quoted are in fact "real Republicans" but merely RINOs...
And, sure enough, right on time along comes Greg Mankiw:
Greg Mankiw's Blog: At least I am consistent: At least I am consistent Here is the memo that Larry Summers sent to President Obama when the 2009 stimulus package was being debated. It was originally confidential, but somehow it has recently been made public and is now going viral. I make a brief cameo appearance on page 11:
Greg Mankiw is the only economist we have consulted with who refused to name a number and was generally skeptical about stimulus.
I explained my skepticism here. Of course, the fact that I was "the only economist" expressing skepticism reflects the range of economists that Team Obama chose to consult.
Greg doesn't mention a single additional name. Who is he thinking of? Robert Lucas? Eugene Fama? John Cochrane? Ed Prescott? Caroline Hoxby? Ed Lazear?
Greg's arguments against use of fiscal policy have always seemed to me of the: "I assume the Federal Reserve has a can opener, and has the technocratic skill and the political will to use it". Which is fine. If you have a can opener--a monetary authority committed to offsetting shocks to nominal GDP and keeping it on a stable path. But what if you don't?
The others strike me as considerably worse.