Daniel W. Drezner: MIchael Kinsley Produces the Worst Piece of Conventional Wisdom You Will Read This Year
Liveblogging World War II: May 22, 1943

Another Opinions-of-Shape-of-Earth-Differ Journamalist Who Doesn't Do His Homework: Charles Lane of the Washington Post


Why oh why can't we have a better press corps?

Charles Lane emulates Clive Crook and Michael Kinsley in not citing and not quoting from the people he is criticizing. But he goes further: he doesn't even try to read what they have just written.

Daniel Kuehn delivers the smackdown:

Facts & other stubborn things: An email to Charles Lane of the Washington Post: Perhaps I'm missing something, but isn't your "compromise" option precisely Krugman's position? I think it's the right idea, but I think that's exactly where Keynesians are. The tough part is figuring out how to get the pro-austerity crowd to that point.

Keynes actually advocated separating the current budget from the capital budget, and it was the current budget that was supposed to be balanced, not necessarily the two together. Most economists agree that you can run perpetual budgets and still maintain a stable debt ratio as long as the deficits aren't too large.

Daniel Kuehn
Doctoral student, Department of Economics
American University

Charles Lane:

Austerity and Keynes can coexist: For those of us trying to sort out the debate over economic “austerity,” there’s a limit to what can be learned by inspecting the credentials of the contending economists. Yes, the fiscal-stimulus vanguard includes a couple of famous Nobel winners, but those pesky Swedes also gave their prize to the harshest postwar critic of Keynesian economics, a man whose signature policy proposal was the balanced-budget amendment. I refer to the late James Buchanan….

Krugman et al. place top priority on the short-term problem of alleviating unemployment. Although they often cast this as a moral issue, they also argue that avoidable idleness reduces the economy’s growth potential, as jobless workers tend to lose skills or quit the labor force altogether. Compared with these risks, possible future inflation and debt accumulation hardly matter, and wise politicians would proceed accordingly. “In the long run we are all dead,” quoth John Maynard Keynes.

Buchanan’s contribution was to remind everyone that, in a democracy, deficit spending is very easy to turn on and very hard to turn off…. Keynes argued that depression-­fighting deficits should give way to boom-moderating surpluses. Buchanan said, in effect, “fat chance.”…

In other words, Buchanan identifies the Achilles’ heel of Krugmanomics: that politicians simply cannot be trusted, over time, to manage the economy as Keynes prescribed. In the name of fighting unemployment today, they lay the basis for more of it tomorrow….

It’s possible, in theory, to reconcile the Krugman and Buchanan worldviews. During crises, governments could use term-limited fiscal and monetary stimulus to prop up demand, buying time to reform accumulated structural impediments to growth…. Krugman, Stiglitz and their German nemeses can argue endlessly, and probably will. The only thing I’m sure of is that neither side can achieve… scientific victory…. This ostensibly economic debate is being conducted amid uncertainty over such basic parameters…. (Come to think of it, does “austerity” even have a technical definition?) It is also essentially about value judgments and trade-offs. Nobelists may be better qualified to describe the issues than the average voter, but they are no better qualified to decide them.

Paul Krugman comments:

Perma-Stimulus, Again: Jonathan Chait tells me that the new anti-Keynesian paladin is James Buchanan, who supposedly showed that stimulus, however worthy, can never be reversed. The elevation of Buchanan comes from Charles Lane at the Washington Post, who name-checks me as one of those naive Keynesians who doesn’t get it (and misuses the “in the long run we are all dead” line to boot).

But wait: haven’t I dealt with this claim before? Why, yes — in a column published in the Times just two weeks ago, which was largely devoted to this very issue:

But there is, I believe, a further obstacle to change: widespread, deep-seated cynicism about the ability of democratic governments, once engaged in stimulus, to change course in the future.

So now seems like a good time to point out that this cynicism, which sounds realistic and worldly-wise, is actually sheer fantasy. Ending stimulus has never been a problem — in fact, the historical record shows that it almost always ends too soon. And in America, at least, we have a pretty good record for behaving in a fiscally responsible fashion, with one exception — namely, the fiscal irresponsibility that prevails when, and only when, hard-line conservatives are in power.

Incidentally, foreign experience follows the same pattern. You often hear Japan described as a country that has pursued never-ending fiscal stimulus. In reality, it has engaged in stop-go policies, increasing spending when the economy is weak, then pulling back at the first sign of recovery (and thereby pushing itself back into recession).

So the whole notion of perma-stimulus is fantasy posing as hardheaded realism.

This argument is then backed by various pieces of evidence.

So I answered this latest anti-Keynesian claim before it was even made. Oh, and I was under the impression that if you’re going to characterize a named writer’s views, and in particular to make claims about what that writer doesn’t get, you might want to read a few things said writer has written — say, his last two columns. But I guess I don’t fully understand the rules here.