Back on Friday, Matt Yglesias wrote that Mitt Romney will probably be better for the economy in the short term than Obama will be. This is really not an outrageous statement. This is pretty much what I think. Republicans always campaign about getting rid of the deficit, but once in power, they spend like a teenager with his first credit card. But understandably, many people were shocked by Yglesias’ claim, even though he has been very clear that he plans to vote for Obama. Since then, he has been defending himself and finally today publishing another article, Why Romney Might Boost Growth More Than Obama.
Yglesias offers three reasons why Romney would boost the economy more than Obama. First, as I’ve already mentioned, Republicans tend to run higher deficits than Democrats and for now, deficits are a good thing. Second, the Federal Reserve does a better a job under Republicans because the Fed is mostly made up of Republicans who are a bunch of assholes who should be tried for treason. And third, Republicans would stimulate the economy at the expense of the environment.
There is no question about his first reason. But there are a number of reasons to be against it. Republican deficit spending is not nearly as effective as Democratic deficit spending. This is because Republicans use the debt to pay for things that are not very stimulative: tax cuts for the rich and weapons manufacturer contracts. These don’t stimulate the economy the way that social welfare and infrastructure and education spending do. Eventually, the debt has to be paid off. The question is whether we get good value for this spending and with Republicans the answer is no.
On the second question, Yglesias is using the Frum Conjecture: since the Federal Reserve does a better job of stimulating the economy under Republicans, we should elect a Republican rather than let the Fed continue to fuck us. In fairness to Yglesias, he isn’t saying this. He is just saying that the economy will do better because the Fed acts this way. However, I don’t think the case is quite so strong now that it has been made very public that the Fed does this. I don’t think the Fed ever acted this way on purpose, and I tend to think in the future they will try to be more evenhanded. And even in the last couple of months, I think they’ve done a better job.
Yglesias is totally wrong the third point. Recessions are the perfect time for companies to clean up their processes. As is well known, companies are sitting on trillions of dollars that they don’t know how to spend. This money could be used effectively to fix their dirty infrastructures and simultaneously stimulate demand. While it is true that allowing more oil drilling would also stimulate the economy, it is not nearly as effective. Remember: the problem is not supply, it is demand. So I don’t think Yglesias is giving enough benefit to the clean environment side of the equation.
Regardless of all of this, there is a reason that Yglesias is still going to vote for Obama, and I think it is every bit as important as the social issues that he cares about. Under Obama or Romney the economy is likely to do quite well over the next four years. If Romney will be better for the economy, he will be only slightly better. I will add another ripple: if Romney managed to get the Ryan budget passed, it would greatly hurt our economic recovery. The odds are long on Romney being able to do that. But is even a 5% chance of success a risk we want to take?