There was a big fight in San Diego this weekend, but it wasn’t even on pay-per-view. It was on the effects of government stimulus between Paul Krugman and UC San Diego professor Valerie Ramey at the American Economics Association conference. Unfortunately, the only coverage I’ve read of it comes from Matt Yglesias in the article whose title demonstrates its problems, The Frustrating Fiscal Stimulus Debate. In as much as Yglesias presents a blow by blow account, it seems that Krugman scored a technical knock out. But Yglesias’ commentary is classic false equivalence.
The argument he makes is that the economics profession pretty much agrees when you get right down to it. Ramey was arguing that stimulus wasn’t very effective throughout the 20th century. But, Yglesias notes, Krugman agrees: there are very few times when government stimulus is high effective. It is just that right now is one of those times. And that, I fear, is where Yglesias goes off the rails.
The problem is that conservative economists are ideologically constrained. Krugman is a liberal. But you don’t see him claiming that there wasn’t stagflation in the 1970s. He doesn’t claim that stimulus is always the answer. But conservative economists certainly do claim that stimulus is never the answer—at least as long as a Democrat is in the White House. What’s more, Ramey wouldn’t be arguing as she is if she thought that stimulus worked now. And we have plenty of examples of conservative economists this last four years claiming that the recession was due to some supply shock.
Yglesias ends his article by speculating what is driving conservative and liberal economists. “I get the overwhelming impression that with a few exceptions the issue is basically that right-of-center economists generally think the existing level of government spending is too high and that additional government spending is likely to be wasteful.” He says the reverse can be said about the liberals.
There are a couple of problems here. First, the issue of stimulus is not about money being well spent or not. The idea is to get the government started. World War II was not useful spending. But apart from this, the claim that stimulus money is wasted is just an excuse for not doing anything. It is like oil company funded politicians who claim to be for tighter regulation, but there are somehow always minor problems with any bill that comes for a vote. If the multiplier of a stimulus bill was thought to be 2.2 instead of 1.2, the conservatives would claim that any multiplier under 2.5 was wasteful. So Yglesias is treating these economists as though they are honest players. Certain the behavior of Kevin Hassett, Glenn Hubbard, Gregory Mankiw, and John Taylor this last year should have put such nonsense to rest.
What’s more, Yglesias’ claim that conservatives think government spending is too high was dealt with in a recent Krugman article. He was talking about politicians, but I don’t see how it is any different with economists. Conservatives think the the government is too big. But they don’t have a clue what about the government is too big. I don’t know what Valerie Ramey would say on this issue. But I doubt she could say any more than conservatives will generally say in private: kill Social Security; kill Medicare; kill Medicaid. But the people see things differently—making these the most popular of government spending.
The whole push of conservative economists to show that stimulus is just never quite effective enough to be done is nothing but apologetics. And apologetics is not about science. The very fact that these conservatives are feverishly hunting around for some information—Any information!—that will justify their favored policies shows they have a real problem. They are not engaged in science. And thus, they are doomed to failure, even if some of their favored policies turn out to be right.