Here’s Arnold Kling:
I am amazed by how many proponents of fiscal policy don’t understand that it’s symmetrical. Fiscal policy doesn’t mean more government; it means more government during recessions and less government during booms, with no overall change in the average level of government. Anyone who doesn’t even get to that level of understanding, who doesn’t think in terms of policy regimes, is simply not part of the serious conversation.
I agree with the first two sentences, but not with the last.
Yes, in theory, there should be economists who, as they argued for more stimulus in 2009, should at the same time have been arguing for entitlement reform or other reductions in future spending. Other things equal, the bigger debt that we have accumulated over the past five years would make a non-ideological macroeconomist want to propose tighter fiscal policy somewhere down the road.
But “nonideological” and macroeconomics are nearly oxymorons. Name a prominent economist who believes that fiscal expansion is important during recessions and who also is to the right of the median economist on issues like school choice or taxing the rich or the usefulness of regulation. Or try to name a prominent economist who is to the left of the median economist on those issues and who does not believe that fiscal expansion is important.
A few comments:
1. The eurozone is far to the left of America. They have very big government, some of the biggest in the world. And they rejected Keynesianism decisively during this crisis. Keynesians like Paul Krugman were horrified by the austerian policies of the eurozone.
2. Australia has a relatively small government by developed country standards and did do some fiscal stimulus during a crisis.
3. There are many conservative Keynesian economists in America. Greg Mankiw famously named his dog “Keynes.” Glenn Hubbard is a Keynesian. Ben Bernanke is a Republican. George Bush did Keynesian-style fiscal stimulus in 2008.
4. It’s true that Keynesians favor bigger government than non-Keynesians, on average. People like Paul Krugman would prefer the government spent at least 40 to 50% of GDP rather than 30 to 40% of GDP. But this is true regardless of whether the government uses monetary or fiscal policy to smooth out the business cycle. So Krugman’s support for bigger government and Krugman’s support for fiscal policy at the zero bound are conceptually very different. One way we know this is that Krugman does not support fiscal stabilization policy when the economy is not at the zero bound. If his support for Keynesianism was purely ideological, why would he abandon that support when interest rates rose to 3%?
5. I understand that when we are in a cynical mood it’s tempting to say “Keynesians favor raising government spending as a share of GDP and recessions, and raising taxes as a share of GDP during booms.” But that’s not really what Keynesianism is about, that merely reflects the fact that this particular Keynesian is living in a country with a smaller government sector that they would prefer. As we see from the recent events in Europe, once government reaches a size that Keynesians are broadly satisfied with, they no longer favor steady increases the size of government. Policy becomes symmetrical.
Even when groups of people have views that are highly correlated, it’s very important to keep those views conceptually distinct when discussing the merits of various public policies. It’s true that those who favor single payer healthcare also tend to support public schools, but it makes no sense to oppose a single-payer healthcare regime on the grounds that education vouchers are a good idea.