Keynesianism on the right and the left

Ótimo resumo do debate entre os keynesianos americanos sobre a questão fiscal.

MARTIN WOLF had a very harshly-worded piece in the Financial Times on Monday warning of the long-term consequences of the GOP's continuing de facto embrace of supply-side economics. While we don't often hear explicit arguments anymore that we could increase revenues by cutting taxes, Mr Wolf thinks the inherited belief in supply-side economics is at the root of the GOP's current fiscal policy trilemma: the belief that large budget deficits are ruinous; a continued eagerness to cut taxes; and an utter lack of interest in spending cuts on the scale that would be required to make a noticeable dent in the deficit. To illustrate, he cites a recent pronouncement by Jon Kyl, the senator from Arizona, that while spending hikes need to be paid for, tax cuts don't:

You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans.

Mr Wolf thinks the Republicans' "de facto Keynesianism" puts the Democrats at a historic disadvantage, as it's almost impossible to run against a party that constantly promises everyone a free lunch and blames the other guys when the check arrives. He thinks the situation could become disastrous if a Republican win leads to long-term policies so fiscally irresponsible as to flirt with the possibility of a federal default.

Bruce Bartlett, whom we interviewed over the weekend, agrees with Mr Wolf's prognosis, and adopts a tone that is if anything more dire. Andrew Sullivan agrees as well. Derek Thompson holds out the hope that over the long term, the GOP will produce more leaders like George H.W. Bush, who saw the need to raise taxes in 1990 (and paid the, shall we say, penultimate price in 1992). Paul Krugman wishes he could disagree with Mr Wolf, but can't.

What I find really interesting here arises in a quick reference Mr Krugman makes to a discussion he had last week with Jamie Galbraith. Mr Galbraith is one of a few economists who hold the view that deficits don't matter, from the left. (Or, to be fair, that they can matter, but only in circumstances so different from those of the contemporary American economy as to be irrelevant.) In a comment responding to Mr Krugman, Mr Galbraith writes:

In the actual world we live in, government does not have to “persuade the private sector to release real resources.” In the actual world, the private sector has already released those resources by the tens of millions of people.

All the government has to do, in the actual world, is mobilize those resources, which it does by issuing checks, preferably to pay people to do useful things.

There is no reason why this should be considered “costly.” Done correctly, in economic terms it amounts simply to the reduction of the waste that is associated with unemployment.

Mr Krugman thinks Mr Galbraith is wrong because, while the Fed can issue money today without risk of inflation because we're in a liquidity trap, the extra money issued will ultimately start to fuel inflation once the economy recovers, and that could prompt some nasty after-effects. But what interests me is that this is a way of thinking about money that not just the vast majority of Republicans, but the vast majority of citizens find completely incomprehensible. Most people have a naive view of money based on the model of the household budget. They're not used to thinking about money as an artificial token of exchange backed by the totality of productive capacity in the economy, whose purpose is to allow people to incentivise others to do useful things for them, such that if an accounting imbalance makes it difficult to pay people to do the useful things they're capable of doing, one way to get them working again might be simply to create more money. I obviously can't describe this view of the economy as well as Paul Krugman or Jamie Galbraith can, so you should read them on this question, not me. But I'm struck by the immense gap in vocabulary between the discussion Mr Krugman and Mr Galbraith are having, and the discussions going on in our political sphere. It's not just that Messrs Galbraith and Krugman believe in fiscal stimulus, while Republicans don't. It's that the two don't seem to agree on the definition of the word "money".

Fonte: The Economist