Krugman’s Blog, 3/14/13

There were two posts yesterday.  The first was “Night of the Living Alesina, Continued:”

So, while I was dealing with real life yesterday — sorry about the blog silence, but sometimes other things are more important — Paul Ryan weighed in. Now, Ryan’s status among the Very Serious People has taken a Very Steep Plunge; at this point Dana Milbank sounds a lot like, well, me back in 2010. (But that won’t stop the VSPs from considering me unsound; I was prematurely anti-flimflam, you know.) Still, it’s worth spending a few seconds parsing his current position.

Like almost everyone on his side (and many centrists), Ryan pretends that Keynesians are for fiscal stimulus always and everywhere — as opposed to the reality, that it’s about doing something in a liquidity trap, when monetary policy can’t cure mass unemployment. But what really struck me was his assertion that the notion that spending is expansionary and austerity contractionary has been debunked by “lots of studies”. Which studies, exactly?

I think it all comes back to Alesina and Ardagna — which, to repeat has been more thoroughly refuted by both academic criticism and real-world experience than any other popular doctrine I can think of. If Ryan’s faith is unshaken, that says everything about him and nothing about the evidence.

And let me ask a broader question: what, exactly, have Ryan and the economists he likes to cite gotten right these past, oh, five years? How has the Heritage Foundation prediction of soaring interest rates from four years ago panned out? How has Ryan’s own warnings from two years ago that Bernanke’s debasing of the dollar would translate into sharply rising inflation panned out? How has Alesina’s prediction that European austerity would be consistent with a strong recovery panned out?

OK, I understand that in GOP internal politics we seem to have a principle of survival of the wrongest, in which the less real-world outcomes corroborate the dogma, the more fiercely that dogma is held. But Ryan’s complete lack of self-reflection is nonetheless something wondrous to behold.

The second post of the day was “Running Government Like A Business or Family:”

I’ve spent a lot of time trying to knock down the bad analogy between governments and individuals, and the line that the government should act like an individual family or business, and cut back when times are tough. The key point is realizing interdependence: your spending is my income, my spending is your income, and if we all try to slash spending at the same time the result is a depression. Somebody needs to step up and spend when others won’t — and the government can and should be that somebody.

That said, the funny thing is that real individuals and businesses don’t behave the way the balanced-budget scolds claim. Businesses often borrow and spend when borrowing is cheap or they see high payoffs to investing; so do families. So Think Progress is doing good by pointing out how many of those deficit-fearing Congresscritters turn out to have quite large personal debts.

 

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