There were two posts yesterday. The first was “Europe’s Keynesian Problem:”
Rogoff’s piece is structured as an argument against Those Who — those who believe that Europe’s problems result solely from excessive austerity, and would all be solved with a bit of Keynesianism. It might help if he would name names; otherwise people might imagine that he’s talking about, say, Martin Wolf or me. But he can’t be, can he? Because neither of us — or, for that matter, anyone else I can think of — is making that argument.
Everyone with a bit of sense has argued all along that Europe has a big problem resulting from the single currency: there was a sharp rise in relative costs and prices in the periphery during the boom years, and the process of correcting that overvaluation through “internal devaluation” is extremely difficult and painful.
The Keynesian argument instead has been that this inherently difficult situation is made worse by two aspects of fiscal policy. One is the extreme austerity being imposed on the periphery; nobody is suggesting stimulus for, say, Portugal, but the question is whether a less extreme austerity regime might not do almost as well at limiting debt while internal devaluation takes place, while hugely reducing the human cost.
The other is that on any kind of rational pan-European basis, we should be seeing austerity in the periphery at least partly offset by stimulus in the core. What we have instead is substantial austerity in the core too. Here’s the IMF:
Surely the terrible adjustment problem facing the periphery would be at least somewhat easier if the core weren’t doing this; looser fiscal policy would directly help their exports, and it would also help promote, yes, somewhat higher German inflation, helping achieve internal devaluation.
So what the heck is Rogoff talking about? He has invented a class of straw men who believe that fiscal expansion alone can solve all of Europe’s problems, then uses the assertion that this is untrue — an assertion nobody disputes — to claim, or maybe just insinuate, that a reduction in austerity would achieve nothing at all.
This is not a helpful contribution.
The second post of the day was “The Closing of the Conservative Mind:”
Jonathan Chait has an interesting portrait of Josh Barro; Mike Konczal, citing this and also a longer discussion of “reformish” conservatives by Ryan Cooper, argues that there really isn’t much to see here. I agree, and have been trying to pin down what I mean by that.
Start with the proposition that there is a legitimate left-right divide in U.S. politics, built around a real issue: how extensive should be make our social safety net, and (hence) how much do we need to raise in taxes? This is ultimately a values issue, with no right answer.
There are, however, a lot of largely empirical questions whose answers need not, in principle, be associated with one’s position on this left-right divide but, in practice, are. A partial list:
1.The existence of anthropogenic climate change
2.The effects of fiscal stimulus/austerity
3.The effects of monetary expansion, and the risks of inflation
4.The revenue effects of tax cuts
5.The workability of universal health care
I’ve deliberately chosen a list here where the evidence is, in each case, pretty much overwhelming. There is a real scientific consensus on 1; the evidence of the past few years has been very strong on 2 and 3; there are no serious studies supporting the view that we’re on the wrong side of the Laffer curve; one form or another of UHC operates all across the advanced world, with lower costs than the US system.
So? You could, as I said, take the “liberal” position on each of these issues while still being conservative in the sense that you want a smaller government. But what the “reformish” conservatives Ryan Cooper lists do, in almost all cases, is either (a) to follow the party line on these issues or (b) to hint at some flexibility – and thereby cultivate an image of being open-minded — as long as the issues don’t get close to an actual policy decision, but to always find a way to support the Republican position whenever it actually matters.
But aren’t there people like Bruce Bartlett or Josh Barro who really do break with the party line on some or all of these issues? Yes, but they are then immediately branded as “no longer conservatives”, in a sort of inverted version of the none-dare-call-it-treason effect.
The point is that there remains essentially no room for independent thinking within the conservative movement.
Could you say the same thing about liberals? I don’t think so. A few decades ago, you might have been able to draw up a somewhat similar list for the other side, involving things like the superiority of tradeable emission permits to command-and-control pollution regulation, the general undesirability of rent control, the benefits of airline deregulation, the absence of a usable long-run tradeoff between unemployment and inflation (and hence the impossibility of setting a 4 percent target for unemployment). But many liberals eventually conceded the point in each of these cases (maybe even conceded too far in a couple), without being declared no longer liberal. The point is that being a good liberal doesn’t require that you believe, or pretend to believe, lots of things that almost certainly aren’t true; being a good conservative does.
And like Mike Konczal, I see no sign that any of this is changing.