E-gad it’s hard to keep those heterodox ideas from popping out – especially if they’re the plainest commonsense. Brad Delong quotes Matthew Yglesias:
Mitt Romney on Fiscal Policy: The GOP candidate sounds like Paul Krugman except without the qualifications about the zero lower bound and the liquidity trap:
Halperin: You have a plan, as you said, over a number of years, to reduce spending dramatically. Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?
Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.
So front-loaded tax cuts, offset over time by phased-in spending cuts. That’s a pretty textbook Keynesian approach. A fair amount of scholarship indicates that doing your stimulus on the tax side gets you less bang for your buck, but there are logistical considerations on the other side—it’s easier to do a massive tax cut really quickly than to ramp up a useful spending program.
Heretical, but very sensible nevertheless. Romney’s explanation of what he’s doing is an explanation of why Howard’s fiscal liquidation in 1996-7 could be regarded at least with hindsight as too aggressive and what Romney’s promising now is what Cameron should have promised in 2010. It might not have done their country much good at the time but at least they can argue that their haste was a bona fide exercise in political expediency – getting the political pain out of the way as far from the next election as possible. (And you can pass the buck for Howard’s jobless recovery onto the RBA for not cutting interest rates faster. The Bank of England had the zero lower bound beyond which it couldn’t cut.)