Mitt Romney’s guilty (Keynesian) secret

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.)

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Tel
Tel
9 years ago

The POTUS does not decide the budget, Congress does.

If a lot of Tea Party people get into Congress this time round and they insist on spending cuts, then Romney will not get a choice in the matter. If people around the world decide they don’t trust the US dollar and don’t want to buy Treasuries, then neither the Tea Party nor Romney will get much choice (nor will Obama if he wins).

At this stage, the polls are pointing to an Obama win anyhow (but personally I think it will be close) and yes the Republican base are more than well aware that Romney’s policies are very similar to Obama’s in many ways. I guess if you know that big government are going to force their way into the “picking winners” way of doing things, and thus implement central planning; would you rather have Obama pick winners (e.g. Solyndra) or would you rather have Romney picking winners?

That’s basically the decision Americans are facing.

Katz
Katz
9 years ago

The GOP base won’t get out of bed to vote for Romney. That’s why he is talking like a Democrat.

Whatever Romney says between now and November will be the biggest waste of hot air since the Zeppelin went down.

Tel
Tel
9 years ago
Reply to  Katz

They will get out of bed to see Obama lose. That’s about it.

Fyodor
9 years ago
Reply to  Katz

Heh. The Zeppelin? Filled with “hot air”, you say? How kurious.

There’s nothing particularly meaningful about Romney’s positioning. One reaches for the extremes in one’s own party in the primaries, then converges on the centre for the election. Tale as old as time, song as old as rhyme, und so weiter.

derrida derider
derrida derider
9 years ago

Yes, I agree about the RBA. We all know about the mistakes they made in the late ’80s, but I’ve always thought their performance all through the 1990s was pretty bad too. We had a totally unnecessary long-term unemployment problem that can largely be traced back to an RBA that thought it was someone else’s problem.

JB Cairns
JB Cairns
9 years ago

Nick,

What is he evidence for Howard being too aggressive in fiscal consolidation?
It certainly doesn’t appear in the GDP figures. Are you suffering from Kates disease?

The problem for Romney is showing some sort of long term program to reduce the budget. the CBBP has shown his policies will lead to increased deficits.
you would have to be very sceptical about his ‘desire’ to reduce spending.
he wants to get rid of Obamacare which the CBO shows reduces the deficit ( which in itself essentially copies what Romney did an massachusetts.)
He wants to increase defense spending significantly and hasn’t spelt out what areas of spending he would cut per se’.

Thus in the short term he maybe Keynesian but in the long term he is another deficit boosting Republican.

Katz
Katz
9 years ago

Fido, did I say “filled”? I notice that you precipitately interpolated that particular term. That’s called “verbalising” in some circles.

The hot air referrred to was generated by a hydrogen conflagration.

Is this konversation necessaire?

Fyodor
9 years ago
Reply to  Katz

Fido, did I say “filled”?

Didn’t say you did. It’s implied in your use of the word “waste”, Lolkatz.

I notice that you precipitately interpolated that particular term.

Interpolation doesn’t mean what you think it means, and there’s nothing precipitate about my inference. It’s the only logical inference from your phrase “biggest waste of hot air since the Zeppelin went down”. A zeppelin going down doesn’t “waste” hot air, whether it generates it or not. Your analogy went down like a lead zeppelin balloon.

That’s called “verbalising” in some circles.

Your circle, maybe. Did you mean “verballing”? If so, nah – you’re still wrong.

The hot air referrred to was generated by a hydrogen conflagration.

Whereas your hot air is generated by hyperbolic confabulation.

Is this konversation necessaire?

Necessaire? Natürlich. It grieves me deeply that you refuse to show Graf von Zeppelin his due.

Plus: shits & giggles.