Network News

X My Profile
View More Activity

Is there more consensus on (some) stimulus than we think?

At first glance, David Brooks and Paul Krugman have released precisely opposite columns over the past few days. Krugman's Sunday effort blasted the Senate for failing to pass further stimulus in the form of unemployment benefits. "We’re facing a coalition of the heartless, the clueless and the confused," he lamented. Brooks's column is an effort to punch holes in the case for stimulus. "Debt-fueled government spending doesn’t increase confidence," he writes. "It destroys it."

But if you actually look at their prescriptions, they are, in this case, similar. Krugman wants to see unemployment benefits extended. So, it turns out, does Brooks. "Extend unemployment insurance," he recommends. "That’s a foolish place to begin budget-balancing." He goes on to argue for a program that would "mitigate the pain caused by the state governments that are slashing spending" by tying state and local aid to the passage of state budgets that make long-term sense -- but notice that he's recommending state and local aid.

Now it may be that a retrenchment to state and local aid and unemployment insurance represents a tremendous defeat for those of us who believe the economy needs further government help to get back on its feet. But getting passage of both -- and quickly -- would also mean it gets some of the most necessary, and quickly-usable, help that government can provide. If you can't do much more on stimulus, you can at least mitigate some of the pain and prevent some of the most predictable sources of economic contraction.

By Ezra Klein  |  July 6, 2010; 11:06 AM ET
Categories:  Stimulus  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Analysis isn't about liberals and conservatives
Next: The case for being careful with the climate

Comments

How does White House get a better political messaging here? The word 'stimulus' is maligned too. It all needs to be 'pro-growth' rather than lessening 'pains' of few.

Posted by: umesh409 | July 6, 2010 11:24 AM | Report abuse

Man, where's that Research Desk post? I've got a question that I need answered!

As to this post, as with so many areas, I feel like David Brooks is trapped between his intellectual honesty and his self-identification as a conservative. I think Brooks recognizes, as most liberals do, that it's really our long-term debt that's the problem, but he's a conservative, so he's expected to rail on deficits in order to stay relevant to people on his side of th aisle. It's a tough position to find himself in, much the same way I think Andew Sullivan was in a tough position when he started to turn on Bush before he just gave up on the conservative establishment. I know third parties are always popular on the internet and as far as I can see always doomed to failure in reality, but I'd love to see a party break away from the Republicans headed by Brooks, Frum, Sullivan, and a few others.

Posted by: MosBen | July 6, 2010 11:33 AM | Report abuse

David Brooks is a chatter..he is no economic expert...he uses generic narratives to back up his theories but his theories lacks facts and logic. He comes up with all sort of weird assertions these days while trying to prove the validation of conservativeness...in fact his another conservative colleague also did the same with his column "Pessimism Bubble'

Posted by: amritpalsidhu | July 6, 2010 11:40 AM | Report abuse

The conservative argument on perpetual unemployment benefits is that it discourages the acceptance of jobs or serious looking for jobs, or taking of lower paying jobs, etc. The point being, extending unemployment benefits would, in theory, keep the unemployment rate up.

So, Republicans in congress and the senate should be all for extending unemployment benefits. It looks better politically for them, and helps (if the theory regarding unemployment rates is correct) keep unemployment rates up, which looks bad for the Obama administration.

Give the Republicans seem to be mostly political in their obstructionism, I don't understand why they don't support extending unemployment benefits.

The Brooks, Sullivans and Frums are going to throw support behind RINOs and ConservaDems. They aren't going to start their own party, and, frankly, aren't on the side of winning political strategy. Plus, I think even the Frums and the Brooks might get a little weirded out with Sullivan's obsession with Sarah Palin's uterus.

Posted by: Kevin_Willis | July 6, 2010 11:48 AM | Report abuse

And the vast constituency that Brooks represents is who exactly? Rahm Emmanuel? Are you saying this might convince the White House to only be half as stupid as it has been?

Posted by: endaround | July 6, 2010 11:55 AM | Report abuse

I rather liked David Stockman's response in the WSJ from January:

http://blogs.wsj.com/washwire/2010/01/08/qa-with-david-stockman-taking-aim-at-crony-capitalism/

"Washington Wire: Does President Obama need to address the enormous deficit today, or would that stall the recovery?

Stockman: He should immediately stop the unconscionable bailout of Wall Street, housing, autos and other sectors. These bailouts are an enormous waste of resources that add huge amounts to the public debt while accomplishing nothing in terms of real economic recovery. Instead, he needs to focus government spending exclusively on the safety net; that is, helping the poor and unemployed to cope with the economic disaster created by the Fed and Washington, while leaving the markets and economy to liquidate excessive debts and failed investments. The second thing he needs to do is fire his economic team: Bernanke, Geithner and Summers. [That would be Federal Reserve Chairman Ben Bernanke; Treasury Secretary Tim Geithner and White House economic adviser Lawrence Summers.]"

Could almost have come from the Huffington Post.

Posted by: jnc4p | July 6, 2010 12:04 PM | Report abuse

I'm with MosBen on this one. David Brooks has been in a confused, awkward place all year. He basically agrees with the moderate policies of the Obama administration, but has been desperately trying to hang on to an increasingly less rational conservative movement that has long left him behind.

I'm no huge David Brooks fan and I don't think he has all that much to say that's both intelligent and original, but I don't envy his awkward position right now.

Posted by: madjoy | July 6, 2010 12:05 PM | Report abuse

If the US is going to stop stimulus spending (which I do not recommend), then the US and the austerity hawks need to go the distance with cuts, and that includes laying off a significant portion of the civil service and state employees. If the austerity hawks would advocate an across the board cut of 15-25% of pay for the civil service and state employees, then their demands for austerity would be more credible...

Posted by: mckibbinusa | July 6, 2010 12:16 PM | Report abuse

mckibbinusa, I don't even need something so drastic as that to prove to me that deficit hawks are really serious about the deficit. Advocating for reduced military spending and some new taxes to go with the tax cuts would make me think they're serious. Hell, even providing a roadmap to eliminating the deficit on paper would be a good step. Paul Ryan tried and everyone backed away from it because it was so harsh, and from what I understand, even that didn't completely eliminate the deficit.

Posted by: MosBen | July 6, 2010 1:16 PM | Report abuse

Many conservatives in particular are strongly in favor of more stimulus, albeit of the monetary kind. One of my concerns about fiscal stimulus is that the Fed is targeting a certain rate of inflation. If fiscal stimulus works as advertised, it increases AD, increasing both output and the price level. But if the Fed is unwilling to accept higher inflation, then fiscal stimulus is offset by the Fed as it runs a tighter monetary policy and all we are left with is debt. Sadly, Bernanke is unwilling to accept a higher inflation target.

This is one of the primary reasons why I always sound skeptical about fiscal stimulus, and why I believe unemployment insurance is probably more a nice thing to do than stimulative.

http://www.reuters.com/article/idUSTRE64P08T20100526

Ezra, you have access to politicians. Do you think you'd be able to bring up some of Scott Sumner's arguments in favor of monetary stimulus?

Here is Scott on the lack of exposure monetary stimulus has in the political press:
http://www.themoneyillusion.com/?p=5897

FAQs on targeting a time path for nominal GDP rather than interest rates.
http://www.themoneyillusion.com/?page_id=3447

Posted by: justin84 | July 6, 2010 1:43 PM | Report abuse

justin84, i too would like to see the fed expand its inflation range, but thus far, it hasn't tightened, so there's no reason to not press on.

as for unemployment insurance, it's tremendously stimulative: you take people who otherwise have no ability to spend and you give them a modest amount which they will spend immediately on necessities within the consumer economy, the precise area where demand is lacking.

Posted by: howard16 | July 6, 2010 2:11 PM | Report abuse

"justin84, i too would like to see the fed expand its inflation range, but thus far, it hasn't tightened, so there's no reason to not press on."

I don't think it is obvious the Fed hasn't tightened. If the Fed was planning on expanding the monetary base by an additional $2 trillion, or charging banks a fee to hold excess reserves, but shelved their plans on news of a massive fiscal stimulus, then fiscal stimulus led to tighter monetary policy.

If Congress had failed to pass a stimulus bill in early 2009, the Fed would have almost certainly have ran an easier monetary policy.

In addition, the existence of fiscal stimulus means actual tightening moves come earlier. For example, the Fed has already begun withdrawing some monetary stimulus, in this case by ending MBS purchases. http://www.newyorkfed.org/markets/mbs_faq.html

"as for unemployment insurance, it's tremendously stimulative: you take people who otherwise have no ability to spend and you give them a modest amount which they will spend immediately on necessities within the consumer economy, the precise area where demand is lacking."

This analysis ignores the alternative use of the unemployment insurance money. We cannot know what that would have been. Even so, assuming fiscal stimulus does increase aggregate demand, remember that both monetary policy and fiscal policy operate through aggregate demand. The Fed takes fiscal policy operations into account when setting monetary policy, and it sets monetary policy so that core inflation grows about 2%/yr over the medium term, regardless of what Congress is doing.

Posted by: justin84 | July 6, 2010 3:31 PM | Report abuse

Hmm, interesting. There seems to be some agreement on extending benefits. The problem is there is agreement in the pages of newspapers and not in congress.
btw, if you're looking for work there's great advice on the internet radio show at www.jobtalkamerica.com

Posted by: kcsam215 | July 6, 2010 3:52 PM | Report abuse

justin84, what you're talking about is whether the fed could act in a more expansionary way, with which i agree, but until there's some sign of tightening and not just not loosening, there's no reason to believe that we can't put more capacity to work.

Posted by: howard16 | July 6, 2010 4:22 PM | Report abuse

How can you compare views of a Nobel prize winning economist to that of a hack with no background in economics. An appropriate counter argument has to come from an conservative economist of equal stature.

Posted by: usjmail | July 7, 2010 2:41 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company