Found this interesting read on the web by Johnathan Chait detailing Paul Ryan and economist Kevin Hasset arguing for a keynesian stimulus despite the fact that a monetary stimulus was the more appropriate method of stimulus at the time since interest rates were not at the zero lower bound.
http://www.tnr.com/blog/jonathan-chait/91384/when-conservatives-loved-keynes#
While researching an item from earlier this morning -- yes, I do research, I just try to avoid talking to people -- I came across a fascinating exchange about the concept of economic stimulus. In 2001, the economy was undergoing a mild slowdown. Liberals generally argued that the scale of the problem was small enough for the Federal Reserve to handle with monetary policy, and didn't require a Keynesian fiscal stimulus. Conservatives took the opposite position. Here's a great exchange at a 2001 hearing in Congress between Paul Ryan, AEI economist Kevin Hassett, and Bob Greenstein of the Center on Budget and Policy Priorities:[INDENT]Mr. GREENSTEIN. If I could just comment on it. As I have said before, I think the economic benefits are being overstated. The economy has slowed right now. I don't see how, particularly given the pace of the Senate, the checks are going to go out much before next summer. The CBO forecast you are operating on shows that by 2002 we have a full scale recovery from the recession.[/INDENT][INDENT]I think we do have a problem right now, and our best mechanism right now is interest rates. I hope the Federal Reserve lowers them further. I think that is going to have a much bigger effect than anything you do on taxes because I don't think -- it is not that tax policy can't have a stimulative effect. It is very unlikely even this year to occur in time to make much difference.[/INDENT][INDENT]Dr. HASSETT.
I would just like to add, Mr. Ryan, that the economists who studied this were quite surprised to find that fiscal policy in recessions was reasonably effective. It is just that folks tried a first punch that was too light and that generally we didn't get big measures until well into the recession. So the reason that in the past fiscal policy hasn't pushed us out of recession is that we delayed.[/INDENT][INDENT]So I think that Mr. Greenstein agrees, and he is saying it is not likely that we would pass it soon but I would argue this is why we should.[/INDENT][INDENT]Mr. RYAN. That is precisely my point. That is why I like my porridge hot. I think we ought to have this income tax cut fast, deeper, retroactive to January 1st, to make sure we get a good punch into the economy, juice the economy to make sure that we can avoid a hard landing.[/INDENT][INDENT]The concern I have around here is that everybody is talking about let's wait and see, let's see if they materialize. Well, $1.5 trillion have already materialized in the surplus since then-Governor Bush proposed this tax cut in the first place. The economy has soured. The growth of the projections of the surpluses are higher. So we have waited and we do see, and it is my concern that if we keep waiting and seeing we won't give the economy the boost it needs right now.[/INDENT]
Greenstein is taking the sensible position that the 2001 recession seems mild enough that Keynesian tax cuts will not be needed -- by the time their stimulative effect kicks in, the economy should be growing again. Hassett, the conservative, replies that Keynesian fiscal policy during recessions works, and the only problem is that it's usually too small. And Ryan agrees!
Ryan and Hassett, of course, fiercely opposed the concept of fiscal stimulus in 2009. I don't see how you can explain progressing from that position to opposing Keynesian stimulus during a severe liquidity trap, the worst economic crisis since the depression, except as a function of pure partisanship.
This brings me back to what I've always argued here...when the economy goes into recession the first tool is conventional monetary policy. When that fails, as in the present scenario when interest rates cannot go lower, keynesian style fiscal stimulus should be used...hopefully spending accumulated surplus (as we had in those days)...in addition to unconventional monetary policy like quantitative easing.
This is why Republicans have it all backwards and should be repudiated as a party. They sought to waste surpluses during an expansion instead of saving for the famine as Joseph instructed the Pharaoh in Genesis and use fiscal stimulus before interest rates were at the zero lower bound requiring interest rates to be higher than they might have been. Then, when it was really time to use fiscal stimulus and unconventional monetary policy, NOW, they have argued for austerity, balanced budgets and tight money.
An entire political movement has everything completely wrong. It has to be shunned until reasonable republicans return.
If Paul Ryan were making the arguments
now that he was making
then when he shouldn't have been...I would vote for Romney/Ryan
okay...this thread looks lonely...I respect your posts even if I disagree with you ....I'll bite.
What do you mean "when Republicans were Keynesians?" Most of them still are.
They just differ in where and how they want to spend the printed paper. 