Tuesday, September 6, 2011

Ezra Klein — "Why did the GOP turn against stimulus?"


...It has become common for Republicans to deride the very concept of stimulus as absurd, to mock Keynesian economics as an ivory-tower fantasy, and to oppose temporary tax cuts as a recession-fighting measure. But during the Bush administration? All that was orthodox conservative policy.

In 2001, Grover Norquist called a national sales-tax holiday “exactly the kind of immediate stimulus our shell-shocked economy needs now.” Norquist went on to quote George W. Bush’s chief economist, Glenn Hubbard, saying we needed stimulus “sooner rather than later.” Sen. Olympia Snowe (R-Maine) introduced a bill to that effect.

Around the same time, Rep. Paul Ryan (R-Wis.) held a hearing in which he invited Kevin Hassett, a conservative economist based at the American Enterprise Institute, to make the case for a fiscal stimulus. “The economists who studied this were quite surprised to find that fiscal policy in recessions was reasonably effective,” Hassett testified. “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.”

Ryan was delighted by his answer. “That is precisely my point,” he replied. “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.”

So not only was it non-controversial that deficit-financed stimulus spending was an effective and desirable way to fight economic downturns, but it was taken as obvious by Paul Ryan — Paul Ryan! — that the big danger was that you did too little. Now, of course, Ryan takes the initial stimulus’s inability to fully combat the recession as evidence of the policy’s failure, even though we now know the recession was deep enough that standard calculations — the sort of calculations Hassett was referring to in his testimony — would have argued for a stimulus of more than $2 trillion.
Read the whole thing at The Washington Post, Why did the GOP turn against stimulus?


2 comments:

Matt Franko said...

"retroactive to January 1st"

This I believe was the first retroactive Federal tax cut in US history.

When the next economic downturn occurred in the Bush 2 admin in early 2008, due to a collapse in the fiscal deficit (and in fact a major fiscal surplus measured over several months of that FY), the Bush 2 admin then did what was another first in US history: an immediate Federal tax rebate in the form of tax refund checks mailed out by the IRS to virtually all taxpayers.

If elected in 2012, the GOP will most likely throw Ryan and Bachmann under the bus (no big loss there) and go straight to Fiscal stimulus again.

Resp,

PS: Obama and his current crew are morons.

Tom Hickey said...

Matt, their mantra is that only broad tax cuts constitute stimulus because they incentivize investment and that since spending incentives demand, it is not really stimulative because nothing is produced, so it is inflationary. They just don't seem to get, or want to get that supply (investment) responds to demand (broad income).