A clarification, a comment on redistribution, and a couple of links.

The clarification: in response to my previous post, Richard Yeselson tweeted at me that I was misreading the Keynesian position; Keynes, he pointed out, argued that government spending would lead to economic growth only at the zero lower bound (i.e., when nominal interest rates are at or near zero). 

This is correct. Keynes's basic argument was that at the zero lower bound, you've effectively exhausted the limits of how the government can goose the economy via monetary policy. What you're left with is fiscal policy, and in those cases, Keynes did recommend "government spending, any government spending," as I put it yesterday. If you're not at the zero lower bound, though, Keynes warned against an overly exuberant fiscal policy, arguing that government spending, in those cases, would actually crowd out the private sector's efforts. 

I don't think this has a substantive effect on the argument I was making yesterday. Two reasons. First, I was talking about the national debate since 2009, at which point the United States had already adopted an expansionary monetary policy, and so, among macroeconomic policy people, some thought experiments about negative nominal rates notwithstanding, attention has been focused on the fiscal side.

Secondly, my overarching point in that post isn't about Keynesianism itself; it's that I think a lot of us are misunderstanding each other. Specifically, I don't think the ongoing debate about government spending should be framed as the austerity vs Keynesianism debate, because a lot of people are having a debate about government spending without reference to either concept, and if you're insisting on this austerity lens they're not going to make any sense to you, and vice versa. And my haphazard summary of the Keynesian argument has no bearing on that point. 

However, I do agree that it's worth clarifying, if only as part of the ceaseless and largely thankless campaign against misunderstanding. So: Apologies, I misrepresented the Keynesian position, but it was clumsiness on my part, rather than a low-key sneak attack on whatever it was he stood for. 


Now, about the argument that the debate is really about redistribution. 

I also had some people tell me that while they agree that the debate isn't fundamentally about austerity, they think it's fundamentally about redistribution; that is, some progressive have suggested to me that Republicans want to dismantle the safety net. Again, this is not how the spending debates look in Texas. It's possibly because state spending is so low that it's sort of a moot issue. (I touched on this briefly in my comments about Denmark.) 

But let me give an example. The Texas legislature is hurtling to the end of its biennial legislative session. That means that I've been trying to catch up with this "austerity debate" during peak spending-debate season for the state, which is pretty grim on a personal level, but it does mean that I'm pretty current on what the Texas policy people are talking about. So, not very long ago, I was talking to a couple of Republicans about one of the bills they had passed, which mandates drug testing for welfare recipients. They thought it was a major accomplishment, and said that it was getting good review from voters. I told them I wasn't impressed with it; that every other state that has passed such a law has found it ineffectual; and that I was wondering if it was actually the bill's existence that ginned up the demand for the bill. After all, Texas has such stringent welfare standards that mischievous use of welfare, even if widespread, probably costs us, like, a couple hundred dollars a year. (Heuristic: California has about ten times as many people on TANF funds as Texas does, but Texas has more people on food stamps. The reason is that food stamps are distributed according to federal guidelines.) The Republicans agreed with that, but responded that the point of the bill was to bolster credibility and accountability in the system, so taxpayers can know that their tax dollars are being prudently spent.

If you think Republicans are hell-bent on slashing the safety net, this probably sounds like a case in point: an effort to deprive poor people of the few resources the state makes available to them for ideological reasons, with a heavy dose of moral judgment. And what the Republicans I was talking to had said did sound sort of like an argument against redistribution, albeit cloaked in an argument about accountability. 

And yet the bill in question, by the time it passed from the Senate to the House, was different from the drug-testing for welfare bills that other states have passed. Democrats in the Senate had argued, successfully, for a provision that if a parent receiving TANF funds tests positive for drugs, most of the money will follow any children to his or her guardian; the Senate Republicans had, fairly cheerfully, agreed, and the Republicans I was talking to pointed it out as an important provision. The bill's fiscal note predicts that the whole thing will cost the state money, albeit only a little

I still don't think it was a good bill, but it has been the most serious assault on the safety net that Texas has seen this session, and it passed out of the state senate unanimously because it included a provision designed to preserve the safety net. Again, it's possible that Texas would see more effort to gleefully slash the safety net if we had a bigger safety net, but that's getting into counterfactual territory. 

And so I continue to think that although there are probably some fiscally conservative policy people who are passionate about the bracing disciplinary effect of austerity or driven by their contempt for poor Latino orphans, there are a lot of them who are pragmatic and reasonable. Just as there are a lot of progressives who are pragmatic and reasonable. In fact, and I'm going way out on a limb here, but I even think it's possible that the reasonable people on both sides have pretty similar concerns, although they may disagree about the best way to work towards those goals, so maybe next month our respective book clubs should pick Arthur Okun, or if that's too hard, The Butter Battle Book.


And a couple of related links: I enjoyed Michael Kinsley's critique of Paul Krugman, at The New Republic, although I was wary of his normative defense of austerity, because I think people should get churched via church (or ethical inquiry, whatever) rather than by central bankers or economic advisors. And, accordingly, I especially liked Dan Drezner's take on both

Your comment will be posted after it is approved.

Leave a Reply.