The gist of Keynesian economics is fairly straightforward: during an economic downturn, caused by insufficient demand, it’s up to the public sector to inject capital into the system while consumers and businesses pull back. It’s what FDR used to rescue the country from the Great Depression and it’s what President Obama used to rescue us from the Great Recession.
Republicans, at least the contemporary version of them, loathe Keynesian economics. As the GOP sees it, supply and demand aren’t as important as shrinking government during a downturn. When consumers and businesses pull back, Republicans argue, the economy will improve if government does the same — taking capital out of the struggling system — and focuses more on debt reduction and less on growth.
It’s why, in 2009, at the height of the global crisis, congressional Republicans not only vehemently fought against a Keynesian stimulus, they also strongly recommended a five-year federal spending freeze (a proposal even David Brooks characterized as “insane“).
In 2012, however, Republicans have suddenly discovered the inner Keynesians within.
Sen. Harry Reid’s refusal to “back off” looming cuts to the Pentagon won’t just harm the nation’s security, Republicans say. It could plunge the fragile U.S. economy back into a recession next year. […]
“Puzzling” was how Minority Whip Jon Kyl (R-Ariz.) described Reid’s remarks. With CBO’s warning, Congress should be looking at every possible option to renew the Bush tax cuts and avoid the automatic, across-the-board cuts to defense and domestic spending.
“The whole point here is to try to get some economic growth, job creation, to get out of this recession,” Kyl told POLITICO. “Why would we risk going backward with policy that even CBO says would be the wrong prescription right now?”
Sometimes, I can’t help but feel like I’m stuck in a Lewis Carroll novel.
In this case, Republicans not only demanded debt reduction during last year’s debt-ceiling hostage crisis, they threatened to crash the economy on purpose unless they got their way. Democrats struck a deal and the GOP got what it wanted — with spending cuts due to kick in just as Bush-era tax rates expire, which happens to be another Republican proposal.
Senate Majority Leader Harry Reid said this week that unless his foes want to strike a broader deal involving new revenues, he intends to stick to the plan the GOP said it wanted — they asked for automatic spending cuts and deficit reduction, so Reid will stand by the automatic spending cuts and deficit reduction.
And yesterday, GOP officials said spending cuts and deficit reduction would take capital out of the economy, undermine demand, and hurt economic growth. In other words, Republicans have enthusiastically embraced the very Keynesian economic principles they claim to hate.
It’s not just yesterday, either — none other than Mitt Romney argued this week that he can’t accept too many spending cuts in his first year as president because it would undermine demand and push the economy into a recession. So he’s a Keynesian, too. I realize, of course, that Republicans aren’t actually genuinely embracing the left’s economic model; they’re just scurrying to protect tax breaks for the wealthy and Pentagon spending. This isn’t about ideological consistency or policy principle; this is about the right doing whatever it takes to get the policy outcomes it wants. But that doesn’t mean the GOP’s new arguments should be dismissed out of hand. On the contrary, this is an opportunity for the left — according to new Republican arguments, spending cuts and taking capital out of a fragile economy is dangerous and wrong. Perhaps, the next time conservatives scream bloody murder about a non-existent “debt crisis,” or cry about the horrible burden the deficits will put on our poor grandchildren, Democrats might take a moment to remind their friends on the other side of the aisle what Republicans argued the week of May 25, 2012, when the GOP effectively argued, “Screw the debt crisis; we want more spending and extended tax cuts.”
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