Wednesday, June 6, 2012

Might Romney Prove To Be A "Better Keynesian" Than Obama?

This was suggested in yesterday's Washington Post by Ezra Klein.  The argument goes as follows.  The effectively GOP-controlled Congress is currently blocking all fiscal stim efforts by Obama, along with making fusses over raising the debt ceiling, even though in reality fed spending has risen much more slowly in his presidency than under most other presidents, and unprecedentedly state and local spending and employment have been in a near free fall.

So, enter Romney, who claims to want "smaller government" like all GOP candidates, but who somehow in reality end up increasing it more than their Dem rivals.  He is in fact running on the old Reagan "voodoo economics" platform of cut taxes, increase defense spending, while supposedly balancing the budget.  It is famously bizarre that somehow at the end of his presidency Reagan expressed regret that somehow he had increased the deficit rather than balanced the budget.  Of course, quite a few self-proclaimed Keynesian economists praised what Reagan did, even though he and most of his advisers convinced themselves that what they were up to was supply-side economics, even though those darned revenues just never did quite come in sufficiently to cover all that wonderful increased defense spending without any other substantial cuts.

So, it is true that Romney claims to support the Ryan budget proposal, which does have all sorts of cuts in social safety net programs in it, along with those tax cuts for the rich and increased defense spending.  However, most of it is asterisks, as has been pointed out by many.  The reality is, of course, that when it comes down to it, Repubs in the Congress will not be keen on cutting either Medicare or Social Security noticeably anymore than they were under W.  And if they repeal Obamneycare, well, it had a cost control mechanism in it that will get ditched.  But, one can certainly count on those tax cuts for the rich going through and defense spending increases going through as well (I with Ezra am assuming that if Romney wins, the Senate will go GOP as well).  So, heck, deficits will explode, but now that it will be GOPster in the WH rather than the reviled Obama, the GOPsters in the Congress will suddenly discover that it is in the national interest to raise that pesky debt ceiling with minimal muss and fuss to let it all rip.  So, could happen.

BTW, I personally am more of a "balance the budget over the business cycle" kind of Keynesian, but I must admit that this scenario is highly likely if Romney wins, with a greater fiscal stim likely under him than under Obama if he wins, given that the GOP will probably still control at least the House, and quite possibly the Senate, or at least have enough there to cause trouble with filibusters as they have shown no compunction about using for anything and everything without anybody apparently inclined to punish them for doing so.  At least some "Keynesians" might well be more pleased with the Romney outcome than the likely Obama one for fiscal policy.


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