The Administration tells us that there is a consensus of economists for a big stimulus package. As Vice-President Biden puts it:
Every economist, as I’ve said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.
This is patently false. Biden is either lying or shockingly misinformed. Brian Riedl runs down a list of economists that Biden has apparently never heard of:
Nobel Laureates Ed Prescott, James Buchanan, and Vernon Smith recently joined 200 other economists signing a letter opposing the legislation. Other notable economists critical of the stimulus package include Nobel Laureate Gary Becker, as well as Robert Barro, Greg Mankiw, Arthur Laffer, and Larry Lindsey. Martin Feldstein, who had been the only notable conservative economist loudly supporting the stimulus, has since changed his mind.
Even President Obama’s own economic advisers—who are leading the fight for the “stimulus” bill—previously criticized the bill’s economic underpinnings.
Riedl goes on to list several criticisms of the plan from the president’s own advisers. Greg Mankiw adds a few more names to the list, including Robert Lucas, a Nobel Prize winner formerly at CMU. Mankiw goes on to speculate about what Biden might have been thinking, which seems like a thoroughly unprofitable enterprise to me.
In the battle of the politics of economics, one significant player is the master of economic misinformation, Paul Krugman. Robert Barro writes of Krugman, “He just says whatever is convenient for his political argument. He doesn’t behave like an economist.” Will Wilkinson has a more extensive analysis (and perhaps a more helpful one) :
Like the president, Krugman seems firmly caught in the paradox of countercyclical macroeconomic politics. The intermediate-level textbook theory says that at times like these we need a certain kind of policy to steady the economy’s nerves and lubricate consumption and investment. The economics says we need confidence. But political reality says we need panic. So we try to induce panic so that we can later induce confidence. This seems an extremely awkward and implausible approach, but that doesn’t keep anyone from trying it.
The deeper problem, I think, is that the textbook theory doesn’t have any politics in it. . . But of course, there is politics, which trashes hope of either consensus on or compliance with theory. And that’s how we ended up with the legislative monstrosity actually under consideration in Congress.
The economists can duke it out over the possibility of successful fiscal stimulus. But is there any reason based in up-to-date economic theory to believe that this trillion dollar deficit-spending bill is not, as Barro says, garbage?
Krugman is plumping for it anyway. Hard. . . Perhaps more than any economist of his caliber, Krugman understands that policy is largely determined by the outcome of the public opinion shoutfest. Yet this recognition seems to have no effect on Krugman’s ideas. Rather than bring inside his models disagreement over economic theory and the lack of political incentive to faithfully apply them, which would lead him to radically revise his prescriptions, Krugman leaves his textbook theory untouched and simply tries to win the shoutfest. Krugman’s often unbearable stridency seems to reflect an attempt to overcome the problems of democratic disagreement and incentive compatibility through sheer force of will.
(Via Asymmetrical Information.)