Friday, February 5, 2010

The Necessity of Obamanomics

Wall Street Journal opinion editorial "The Necessity of Obamanomics" (February 4th, 2010)

You don't have to be an orthodox Keynesian to understand that as long as the private sector is deleveraging the public sector has to borrow and spend in order to keep the economy moving forward. Spending on the original stimulus will peak soon; spending for additional unemployment insurance and the jobs bill will add about $90 billion.

You may not have to be an "orthodox Keynesian," to believe that the government can stimulate aggregate demand as a pareto-improving (or some "aggregate" utility improving) government intervention, but if you aren't an orthodox Keyesian (whatever that means), you might find yourself as a hydraulic Keynesian or neo-Keynesian. Perhaps familiarity with economics breeds an inability to understand when a non-economist such as Robert Reich makes contentious claims seem ordinary.

Corrections disputes Reich's point, and suggests that even if you don't have to be an "orthodox Keynesian," to understand government intervention is currently necessary for some reason, you have apparently heard of some secret consensus that has evaded Correction's ears.

1 comment:

  1. Moreover it seems an error to assume that borrowing and spending by the public sector is itself without consequences. It is certainly possible that many people find the creation of literally Trillions of dollars from the printing presses of government or issuing from the brow of Bernanke to be a tad disturbing and a reason NOT to invest in the US, not to invest in or expand your own business. Consider a thought experiment. If you were a businessman resident in Zimbabwe just before Mugabe began the massive printing of money that led to the hyperinflation and you got notice from a time traveller what was about to happen in terms of hyperinflation, civil chaos and economic collapse, would you have invested in growing your businesses, hiring new workers, opening an new plant, building a new house etc? Perhaps. But perhaps not. Perhaps prudent Americans, seeing a government behaving irresponsibly, are altering their own behavior in a manner that has the effect of lowering aggregate demand more that the government spending is enlarging it.