It always strikes me that the published versions of these debates seem a bit too fastidious. As best I can tell, the real dynamic of the debates here are that many people on the left hope and many people on the right fear… a lasting change in the policy environment. After all, when you engage in some temporary deficit spending the deficit could be temporary in two ways. The spending could vanish. Or taxes could be raised. Progressives hope, and conservatives fear, that much of the new deficit spending will prove popular and anchor expectations about levels of federal services.
This hope/fear is extremely realistic. It seems very unlikely to me that all of the American Recovery and Reinvestment Act’s spending increases will actually be undone when the legislation expires.
That gives people who think that overall levels of taxes and spending should be lower strong reason to cast around for reasons why stimulus is a bad idea. Were conservatives in power and proposing stimulus via a temporary tax cut, I believe most of the people currently making fallacious arguments about Ricardian Equivalence wouldn’t be doing so. They’d be saying to themselves “even if this doesn’t work, it’ll probably lead to lower tax rates over the long term so whatever.” Nobody likes to believe that they’re just screwed, that the short-term economic situation dictates letting the political opposition unleash some of its long-treasured schemes.
Of course, the economists are debating about stimulus in general, from an academic perspective. It’s funny that Yglesias would reduce the debate to the specific political implications of the Obama stimulus — no one needs to be reminded that it’s an attempt by the Democrats to take advantage of the short-term turmoil to implement their long-term schemes. Aren’t there reasonable policy debates about whether in general short-term monetary and fiscal policies can improve economies, regardless of the underlying economic regime?
There are, but Yglesias’s honest assessment of the matter at hand seems to point to the fact that while the left does have useful academics like DeLong giving intellectual justification for short-term fiscal policy, the actual stimulus has very little to do with improving short-term outcomes and a whole lot to do with large-scale reengineering of the economy. I’m sure that pro-market academic economists give their pro-stimulus opponents the benefit of the doubt when they embrace massive stimulus policies that otherwise seem cynically political. It’s interesting to see a liberal commentator arguing that there is indeed a fair amount of cynicism involved in the left’s approach, and that the real game, even in friendly debates like the one between DeLong and Cowen, isn’t about curing the economy at all.