A recent back and forth between Paul Krugman and Russ Roberts on Keynesian economics reminded me of something I discussed briefly on twitter some time ago and wanted elevate it blog post level. Here’s what Russ said:
Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews.
Now there are many places where I think “better government” is more important than less government, and sometimes better even means more, but I’m broadly supportive of the notion that government should be smaller. And yet I find myself in much more agreement with Keynesian economists than those like Russ Roberts about what we should do about the recession.
But I think Russ’ point tends to be very true, and is exemplified by what, I think, Ezra Klein called “Now-More-Than-Everism”. This is when someone argues that the solution for any given problem is simply that their favored policies are needed Now More Than Ever. We find ourselves in an extended recession-like economy, obviously Now More Than Ever we need to gut the EPA, or Now More Than Ever we need green energy subsidies.
In the anti-spirit of this mindset I want to focus on Now-Less-Than-Everism. I’ll let Krugman go first:
“Here’s an example: is economic inequality the source of our macroeconomic malaise? Many people think so — and I’ve written a lot about the evils of soaring inequality. But I have not gone that route. I’m not ruling out a connection between inequality and the mess we’re in, but for now I don’t see a clear mechanism, and I often annoy liberal audiences by saying that it’s probably possible to have a full-employment economy largely producing luxury goods for the richest 1 percent. More equality would be good, but not, as far as I can tell, because it would restore full employment.”
Now my turn. I think education reform is a really important issue, and I think charter schools and some parts of the reform movement are extremely important. But we’re not going to get to full employment through education reform. And what we really don’t need right now is mass layoffs of teachers. Or postal workers. Structural adjustments are easier to make when we are at full employment, if these things need to come the future is better than now.
The home mortgage interest deduction is a terrible policy. And I don’t see any good reason why Fannie or Freddie should exist. But we need to get out of these bad policies now less than ever. The housing market continues to be a drag on the economy, and it’s worth putting off reforms until a time when so many homeowners aren’t underwater and are in a better position to absorb negative equity shocks. This isn’t to say we couldn’t begin instituting a long phase out to the deduction, but long term, smart, cautious reforms are needed here, not pulling the rug out. In full employment I’d support pulling the rug out.
Deregulation is important, and necessary, and too much regulation is a problem. But it’s not the problem the economy is facing right now. Attempts to focus on regulation are a distraction, and we’re not going to deregulate our way to full employment. We need to focus on deregulation now less than ever.
I am a creative destruction proponent and regulatory burden is a big long-term concern of mine. I wish that was what was causing our current malaise, I really do. Everyone likes to have their beliefs confirmed, and Now More Than Everism feels good. But it isn’t the problem.
So now it’s your turn. Help prove Russ Roberts’ cynicism wrong, and tell us what favorite policies of yours we need Now Less Than Ever. These can be things that either would be downright harmful now, or that we simply shouldn’t be focusing on and aren’t as important as actual recession cures.