Key points

Krugman and some of the cyclicalists have focused the vast majority of their attention on cyclical issues. But this reinforces the (mistaken, misleading) claim of the structuralists that there is a tradeoff between the short term and the long term. One more Krugman blog post is not going to convince anyone to support stimulus, QE, etc. But one more Krugman blog post dedicated to discussing long-term issues will do a lot to convince readers that there is no policy trade-off. In other words, the marginal value of Krugman devoting more time to cyclical issues is negative.

I am sympathetic to this view and used to more or less hold it, but now I think it is mistaken.

While you don’t want to get trapped into people thinking that cyclical concerns are liberal concerns – hence my constant reminder that tax cuts are fiscal policy – I don’t think it actually helps to offer middle ground.

The problem is that too much of the debate is manufactured. That is, it is debate for debate’s sake. There is no underlying reasoning going on. So, if you move the debate towards a compromise the parameters will simply change because people want to continue having some form of a debate.

In short, the way the political narrative is set up makes it sound as if their ought to be “sides” and “viewpoints” and so even if there aren’t really sides to be had on an issue sides will be manufactured so that they can fit this narrative.

Look at the way Rajan’s essay was cast for example. You could have easily written that as, here are some long-run challenges that the West faces and a few modest proposals for what could be done. But, that’s not how it was cast. It was cast as “True Lessons of the Recession: Why the West Can’t Borrow and Spend its Way to Recovery”  though the piece had little to do with the recession and nothing to do with borrowing and spending for recovery.

You see it in the budget debate as well. A person like me could say “why not just tolerate the mantra about the need for long run fiscal consolidation” even if I think long run plans are at best masturbation and at worst hubristic folly (see Regime Change, the Euro, Dirigisme.)

Well, the reason not to tolerate it is then the debate shifts into: should we cut spending or raise taxes and who “wins” this battle. The notion that hey this entire exercise flies in the face of what real interest rates are telling us and risks creating a massive global shortage in safe assets doesn’t even register. The debate has already settled, people have taken sides and that’s what they are comfortable doing.

So, you can’t let the debate settle. You have to keep needling.

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