At least that’s what he
claims in this post
which I just stumbled across.
As it explains in the
introductory economics text books, fiscal stimulus can take the form of EITHER
more government spending OR tax cuts. Indeed SS himself actually says “Tax cuts
are fiscal stimulus..” Well quite. Ergo fiscal policy is not inherently left or
right wing. He contradicts himself.
By way of trying to
bolster his case, SS claims “Fiscal policy can’t really do anything in the
AD/NGDP area.” The implication presumably being that advocates of fiscal policy
are not trying to bring about an ECONOMIC effect, so they must be politically
motivated.
Well unfortunately about
95% of economists would disagree with the idea that fiscal policy has no effect
at all. Fiscal policy is widely regarded as defective in that crowding out to
some extent negates the stimulus that fiscal policy is supposed to bring, and I
agree that that defect is there. But very few economists regard the defect as
being severe enough to render fiscal policy totally useless, as SS claims.
Another argument put by
SS is that the majority of Keynsians / advocates of fiscal stimulus are left of
centre and want bigger government. Well perhaps they do. And perhaps the
majority of tea drinkers are left of centre politically, while the majority of
coffee drinkers are right of centre. But
that doesn’t mean that drinking tea is an INHERENTLY left of centre activity or
that drinking coffee is an inherently right of centre activity.
Scott Sumner, like many
other professional economists, needs to do a course in basic logic.
Sumner id's himself as a Libertarian pragmatist. Libertarian populists consider him a Libertarian elitist. Whatever. Libertarians are viscerally against fiscal policy and favor sound money and the use of monetary policy to stabilize price level.
ReplyDeleteLibertarian pragmatist, populist, elitist. Normally I’m pretty confused. Now I’m totally confused..:-)
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