an obession with first principles

Fun With Columbia Economist

Posted: Friday Jul 13th | Author: JohnO | Filed under: Politics | View Comments

First, I want to explain my (unclear) usage of “public investment”. I used it to indicate corporate “investment in the public good.” I did misunderstand where Sachs was going. But it only exacerbates my point — the 2008 crisis (from a finance POV) was one of zero private (company) investment. So in the face of an immediate crisis short-term gov’t spending plans overtook long-term gov’t spending plans. Who is surprised by that reaction? But the fact that its being held up as a crisis of leadership is silly. Imagine the actual crisis of leadership it would have been to have no reaction to a short-term crisis.

Upon reflection I think the most shocking thing, about both Sachs’s article that started this whole thing and the ensuing discussion, was the misguided rhetoric. It followed the traditional two-sided news story: side-a vs side-b. Keynesian vs. Supply-Side. Part of the failure of the American intellectual and news media (not to confuse you that they are even close to one and the same) is whitewashing arguments and refusing nuance based on data.

In many ways Keynesian thought and Supply-Side are opposed. But it is a mistake to suggest that Keynes ever put forward a system. He put forward observations that resulted in tools. One of these tools is short-term stimulus spending. Since Day One Krugman (the quintessential Keynesian) has argued that the stimulus was not big enough. And that there are structural problems in the economy. And that we need big infrastructure spending on all sorts of upgrades. As we all know from the scant repair crews we do see, infrastructure upgrades take forever. None of these specific points are what make Krugman a Keynesian. But all of these points are ones that Sachs’s himself suggests. So I don’t know why he is whitewashing Krugman as part of the Keynesian problem. The other hilarious part is that the GOP, while heavily indoctrinated by Supply-side thought, become Keynesians when it suits their agenda. The fact that all this is lost in translation is patently sad.

I also checked in on the “no leadership” on large infrastructure projects claim he made. Two bills, S.1769 and S.1660, were filibustered by the GOP after being introduced by Democrats. Both bills took up the idea of AIFA from a previous bill introduced to committee. This AIFA was a $10billion fund for a bi-partisan group of 7 congressman to spend on infrastructure. And then the next year it would be $20billion. And $50billion the year after that. Sounds pretty intense and long-term to me.