I've spent a rather alarming portion of this week wading into intellectual pissing matches, so I'm loath to respond to Michael Kinsley's response to last week's brouhaha over austerity policies. But one paragraph does merit some pushback. After noting the backlash to his last column, Kinsley writes the following:
There are two possible explanations. First, it might be that I am not just wrong (in saying that the national debt remains a serious problem and we’d be well advised to worry about it) but just so spectacularly and obviously wrong that there is no point in further discussion. Or second, to bring up the national debt at all in such discussions has become politically incorrect. To disagree is not just wrong but offensive. Such views do exist. Racism for example. I just didn’t realize that the national debt was one of them.
Kinsley assumes that it must be the second explanation, and then goes on from there.
I can't speak for anyone else who pushed back against Kinsley's column from last week. Speaking for myself, however, I blogged about it because Kinsley was "spectacularly and obviously wrong." I say this because almost everything I wrote in my response to Kinsley I knew at age 18 after taking Economics 101 in college.
To explain, let me focus on Kinsley's motivation for thinking that the austerians have a point:
Austerians believe, sincerely, that their path is the quicker one to prosperity in the longer run. This doesn’t mean that they have forgotten the lessons of Keynes and the Great Depression. It means that they remember the lessons of Paul Volcker and the Great Stagflation of the late 1970s. “Stimulus” is strong medicine—an addictive drug—and you don’t give the patient more than you absolutely have to.
This is wrong for three reasons, one pedantic and two substantive. First, to be pedantic, the austerity debate is about the wisdom of using expansionary fiscal policy -- i.e., running a significant federal budget deficit -- to alleviate downturns. Paul Volcker was the chairman of the Federal Reserve and thereby responsible for setting monetary policy. He had nothing to do with fiscal policy. This is a distinction that I learned in my first few lectures on macroeconomics. So either Kinsley phrased this badly or he's confused about what this debate is about.
The substantive errors can be explained more easily once you look at this chart of the budget deficit as a percentage of GDP:
So, looking at the above, you find Kinsley's two substantive errors. First, during the period that Kinsley seems to find so relevant -- the late 70s -- you discover that the budget deficit as a percentage of GDP was shrinking and not growing. So, to repeat a theme, I'm not sure where Kinsley is getting this notion that expansionary fiscal policy is responsible for the high inflation of the 1970s [Maybe Kinsley would argue that stagflation was an aftereffect of the spending spike that followed the 1973-1975 recession?! --ed. OK, except a glance at that chart shows that compared to the 1980s, the 1970s was a period of fiscal probity. Oh, and as I said before, there was that whole expansionary monetary policy/commodity price shock thing happening as well. Which I learned about from my Econ 101 textbook oh so many moons ago.]
Second, contra Kinsley (and Charles Lane while we're at it), stimulus is not an addictive medicine. The above graph shows budget deficits expanding during recessions and then shrinking again as the economy recovers.
Look, this isn't rocket science -- Kinsley made an argument about austerity that got a lot of basic economic facts about the 1970s and the current era very, very wrong. Dare I say, spectacularly and obviously wrong.
So there's really no point in further discussion.