Tyler Cowen Cannot Admit Defeat of Austerity Policy – And So He Purposely Re-writes History
If the Facts Don’t Work for Conservatives – Make Up New
The war of austerity
vs Keynesian economic policy is over, Keynesian economic policy has won (More
on the battlefield statistics later).
But austerians are furious, they cannot grasp the concept of being
wrong. So a typical response to the fact
that the U. S.
economy is growing, albeit slowly, and the deficit is shrinking is
this one from respected but often wrong Tyler Cowen.
Mr. Cowen's false premise is that the U.
S. implemented austerity policies.
For instance, we have
been told that the United
States has been engaged in a good deal of
fiscal austerity in the last few years.
We also were told that
fiscal self-austerity was quite possibly self-defeating(orhere, pdf) or at the very least fairly close to
self-defeating. That is, it would make budget balance harder rather than
Uh, no Tyler,
you have your continents mixed up.
You have been told correctly that Europe
instituted austerity. And it was
self-defeating (six straight quarters of recession type defeating). In
the United States
we had a stimulus program (you can look it up, see any entry like “Republicans
Outraged over Stimulus”. What you were
told, and what is true is that the Obama Stimulus was too small and way to
misguided to produce a strong, fast recovery, so as a result the United States
got a weaker, slower recovery. But no
austerity, and nobody told you that the U. S. did have austerity. You are making that up.
So Mr. Cowen's wonderment that the budget deficit is
falling in the face of austerity is baffling only on his part. The budget deficit is falling because the
recovery is working. Keynesian economics produced a recovery, and recoveries
result in higher tax revenues and lower government spending on programs like
unemployment compensation and other safety net programs. This has happened so repeatedly in the
history of this country that one would think even Conservatives would have noticed.
says he is a happy person
I am myself comfortable arguing something like
“when underlying fundamentals are sound, and/or there is monetary
accommodation, an economy can withstand fiscal consolidation just fine.”
That is simply a more specific variant of the above.
but he is not in Greece,
Ireland, Italy, Spain,
(to name a few countries that contradict his comfort). People in those countries that have
experienced fiscal consolidation are have contracting economies, high unemployment and children are going to school
hungry. The fact that Mr. Cowens is
comfortable does not make them comfortable.
The other factor here
is tax increases, which are producing higher revenues and which will slow
the recovery somewhat, but hopefully (unless one is a Republican) the momentum in
the United States economy is fairly strong, and looks to be strong enough to
overcome the fiscal drag that is being pre-maturely thrust upon the nation.
Of course, if
Republicans get their way and a real austerity program is implemented than
the economy will fall back into recession.
But this will also confirm Keynesian economics, and just further confuse
people like Mr. Cowen. So that is just
another reason why everyone hopes Republicans stay in the minority. We don't want Mr. Cowen to be confused.