At Democracy in America, he writes:
The conservative National Review’s Reihan Salam went so far as to deny last week that any conservatives actually hold such views.
Which views? I think he’s referring to views he attributes to John Cochrane and Brian Riedl, which he describes at considerable length.
They argue that the ARRA has created no jobs whatsoever, and that, moreover, it is theoretically impossible for the government to reduce unemployment. Deficit spending, they say, simply soaks up capital which would otherwise have been spent by the private sector. They are thinking of deficits created by spending hikes rather than tax cuts, but there is no reason why this should make a difference to their argument: all government deficit spending does, to quote Mr Cochrane, is “take money from one place and give it to another,” which cannot create jobs.
I actually don’t think that this is a fair characterization of Cochrane’s view, but he can speak to that better than I can. So what did I say? Here is the original post. I can think of two statements that might elicit this response.
Leonhardt refers to “hard-core skeptics,” and my worry is that this does a lot of the work for him. Critics like Desmond Lachman believe that the stimulus was poorly timed and poorly designed. This suggests that he is not a hard-core skeptic, though of course many if not most skeptics and critics of ARRA fall into this camp. Others are concerned about the impact of heavy deficit spending on long-term growth prospects, i.e., the fiscal stimulus program has a beneficial growth impact in the short term, but exacerbating extreme fiscal policy swings are very difficult to sustain. These critics are also not hard-core skeptics. So is Leonhardt taking issue with people who believe that spending hundreds of billions of dollars in the space of a few month would have zero impact on GDP growth? In that case, I would enthusiastically agree with him.
You know, in reading the back and forth on this post, I didn’t even go back and read the original. I assumed that my interlocutors were arguing in good faith, or that they had read my admittedly rambling post. Then there was this:
But again, I don’t thing [sic] that anyone doubts that ARRA helped perk up growth. It is very hard to imagine that spending an enormous sum of money would not.
So what did I mean by perk up growth? I meant that I don’t think (nice typo, Salam) anyone doubts that spending under ARRA increased GDP relative to where it would have been in its absence. Of course many people believe that borrowing creates a long-term drag and that we are shifting economic activity from one period to another to no discernible long-term end. I used the phrase “perk up growth” advisedly. If the government borrowed hundreds of billions to build an enormous pumpkin pie in Nevada’s Area 51, and built high-speed rail to the facility from various pumpkin-producing greenhouses houses built throughout swing congressional districts across the country, I imagine it would increase GDP.
Are there conservatives who believe that ARRA had zero impact in terms of perking up — and remember, the phrase “perking up” is meant to invoke a temporary impact — GDP? It’s entirely possible that theres’s someone out there. Does Riedl fall in this category, or Cochrane?
I should have used my words more carefully. I don’t think that anyone who can describe what ARRA is doubts that it would by nature have some impact on GDP growth. The “creating jobs” question is a separate one, and actually very hard to tease out in terms of net impact. I have my views, others disagree.
I miss the days when W.W. was blogging for The Economist.