An Intellectual Bailout

In 2003, Megan McArdle coined Jane's Law: "The devotees of the party in power are smug and arrogant. The devotees of the party out of power are insane."  Some friends on the Left appear to be exploring both.

Speculating on the Right's distaste for the various fiscal stimulus proposals and bailout billions, Steve Benen, Ed Kilgore, Josh Marshall, and Matt Yglesias all argue that the only explanations for involve the Right being stupid or evil.  Yglesias summarized...

• The Moral Explanation: Ed Kilgore explains that some on the right thing America is too fate and happy. This is a bit like David Frum’s nineties vintage Donner Party conservatism.

• The Benefactor Explanation: Matt Stoller says the right is more interested in entrenching inequality than worrying about the economy.

• The Illiterate Explanation: Maybe they’re just dumb.

• The Strategic Explanation: TPM Reader JF observes that a long depression serves the GOP’s political interests.

Washington Monthly's Benen also speculates on a Machurian Explanation, which assumes "it's possible that GOP officials secretly hate the United States and are actively trying to destroy us from within. That last one seems unlikely, but I'm just presenting the possibilities."   Classy.  Let's try not to think about how outraged the Left has been for the last 7 years over Andrew Sullivan suggesting that some people could "mount what amounts to a fifth column." 

Inexplicably, none of them appear to even consider the arguments that skeptics actually make: that (a) fiscal stimulus is a poor tool for addressing recessions, (b) fiscal stimulus and bailouts are distortionary, and (c) we can't keep doubling down every time the previous policy bets go bad.

The case against massive government intervention isn't tough.  The Left should be particularly aware of that after having spent the past few years attacking Republicans for doubling down on various well-intentioned but unhelpful interventions.  And the case against fiscal stimulus isn't exactly unknown...

• "Can we pump up the economy with additional tax cuts or temporary public spending? Not safely..."
  
• "What about fiscal policy? Some liberals have recently [argued] that the economic slump is a reason to put aside promises to protect the Social Security surplus. But those liberals are making a big mistake."
  
• "[A]lmost all economists now agree with [Milton Friedman's] position that monetary policy, not fiscal policy, is the tool of choice for fighting recessions."

In fact, the case against fiscal stimulus shouldn't be unfamilar to the Left, either.  Each of those quotes is from liberal economist Paul Krugman.  In fairness, there are also good economic arguments for fiscal stimulus - even massive fiscal stimulus - as "in the face of deep and persistent slumps" and when "the economy is near a liquidity trap" (both of which are possible).   Like an alcoholic taking another drink to ease the pain, though, those arguments amount to doubling down to get relief from the symptoms.

And then you have positively weird comments, like this from Matt Stoller...

Deflation transfers wealth from debtors to creditors, which is another way of saying from people who are cash poor (the poor, the middle class, entrepreneurs, risk-takers) to people who have cash (the risk-averse rich).  Unfortunately, the risk-averse rich don't spend very much of their wealth relative to everyone else, which is why they are risk-averse. ... And here you see the political problem; people that have money would prefer that they remain on top, and will oppose attempts to restart spending from a broad base.  These people are known as 'conservatives', and they have their Beltway facing servants writing screeds about how the New Deal failed in the 1930s.  Economics is very dry and technical, but it is inherently political.  

Stoller seems to confuse wealthy people with people who keep their money in a coffee can.  In the real world, wealthy people keep their wealth in investments....and lose massive amounts of it when the economy tanks.  And while deflation might make any given dollar more valuable, that's not at all the same thing as making wealthy people wealthier.  Anyway, the implication of all this is that massive inflation is an important progressive policy.  Think of all the wealth you could transfer to the poor!  Viva la 70's!  I encourage the Left to start making this argument.

Which brings us back to this: the Left has always some very conspiratorial, paranoid notions about the Right (and the same can be said of the Right about the Left, of course).  But they will have fewer and fewer tangible Republican policies to oppose as they consolidate control of government, so expect this to grow worse.  They're going to have to continually work harder to justify vilifying their opponents. 

Ultimately, this dynamic will not be healthy for the Left.   Tylen Cowen is right...

It will be interesting to see if the Keynesian multiplier becomes the Democratic Party economist equivalent of the Laffer Curve, namely a "free lunch" claim used to justify many kinds of preferred policies.  Have I mentioned that having their party in power was very bad for Republican economists too? 

Being out of power helps to sharpen a movement and party; getting back into power dumbs them right back down.