Is moderate columnist David Brooks (a "conservative" praised by Times readers for his thoughtfulness, civility, and support for Obama), indirectly taking on fellow Times columnist Paul Krugman, in his Tuesday column "A Little Economic Realism [1]"?
Brooks is disputing "Demand Side theorists" who automatically favor a big-spending, pump-priming Keynesian approach to the recession while faulting their estrangement from "doubt and modesty," while treating "everybody who disagrees with them [as] immoral or a moron." (Yep, sounds like our Krugman [2].)
These Demand Side theorists are giving you a plan of action. But you're not a theorist. You're a practical executive, and you have some concerns.
These Demand Siders have very high I.Q.'s, but they seem to be strangers to doubt and modesty. They have total faith in their models. But all schools of economic thought have taken their lumps over the past few years. Are you really willing to risk national insolvency on the basis of a model?
Moreover, the Demand Siders write as if everybody who disagrees with them is immoral or a moron. But, in fact, many prize-festooned economists do not support another stimulus. Most European leaders and central bankers think it's time to begin reducing debt, not increasing it - as do many economists at the international economic institutions. Are you sure your theorists are right and theirs are wrong?
The Demand Siders don't have a good explanation for the past two years. There is no way to know for sure how well the last stimulus worked because we don't know what would have happened without it. But it is certainly true that the fiscal spigots have been wide open. The U.S. and most other countries have run up huge, historic deficits. And while this has helped save public-sector jobs, we certainly haven't seen much private-sector job growth. It could be that government spending is a weak lever to counter economic cycles. Maybe monetary policy is the only strong tool we have.
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These days, debt-fueled government spending doesn't increase confidence. It destroys it. Only 6 percent of Americans believe the last stimulus created jobs, according to a New York Times/CBS News survey. Consumers are recovering from a debt-fueled bubble and have a moral aversion to more debt.
Brooks argued that the psychology of entrepreneurs plays more a part than the likes of Krugman admit: "They're afraid of a fiscal crisis. They're afraid of future tax increases. They don't believe government-stimulated growth is real and lasting. Maybe they are wrong to feel this way, but they do. And they are the ones who invest and hire, not the theorists."
Krugman has long railed against cutting the deficit and in favor of additional "stimulus." in his June 28 column [3] he pointed to Ireland's current struggles to argue that the "austerity" (cutting spending) being pushed by U.S. conservatives was dangerous.
This may actually be Round 2 in the columnists' subterranean slap fight. In November 2007 Brooks and Krugman went around and around on Krugman's accusation [4] that racist motives fired Ronald Reagan's decision to begin his successful 1980 campaign for president in Philadelphia, Miss., where three civil rights workers had been slain in 1964.