(OBAMA versus REPUBLICANS – continued)
Into the Obama administration, Republicans stayed with their hostility to government spending and increases in taxation. They ridiculed the Obama administration's increased borrowing to stimulate the economy and the rise in unemployment above what President Obama had estimated.
Expressing an anti-Obama position regarding the economic policy was John H. Cochrane, professor of finance, University of Chicago Booth School. Appearing on the News Hour on February 17, 2010, he spoke against stimulus spending:
I mean, the stimulus, in the end, is taking money from one place and giving it to another place. And it's too easy to forget that you had to take money from somewhere in order to do any stimulating.
Cochrane went on to complain that stimulus money "is going to have to be paid by your and my taxes at some point." As to what the Obama administration should have done about the economic crisis, he said that, "The best thing to do was get out of the way. Let the free market work."
Those who support Obama, of course, believe in government doing something. They agree that the money for stimulus comes from somewhere. They are willing to have the government borrow money as an investment, to be paid back as the recovery makes more money, which supplies the government with more tax revenue – not necessarily from raising the tax rate. In a recession money is withdrawn from investment. The government steps in and compensates for this.
The position of many Republicans going into the second year of the Obama administration is that taxes are a detriment to economic growth regardless. They point to the national debt while opposing any increase in taxes to address it. The way to reduce the debt they claim is simply to reduce spending.
The father of stimulus spending was, of course, John Maynard Keynes. One of Cochrane's University of Chicago economist colleagues, Luigi Zingales, inserts morality into the issue. He writes that "Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behavior."
John Cochrane's disagreements with the liberal economist Paul Krugman are well known among economists. In September, 2009, Cochrane wrote a piece titled "How did Krugman get It so Wrong." It was a response to Krugman's article in the New York Times about the origins of the recent economic collapse: "How did Economists get it so Wrong?" Cochrane complained that Krugman "constantly is telling us that all market deregulation was born of Reaganite ideology," and wrote of Krugman's "rigidly ideological attempt to obscure the fatal flaws of free-market economics." Cochrane considers himself not an ideologue because he works with a collection of facts. He asked why Krugman would publish "an incoherent vision for the future of economics?" "The only explanation that makes sense to me," he wrote, "is that Krugman isn’t trying to be an economist, he is trying to be a partisan, political opinion writer."
One of the dozens of comments in response to Cochrane's article was obviously referring to Cochrane when he wrote that "economists have spent too much time with their mathematical models and too little time on how the world actually works." There was a time when the discipline of economics was joined to social development and called the "political-economy." It was so with Adam Smith. The complainer added that, "Economics went wrong when it strayed from its foundations in ‘political economy’ and started to espouse some Platonic ideal that bore little resemblance to the real world of human beings."
Copyright © 2010-2011 by Frank E. Smitha. All rights reserved.