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Paul Krugman, “Understanding Romneynomics”
by Paul Krugman
“I’ve been delving a bit into what the Romney campaign and its economist fellow-travelers have been saying, and I think I have figured out the true economic doctrine Romney and his inner circle have in mind. It is, needless to say, not what the campaign has claimed.
The official line has been that the five-point program will create scads of jobs. This has a couple of problems. First, the program is vacuous — for the most part it’s a statement of desired outcomes, not policies. Second, as Glenn Kessler points out, the studies claimed as justification for the 12-million jobs number actually don’t say at all what the campaign asserts.
Actually, one point that should be made: Kessler isn’t quite right in his critique of the (not-Peter-nor-Doug) Diamond paper claiming big employment gains from the Romney tax plan. The time horizon is not, in fact, a big deal. What is a big deal is that the Diamond paper is an analysis of an economy that is assumed to be continually at full employment. The “job gains” the paper estimates are supply-side, not demand-side — they represent an increase in the number of people who want to work, not an increase in the number of jobs available. If you like, Diamond is claiming (implausibly) that there would be a big jump in the labor force participation rate. And this, of course, has nothing to do with the problems of an economy where people who want to work can’t find jobs.
So the Romney campaign is lying about the rationale for its boasts about jobs. But what’s the real story? The answer is actually pretty clear: CONFIDENCE. The Romney notion is that we’d be having a rip-roaring recovery right now, except that Job Creators feel that Obama is looking at them funny. And so all Romney has to do is show up, and happy times will be here again. No, seriously: in Boca Raton Romney declared that simply by being elected he could start a boom, “without actually doing anything”.
Now, the obvious riposte here is that we know why we have a weak recovery, and it’s not Obama’s evil eye — it’s the normal hangover from a severe financial crisis, which could only have been averted by much stronger fiscal and monetary stimulus. But that’s not a story the Romney people want to hear. Hence the determined effort by people like John Taylor to dismiss everything we’ve learned — and I don’t just mean me, I mean Rogoff-Reinhart, the IMF, Alan Taylor, and more — about the macro effects of financial crises.
So there you have it. The true plan is to provide an economic stimulus in the form of Romney’s awesome awesomeness; the cover story is the pretense of having an actual program. Are you feeling confident?”
2012-10-18 23:44:22
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