As has been previously observed in this space, the portrayal on the part of most Dem-leaning pundits and bloggers of Republicans as reflexively opposed to government intervention is false. What they oppose is intervention not done by Republicans. Despite his other short-comings, Matt Yglesias is somewhat of a rarity among that field in that he acknowledges this as a falsehood and points it out as such. I’m with the currently missing-in-action Ioz on his overall usefulness, but hey, a stopped clock is right twice a day.
In his latest long-form article, Matt describes how Mitt Romney, were he to win in November, would likely preside not over the hands-off attitude that conservative cheerleaders claim to want but over a switch of Keynesianism A to Keynesianism B. Basically, this is running up debt with Things Republicans Like. He mentions the mask they adopted in opposition like so:
For decades there have been alternate ideas about macroeconomics ignored by mainstream politics. So-called “real business cycle theory” has been influential in academia for decades, and “Austrian” economics has a cult following in libertarian circles. Neither had traditionally impacted the policy domain, but both offered more theoretical firepower for slams on Obama. These ideas quickly started gaining a higher profile among conservatives. Harvard economists Alberto Alesina and Silvia Ardagna argued that cuts in government spending could boost economic growth, bolstering a political argument that deficit reduction rather than stimulus should be the order of the day. Monetary policy, too, came under attack. Ron Paul’s “audit the Fed” movement gathered steam steadily, Rick Perry indicated that Ben Bernanke deserved to be physically assaulted if he tried to stimulate the economy, and Ryan became a strong advocate of tight money policies*. The point of all this was to argue that the economy suffered not from an easily remediable lack of demand but from profound structural problems most likely related to Obama’s socialistic reign of terror.
That last part on its way to the quite justified snark about how Radically Radical that Radical Socialist Obama is being stumbles a bit. Note the implied division: if the problem is that demand is low it’s no big deal, whereas if it’s structural it’s a huge issue and completely separate from demand considerations. Why could the two not be related? It’s not as if the structure of the economy is hermetically sealed from what people within that economy purchase or sell, where does this assumption come from?
This is where Yglesias would be well advised to actually crack open a book (or these days download a PDF) of some Austrian economist or two, particularly where malinvestment is referred to. This is the idea that due to previous interventions money favors the unsustainable, thus bubbles are formed and then pop. Despite the reputation of this view as a right-wing thing, there is an argument along these lines that lefties — real ones, that is — can embrace unawkwardly. I should know, I’ve argued a form of it. The left-wing version essentially argues that at the heart of these snowball-rolling-towards-Hell investments and the carnage their melting causes is financialization of the lives of labor due to borrowing replacing wage growth over time, and the overt lean of the modern economy on rapid consumption: basically, more stuff + less ability to pay for the stuff already needed = huge opportunity (and power) for people whose job it is to parcel out debt.
Leaving the issue at a mere shortfall in aggregate demand & saying “eh, spend more” doesn’t tell the whole story. When the story is told in full though, it can be surprising who agrees. As amusing as it is to observe the similarities in economic approach between the two “major” parties while they claim to be polar opposites, the more informative part is what they *don’t* even touch with a ten foot pole.
By the way: the major beneficiaries of the financialization? They’re betting on both horses. Good luck in November!
(* – funny thing about this is how, as Yglesias mentions in his column, Romney’s rhetoric on China directly contradicts it. If you’re saying that the value of a foreign currency is artificially low relative to yours, you are simultaneously saying that yours is artificially high as a result. Preference for “tight money” is diametrically opposed to preference for losing value versus others, as the former is associated with aversion to inflation.)