J. Bradford DeLong is a contributing writer for the Project Syndicate news series. DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US Treasury Secretary.
The Stimulus Ostriches
By J. Bradford DeLong
BERKELEY – Of all the strange things that have happened this winter, perhaps the strangest has been the emergence of large-scale Republican Party opposition to the Obama administration’s effort to keep American unemployment from jumping to 10% or higher. There is no doubt that had John McCain won the presidential election last November, a very similar deficit-spending stimulus package to the Obama plan – perhaps with more tax cuts and fewer spending increases – would have moved through Congress with unanimous Republican support.
As N. Gregory Mankiw said of a stimulus package back in 2003, when he was President George W. Bush’s chief economic advisor, this is not rocket science. Deficit spending in a recession, he said, “help[s] maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: you can find it in all of the leading textbooks…”