Friday, August 24, 2012

Keynesian? That's Just A Name That Stuck...

Those of you who have been following this blog since its inception know that I regard the current  Republican deficit hawkery as mostly a farce. Yet again, though, they've made it abundantly clear that debt apparently doesn't matter to them. The CBO report released yesterday said that the "fiscal cliff" -- the automatic spending cuts and tax hikes set to take place beginning in January -- will plunge the U.S. economy into a recession, leading to a loss of 2 million jobs and 4 percent of GDP. As horrible as the prospect of that is, that isn't the interesting part.

The interesting part is that Republicans are seizing on this to try and argue that Democrats are somehow in favor of fiscal tightening. Okay, first things first, Democrats are threatening to repeal the Bush tax cuts for top earners, but that's a fairly small part of the larger package of spending cuts and tax hikes. Those spending cuts, might I remind all of you, are the same ones that Republicans steadfastly demanded in return for raising the debt ceiling last year. Just to be clear, though, tax hikes and spending cuts are both austerity measures. They both qualify as being fiscally contractionary. 

Let's take a walk down memory lane, though. Remember when numerous Republicans and right-wing groups said that balancing the budget by cutting spending would lead to economic growth? Well, I certainly do. If you'll recall, Mitt Romney accidentally told the truth earlier this year when he said that cutting spending harms economic growth. The result? A flurry of criticism from groups like the Heritage Foundation and the U.S. Chamber of Commerce. Oops.

In any case, my point in spelling all of this out is that what Republicans are currently saying is a clear contradiction of what has seemingly become the official dogma of the GOP. In 2011 and earlier this year, they claimed that cutting spending can and will yield economic growth by instilling confidence in investors, businesses, and consumers. Now they're bemoaning the fiscal cliff at the end of the year, because it will...harm economic growth? If anything, to be logically consistent, they ought to be denying the CBO report's findings, rather than embracing them. By their logic, those budget cuts and tax hikes ought to instill confidence in businesses and consumers. So why the sudden turn to Keynesianism?

P.S. Name the (kind of) movie quote in the title...win a prize?