Friday, February 24, 2012

Is Romney a Closet Keynesian?

I received a great deal of criticism from some Romney supporters for repeating a line that Romney said on the campaign trail. Committing a Kinsley gaffe, Romney inadvertently let it slip that he understands that deep government cuts would have a negative effect on the recovery. Of course, Romney was trying to point out why he would reform the tax code. Unfortunately, he said too much.

Jonathan Alter and Paul Krugman seemed overjoyed to write about Romney's gaffe. The Club for Growth is, of course, outraged.
Sure enough, Andy Roth, vice president for government affairs at the fiscally conservative Club for Growth, called Romney’s comments “hogwash.” Roth said the statement “confirms yet again that Romney is not a limited government conservative. The idea that balancing the budget would not help the economy is crazy. If we balanced the budget tomorrow on spending cuts alone, it would be fantastic for the economy.”
Now, understanding how cuts affects economic growth does not make Romney a Keynesian. It just means that Romney can add and subtract and has taken Macroeconomics 101. Nevertheless, let's consider a few points:

1. Romney has an MBA from Harvard and has spent his life rubbing shoulders with people who understand economics.

2. His chief economic advisers are Glenn Hubbard and Greg Mankiw, both leading economists. Mankiw, for example, is the editor of a collection of papers known as the New Keynesians Economics.

Again, this is not proof that Romney is a Keynesian. It just doesn't seem likely that he isn't though. This does not mean that he isn't conservative. Keynesian economists have consistently argued that governments should increase spending during the bad times and decrease spending during the good times. Politicians since the 1960s have obeyed half of this prescription. Romney, unlike most politicians, actually has decreased government spending during an economic boon. That is why he would be a better President than Obama for the next cycle. We are likely heading toward a full recovery and we need a President who can cut government after the cries for cutting government grow dim.

More on this later.


Anonymous said...

You know, Pablo, I think your idea that Mitt is a "Keynesian" is stretching things a little. Mitt is a pragmatist. He is going to go with what works. Period. Congress is ultimately in charge of the budget, so Mitt will try not to promise what he can't deliver on.


Anonymous said...

Did you listen to Romney's economic plan and speech in Detroit a few minutes ago?

He doesn't sound Keynesian to me!

Anonymous said...

Slavery to half baked ideology is what I hope Mitt will stop! This is not a battle between economic theories!

Romney knows what works. That is what is important... not whose feelings he hurts.

Conservatives are afraid to have Romney go to and fix things... afraid to have their ideas tested in the real world.

Anonymous said...


Pablo, you must be mistaken. Gov. Romney believes in free markets.

To balance a budget you have to take the most important things and focus on those. But essentials cannot be cut. You must also have a plan for growth (more income).

For example. Home budget: Food, Shelter, Gas, Electricity, Water and Transportation to work are essentials. Those cannot be cut.

Then you focus on improving your skills and finding a better paying job. More growth turns into more income.

Terrye said...

Oh come on...look at Greece..austerity programs over there are not helping the economy..they are not cutting government spending to help the economy..they are out of money and in debt.

This is apples and oranges..if we suddenly cut social security payments to people it would hurt the economy, however, that does not change the fact that actual economic growth comes from the private sector.

Anonymous said...

Did Pablo used to be a Romney supporter? Am I thinking of another contributor??

newark hawk said...

Romney is right, The Club For Growth is wrong.

The very reason that you want to reduce government spending is so that you can ALSO reduce taxes without blowing a hole in the budget.

Case-in-point: massive spending AND tax cuts led to the boom years following World War II.

Most economists agree that those boom years would not have happened with just spending cuts alone.

Once again, Romney is right, and his critics are dead wrong.

newark hawk said...

Hmmmm ... "ROMNEY IS RIGHT" ... looks like a good bumper sticker to me ... lol

dgenetaylor said...

"Romney is Right" I like the the sound of that.
Hey, this is simple--
turn down the spending and increase growth.

dgenetaylor said...

When you are driving fast on a slippery road and start to lose control--do you slam on the breaks? No!
Let off the gas and turn into the slide to get control.
Cut spending by a trillion the 1st-year would be harsh treatment that might kill the patient. Cutting half a trillion is enough the first year.