It’s not just that Mitt Romney intended to quote conservative hero-figure Winston Churchill but instead quoted conservative hate-figure John Maynard Keynes. Evidence is popping out all over that Romney is, at heart, a Keynesian. As the Republican Party has given itself over completely to fervent anti-Keynesianism, this is no small matter.
Keynesian economic theory, for those of you nodding your heads at the phrase but secretly unsure of what it means, holds that business cycle downturns are generally the result of a lack of consumer demand. Bad economic times cause a vicious cycle in which people spend less money, thus causing other people to lose their jobs or make less money, and spend less themselves. The Keynesian answer is for the government to reduce interest rates and to increase deficits, pumping up demand until the economy can recover.
That remains the mainstream economic belief. (See Bloomberg’s recent survey of macroeconomic forecasters, which almost unanimously predicted the American Jobs Act would boost growth and employment.) And until not long ago, both parties accepted this theory. In 2001, even the most right-wing Republicans, like Paul Ryan, argued for Keynesian tax cuts to boost demand during a shortfall. In December of 2008, Romney penned a column for National Review Online, laying out his economic prescription. It was pure Keynes. “This is surely the time for economic stimulus,” he wrote, calling for the Federal Reserve to “expand the money supply,” dismissing fears of inflation, and urging temporary tax cuts and new infrastructure spending.
As seems to happen to Romney, no sooner had he spoken up for a solid Republican position than the rest of the Party decided all at once that the thing they all believed now amounted to dangerous socialist nonsense. By early 2009, anything resembling Keynesian analysis had become Republican heresy. Republicans have begun loudly hectoring (or even threatening) the Federal Reserve to stop expanding the money supply, warning that inflation looms. They have insisted that temporary tax cuts don’t work (they only provide a “sugar high,” Republican leaders now say) and that deficits deepen, rather than alleviate, the economic crisis. Rather than respond to the crisis by easing credit and raising short-term deficits, Republicans now demand the opposite.
Romney, naturally, has stopped advocating fiscal or monetary stimulus. His economic plan is mostly geared toward long-term conservative goals, and is extremely vague on the causes of or solutions to the current crisis. (Admission of vagueness: “I don't have all the answers to all the problems that exist in America and around the world, but I know how to find the answers.”) But Romney keeps forgetting that he’s not a Keynesian anymore. The other day, attempting to indict Obama’s worldview, he inadvertently endorsed it:
The president thinks that if you have cash on your balance sheet that means you’re gonna go hire people. No, you hire people if you have customers. The president doesn’t understand what makes the American economy go. I do.
That, as Alan Pyke points out, is exactly Obama’s worldview, and exactly not the Republican worldview. The Republican worldview is that business aren’t hiring because they think their profits are threatened by new regulations and future tax hikes. The Keynesian worldview is that they’re not hiring because there’s not enough consumer demand. Romney has endorsed the demand explanation. Romney’s two main economic advisors, Glenn Hubbard and Greg Mankiw, have both explicitly endorsed the Keynesian–stimulus framework before Republicans turned against it. (Here's Mankiw doing it, and here's Hubbard.)
Romney’s secret Keynesian shame has not, so far, hurt him in the Republican nominating primary, though plenty of time remains for his rivals to expose yet another strand of technocratic reasonableness to the baying hounds of the right-wing base. He’s already “the father of national health insurance” — will Republicans tolerate it if he’s also shown to be a hated advocate of stimulus?
The more interesting implication here is that, if elected president, Romney may well support essentially the same kinds of short-term responses to the crisis that Obama is proposing. Romney has been forced to swear up and down he’ll try to repeal the Affordable Care Act if elected, but he hasn’t been forced to promise to try to push through contractionary fiscal policies. I’m guessing Romney’s economic plan would have, alongside traditional Party favorites like long-term, debt-financed regressive tax cuts, a heavy dose of stimulus. And I’d bet the Republican opposition to stimulus woud melt away under a Romney presidency. Once their Party has its political skin in the game, Republicans would probably abandon their newfound hard-money, anti-Keynesian beliefs as quickly as they took them up under Obama.
In other words, the best short-term hope for the unemployed may be a Mitt Romney presidency. That’s not enough to make a Romney presidency better for liberals, but it would be a nice consolation prize.