Romney’s Big Fat Wet Kiss to Keynesian Economics

Photo: Photos: Joe Raedle/Getty Images (Romney), Gordon Anthony/Getty Images (Keynes)

The real news in Mitt Romney’s interview with Mark Halperin, as Charles Pierce points out, is that Romney openly repudiated the central argument his party has been making against President Obama for the last three years: that he spent too much money and therefore deepened the economic crisis. Indeed Romney himself had been making this very case as recently as a week ago (“he bailed out the public sector, gave billions of dollars to the companies of his friends, and added almost as much debt as all the prior presidents combined. The consequence is that we are enduring the most tepid recovery in modern history.”) But in his Halperin interview, Romney frankly admits that reducing the budget deficit in the midst of an economic crisis would be a horrible idea:

Halperin: You have a plan, as you said, over a number of years, to reduce spending dramatically. Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?

Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression.  So I’m not going to do that, of course.

Of course! Romney says this as if it’s completely obvious that reducing the deficit in the short term would throw the economy back into recession, even though he and his party have been arguing the opposite case with hysterical fervor. Republicans have committed themselves to Austrian economic notions and other hoary doctrines justifying the position that reducing deficits is a helpful way out of a liquidity trap.

I’ve thought that this represents primarily a case of self-delusion in the cause of political self-interest, as opposed to conscious cynicism: Republicans understood that bigger deficits would spur faster growth and reduce their chances of regaining power, so they found themselves more persuaded by theories suggesting bigger deficits wouldn’t really help. But if they had really converted to this belief, wouldn’t there be even a tiny bit of wailing about Romney’s open endorsement of Keynesianism? It’s not as if conservatives have been shy about holding his feet to the fire when he expresses some tiny deviation from their position. Yet I have noticed zero conservative complaints about Romney’s big fat wet kiss to John Maynard Keynes, which suggests their level of actual devotion to this position borders on nil.

Sheer partisan opportunism also helps explain why (I have argued for a while) a Romney presidency would probably do more to stimulate the economy in the short term than would a second Obama term. Brian Beutler and Matt Yglesias both reach this conclusion today, though I think their reasoning is wrong. They conclude, from the fact that Obama has a more credible plan than Romney to resolve the medium-term deficit, that Obama would do less stimulus than Romney because he wants to do less stimulus than Romney. Both of them ignore the fact that Obama has a pretty ambitious stimulus plan. Now the plan won’t pass because Republicans would never vote for it, and everybody including Obama knows this, so we’ve all treated it as a message device because that’s the only function it serves. But I’m confident Obama really would like to sign his stimulus plan if he could.

Meanwhile, Romney has no stimulus plan. But he may well propose one if he wins, and it would pass, because plenty of Republicans would flip back to being Keynesians like they were under President Bush. What’s more, Democrats wouldn’t stop it, because Democrats don’t have any history of opportunistically abandoning Keynesian economics when the other party’s neck is on the economic line. So, yes, a President Romney would be more likely to sign strong stimulative legislation than Obama — not because he believes in it more strongly, but because, as David Frum says, we’re all Keynesians during Republican administrations.