Not so long ago, Republicans used to portray themselves as sober, economic realists. They knew how the economy worked. When you actually dug down, however, it turns out this was really a big bluff \u2013 or more accurately, a decades-long \u201clong con\u201d. Their solutions never really boosted the productivity of the economy, but made it vastly more unstable and more unequal. To be fair, it took a long time to figure this out in its entirety.<\/p>\n
But they still managed to talk a good talk, and \u2013 for the most part \u2013 they were not crazy. They had a basic understanding of macroeconomics and how things like monetary and fiscal policy affected growth. No longer.<\/p>\n
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Exhibit number 1<\/strong>: the complete intellectual\u00a0dishonesty of the Romney economists\u00a0\u2013 Glenn Hubbard, Greg\u00a0Mankiw, John Taylor, and Kevin Hassett. The first three at least are well-respected\u00a0and have well-deserved reputations (although Hubbard lost much credibility when he had to admit taking large sums of money from the financial sector on camera in the movie, Inside Job<\/em>). Which makes the complete demolition of their arguments by Brad deLong<\/a> all the more stunning.<\/p>\n Let\u2019s face it, there is no real mystery why the economy is performing poorly today. We are five years after a major financial crisis, and all\u00a0the evidence suggests that the economy takes an awfully long time to bounce back after financial crises. America is not (ahem, ahem!) exceptional in this way either! But it\u2019s interesting to look at the numbers. Business investment has rebounded, growing at twice the pace under Obama as under Bush. So much for the famous stranglehold of regulation! Exports, which usually track investment, have also rebounded.<\/p>\n So what\u2019s holding us back? A number of things. First, residential construction\u00a0is still in the tank. No surprise there \u2013 and to be honest, do we really want or need another boom driven by housing? But there\u2019s something else too. Government spending (more technically, government purchases of goods and services) is also in the doldrums. And this is where we can blame policy. Despite the bizzaro-world scenario peddled by Fox News and the right, the government sector has been holding back growth. It is a fact<\/a> that the real growth of government spending is lowest under Obama than any other postwar president. It is a fact<\/a>\u00a0that unemployment remains so high today in part because of the huge decline in public hiring \u2013 if Obama had followed Bush in terms of expanding the number of public sector jobs, there would be an extra 1.4 million working today, enough to reduce the unemployment rate by 1 percentage point.<\/p>\n So we can say the following: the recovery is so lousy because we are still struggling\u00a0with a financial crisis and a legacy of private debt. This is holding down private consumption. And here, it is a huge shame that there has been no action ro restructure private debt, especially housing debt, to relieve this millstone from the necks of millions of ordinary people. As we know, this has a long tradition in both Jewish and Catholic teaching. To make matters worse, the banks were bailed out, while homeowners were sent away emtpy.<\/p>\n Adding to our problems is the\u00a0misguided belief that fiscal austerity is the path to short-term recovery. Of course, some might argue that too much government spending crowds out private spending, but you see this in rising interests rates \u2013 and interest rates have never been lower.<\/p>\n Back to the Romney guys. I won\u2019t rehash all of deLong\u2019s\u00a0points, but the whole thing is worth a read. The worst is when they deliberately misinterpret the results of other economists. One finds that policy uncertainty is holding back growth. But while these guys claim \u201cregulatory\u201d uncertainty,\u00a0he is really talking about Republicans playing chicken with the debt ceiling and other issues. This kind of dishonesty is shocking in economists of this caliber.<\/p>\n Exhibit\u00a0number 2<\/strong>: Paul Ryan. It is quite stunning that this man is being portrayed\u00a0by the media as \u201cserious\u201d on economics. I have no doubt that Ryan is \u201cserious\u201d in what he believes, but all seriousness stops there! Look at his plan \u2013 he basically assumes all non-entitlement non-military government spending will\u00a0pretty much\u00a0wither away (is he a closet Marxist?). Plus, you cannot be serious about reducing public debt when you put forward a deficit-reduction plan that increases public debt! You cannot be serious about reducing public debt if you want to increase military spending and give massive tax cuts to the upper class. It\u2019s also highly immoral of course, as to the extent that Ryan tries to pay for his largesse, it is by cutting programs that benefit the poor, such as Medicaid. If you crunch the numbers, up to 30 million people <\/a>could lose coverage under Medicaid to pay for Ryan\u2019s tax largesse \u2013 this could come on top of the current level of uninsured, as he opposes the Affordable Care Act.<\/p>\n And then there\u2019s the fact that Ryan doesn\u2019t even understand the basics of modern macroeconomics. When somebody like Michelle Bachman speaks on economics, people snigger. And yet when Ryan speaks, people nod earnestly. Well, here\u2019s an emperor-has-no-clothes<\/em> moment: Ryan is pretty much at the same level as Bachmann! Take this gem: he is on record <\/a>as saying that raising interests rates would provide stimulus to the economy in the current circumstances. That goes against everything we know about macroeconomics, and it goes directly against people like Milton Friedman who believed strongly in the power of monetary policy. Indeed, this was the essence of his original criticism of Keynes\u2019s analysis of the Great Depression \u2013 Friedman discounted the role of fiscal stimulus and instead argued that the single biggest mistake of the Great Depression was tight monetary policy).<\/p>\n