Ok, I’ll be honest. I spent almost two years of my professional career writing anonymous, scathing critiques of Paul Krugman’s NY Times missives.
Sometimes – especially when it came to Sweden and Krugman’s “sadomonetarists” – my pieces were downright mean-spirited. To this day, I still contend that Sweden’s headlong plunge into NIRP probably did more harm (in terms of fueling a housing bubble) than it did good (in terms of boosting inflation), but my pieces were slanted to the point of absurdity as were my efforts to blame Krugman for everything that’s ever gone wrong in Japan.
To be fair to myself, I was compelled to write those pieces by the decidedly large paycheck that went along with them and, well, who doesn’t want a $350 pair of Prada sunglasses to match one’s Italian leather loafers, right?
Well I’ve moved on now and as such I thought it might be time to revisit Krugman’s blog and much to my delight, I found a great piece on Trumponomics that ends with a hilarious punchline. Excerpts are below.
Excerpted from Will Fiscal Policy Really Be Expansionary?
It’s now generally accepted that Trumpism will finally involve the kind of fiscal stimulus progressive economists have been pleading for ever since the financial crisis. After all, Republicans are deeply worried about budget deficits when a Democrat is in the White House, but suddenly become fiscal doves when in control. And there really is no question that the deficit will go up.
But will this actually amount to fiscal stimulus? Right now it looks as if Republicans are going to ram through their whole agenda, including an end to Obamacare, privatizing Medicare and block-granting Medicaid, sharp cuts to food stamps, and so on. These are spending cuts, which will reduce the disposable income of lower- and middle-class Americans even as tax cuts raise the income of the wealthy. Given the sharp distributional changes, looking just at the budget deficit may be a poor guide to the macroeconomic impact.
Taking all this into account, that old Ryan plan would almost surely have been contractionary, not expansionary.
Will Trumponomics be any different? It would matter if there really were a large infrastructure push, but that’s becoming ever less plausible. There will be big tax cuts at the top, but as I said, the push to dismantle the safety net definitely seems to be on. Put it all together, and it’s extremely doubtful whether we’re talking about net fiscal stimulus.
Now, you might think that someone will explain this to Trump, and that he’ll demand a more Keynesian plan. But I have two words for you: Larry Kudlow.