Jeffrey Sachs attacks Krugman on 'crude Keynesianism'

[Gustaf]

Interesting article that I recommend for those who want to understand the general debate on Keynesianism.

http://www.huffingtonpost.com/jeffrey-sachs/professor-krugman-and-cru_b_2845773.html

"I have argued against short-term stimulus packages. Krugman has supported them, and indeed argued that they should have been even larger. I have been against temporary tax cuts and temporary spending programs, believing that instead we need a consistent, planned, decade-long boost in public investments in people, technology, and infrastructure. Such a sustained rise in public investment should have been paid for by ending the Bush-era tax cuts in 2010, or by adopting a comparable boost in revenues. Instead Obama and Congress have now made almost all of those tax cuts permanent, putting us into a deeper fiscal bind."

[opebo]

Haha, talk about nit-picking.

[Marokai Backbeat]

I hate to agree with opebo, but yes, that whole thing seemed like nitpicking and generally trying to draw huge distinctions (for what purpose, I have no clue) over not-so-huge individual policy differences by making Krugman's points out to be far more dramatic than they actually are.

[Gustaf]

Huh? If you think important decisions on macroeconomic policy are nitpicking I guess I can't stop you...

[TheDeadFlagBlues]

Sachs' article is far from nitpicky but I think it is off-base and reveals Sachs lack of political knowledge. If the Obama administration followed Sachs' advise and diverged from its "populist" stimulus to include more long-term public investment in infrastructure, the economy would have suffered in the short run. Large-scale public works programs would take years to get off the ground and without "crude" stimulus unemployment would skyrocket to 13-14% + tax receipts would plummet. For this reason, Sachs' response to Krugman is an absurdity if we take his long run debt concerns at face value. How would the economy, and thus the revenue side of the budget, be able to respond to this shock without "crude" stimulus?

I'll ignore Sachs' prescriptions on tax revenue, which are sound and I believe that Krugman would agree with wholeheartedly. The problem is that his proposal isn't politically expedient on that front. His alternative counter-cyclical stimulus is and it is dangerous. It doesn't surprise me that the man who formulated "shock-therapy" as a solution would be so thick-headed there.

If Sachs stuck to writing about the climate and poverty, I'd respect him.

edit: bad response but I agree with long-term investment in key infrastructure whether it be energy, transport or in power grids but not as a foundational counter-cyclical measure especially in a federal polity which contains 50 states without the ability to pursue counter-cyclical policies. Get real, Sachs. 

[TheDeadFlagBlues]

Sachs' is correct about the variability of multipliers but consensus appears to be moving in Krugman's direction there. See: IMF's revision on importance of counter-cyclical spending and change in range of multiplier.

[opebo]

Huh? If you think important decisions on macroeconomic policy are nitpicking I guess I can't stop you...

No, the point is it is silly to fight with one's allies because of very minor differences.  BOTH kinds of stimulus should be done - and both sides on this issue should fight the austerity-ites.