The NYT: No Pain, No Gain
Epic nonsense from the NYT:
“In the short term, policy experts expect that the combination of increased tax revenue and reduced government spending would put a drag on the economy. Both Democrats and Republicans have warned that too-steep tax increases or too-deep spending cuts might create a recession.
Nevertheless, a short-term ‘down payment’ on a broader tax and entitlement reform process might sap growth in the next year or two. That so-called fiscal drag might be offset by increased business investment because of the removal of uncertainty, or a ‘relief rally’ in the stock markets.”
Translation: In order to please the confidence fairy, we need to throw the economy back into recession!
C’mon, people. This is really getting silly. As a percentage of GDP, equipment and software spending by businesses is near prerecession levels. So it’s hard to argue that businesses are “uncertain” when they’re investing so much already. And, no: anecdotes don’t count. If you know a business manager who claims to be uncertain about the future, that doesn’t prove anything; serious economists listen to revealed preferences rather than stated preferences.
Also, in terms of making a “down payment” to please markets, one really has to wonder what the NYT is smoking. If markets were really worried about fiscal policy, then we would be seeing those worries percolating in the bond market (not the stock market). If the NYT has any evidence of this, then it should be presented – because when I look at the bond market, all I see are historically low yields.
In short, the idea that we need to suffer in the short run in order to be rewarded in the long run is incredibly irresponsible. And you don’t need to read Keynes to see this; just ask any worker in Spain, Italy, or Ireland.