NYT Columnist Wants Keynes on Steroids
posted by Lawrence Cunningham
The February 1, 2009, print edition of the Sunday New York Times Magazine will run a long opinion piece, The Big Fix, by staff writer, David Leonhardt. The piece, already available on line, reads as an exuberant, unqualified endorsement of a massive and immediate increase in the role and size of the US federal government—as the only solution to current challenges.
The piece offers a few serious reflections and suggestions, including promoting national investment in education. But it is overall both intemperate and naïve. For some, it may even be irresponsible. Certainly, it contains no acknowledgement of any limitations on its diagnosis of current problems or prescription for curing them.
Mr. Leonhardt encourages any kind of immediate large government spending, for any reason. He writes, seriously, that: “Employing people to dig ditches and fill them up again would” be good government policy. He adds: “Even the construction of a mob museum in Las Vegas, a project that was crossed off the [Obama Administration’s] list after Republicans mocked it, would work to stimulate the economy, so long as ground was broken soon.” He concludes: “Pork and stimulus are not mutually exclusive.”
Are these suggestions seriously responsible? Less fancifully, Mr. Leonhardt says that John Maynard Keynes was right, that government, with its “enormous resources,” is the only force that can catapult a nation out of a deep financial crisis. Sensibly, Mr. Leonhardt says, any such catapult must be designed to increase the nation’s economic growth rate in short order so that enough return is generated to repay debts that any bold government spending plan entails.
As things stand, Mr. Leonhardt asserts without evidentiary support, future sources of US economic growth are unlikely to come from leading past sources, such as Wall Street, Detroit, or Silicon Valley. Instead, Mr. Leonhardt advises, the way out of the current turmoil is for government spending to be made in areas showing under-investment in recent years.
These include investment in government-directed computerization of medical record-keeping; government monitoring of the efficacy of medical treatments; government investment in clean-energy processes; and government investment in education and technology. No doubt, these are areas in which investment may be desirable and economic growth plausible, but can only government do these things, as Mr. Leonhardt asserts?
More difficult yet, Mr. Leonhardt believes that government policies can and must be designed to change cultural norms. He cites two in particular that government should reverse: “consume before invest; worry about the short term, not the long term.” The piece does not explain how government policies can shift cultural norms to make people invest before consuming or worry about the long term, not the short term. (Nor, for that matter, does the piece consider whether worrying about the short-term is always ill-advised—and some of Mr. Leonhardt’s own prescriptions, like government ditch digging and filling, are very short term prescriptions indeed.)
According to Mr. Leonhardt, moreover, government has a good track record at big programs with lasting effects—on both cultural norms and economic prosperity. For this proposition, Mr. Leonhardt cites, without evaluation, the following: Medicare, Social Security, the highway system, the GI Bill, the National Science Foundation, the National Labor Relations Board and the Defense Department’s incubation of the Internet. It would be helpful, when advocating government spending as the only solution to current woes, and giving these examples in support, to note limitations on the success of these examples as well as acknowledge examples of governmental efforts that did not succeed.
It is unclear why Mr. Leonhardt chose to write this piece in the form of a screed—or why editors of the Times’ Magazine propose to run it as written. It is not obvious that government is the only solution to problems, and the piece does not exactly make arguments for that proposition. It is possible that US capital markets, auto manufacturing, and computer technology industries will recover, expand and produce economic growth. But Mr. Leonhardt declares they will not promote sufficient economic growth to work off the current downturn, without explaining why.
It certainly is not obvious that government funded ditch digging and filling is a way, much less the only way, to thaw frozen credit flows. Nor is it obvious that government takeover of investment activity is the only or best way to stimulate inherently risky ventures in, or unleash creative leaps in, medicine, energy, education or technology.
No doubt, it could be valuable to direct investment into such pursuits. But why that should be undertaken solely by government, rather than through entrepreneurial initiative, is unexplained.
Mr. Leonhardt’s opening theme is about how crisis invites opportunity to radical change. He cites, perhaps out of context, Obama Administration officials as portraying the current crisis as an opportunity to refashion the US economy and US society. He says that Lawrence Summers, Obama’s chief economic advisor, told him that Rahm Emanuel, Obama’s chief of staff, said: “You never want a serious crisis to go waste.”
It is not obvious what this quotation means, exactly, or how it translates into the un-pragmatic prescription Mr. Leonhardt is publishing. Perhaps Mr. Leonhardt’s piece is merely trying to provoke thought, and not be taken seriously on its merits. While even that seems a strange role for one of the country’s important newspapers to play, one may have hope that President Obama is not listening to Mr. Leonhardt on matters of national policy.