Brooks Does the Big Lie on Stimulus (with no shame)
David Brooks is playing the “it’s all so confusing, we just can’t really know anything about economic policy” game. The point is to try to make it intellectually respectable to question whether stimulus spending can boost the economy.
This is important for the right, because the evidence from the austerity induced double-dip in the UK and euro zone is making it ever harder to deny that government spending can and does stimulate the economy just as the old textbook models predict. In the wake of this evidence, it is incredibly valuable that someone like Brooks, who can claim credibility by virtue of his perch on the NYT oped page, muddy the waters with this sort of “it’s all so confusing” piece.
The way to understand Brooks’ column, which is ostensibly about the difficulty of sorting out whether government policies work, but which is really about confusing the issue on stimulus, is to imagine that the topic was evolution or the orbit of the earth around the sun. If a person was committed to denying evolution they could easily point to all the mistakes that biologists had made over the years in constructing evolutionary paths. Similarly, one could deny that the earth orbits the sun by pointing to all the difficulties that astronomers encountered over the years in properly calculating its orbit. As Brooks would say, it’s all so confusing, it’s too bad that we don’t have some way to determine these issues.
Of course honest people know that we have ways to determine these issues and it has long been a settled issue that evolution explains the structure of the biological world and that the earth orbits the sun. Similarly, it is simply not true, as Brooks claims:
“Nearly 80 years later, it’s hard to know if the New Deal did much to end the Great Depression.”
Nor is it Brooks being honest in saying:
“Many esteemed and/or Nobel Prize-winning economists like Joseph Stiglitz, Larry Summers and Christina Romer argued that it would help lift the economy out of recession. ….
We went ahead and spent the roughly $800 billion. What have we learned?
For certain, nothing. The economists who supported the stimulus now argue the economy would have been worse off without it.”
At the time, Stiglitz, like most prominent progressive economists outside the administration, said as loudly as possible that the stimulus would not be large enough to lift the economy out of recession. (Here’s one of my pieces on the topic.) Romer also argued for the need for a much bigger stimulus in a private memo, which has been documented in memos that have since been made public. (Summers claims that he agreed with Romer’s position.)
To imply, as Brooks does, that events have somehow shown the advocates of stimulus as being wrong, or that there is even much grounds for questioning the argument for stimulus as its proponents laid it out at the time is an effort to muddy the waters pure and simple. There any number of studies that have shown the stimulus has worked pretty much as predicted, such as this one by the Congressional Budget Office and this one, using an entirely different methodology by two Dartmouth economists.
Of course there can be economists who are opposed to the idea that stimulus can work as an article of religious faith. Economic theory also predicts that for a large enough sum of money there will be economists who will say that the stimulus did not work regardless of what they actually believe to be true.
But the evidence on stimulus, like the evidence on evolution and the orbit of the earth, is not ambiguous. It is unfortunate that some people get paychecks for trying to mislead the public into thinking it is.
[btw, Brooks deserves a heaping dose of ridicule for this section:
“Businesses conduct hundreds of thousands of randomized trials each year. Pharmaceutical companies conduct thousands more. But government? Hardly any.”
If Brooks ever read the paper he writes for, he would know that the pharmaceutical industry routinely misrepresents the results of its studies to exaggerate the effectiveness of its drugs and conceal evidence of harmful side effects. Given its track record it is hard to difficult to believe that anyone could hold up the pharmaceutical industry as a model with a straight face.]
Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’s Beat the Press blog, where this post first appeared.