JAMES PETHOKOUKIS: When it comes to economic policy, liberal pundits are failing their liberal base.
Liberal pundits have a real problem here. Now I’m not talking about old-fashioned, substance-lite stylists such as Maureen Dowd or Gail Collins. But Paul Krugman is a Nobel laureate. He’s supposed to know something. And Krugman surely does. But he’s just playing to his liberal fan base when he writes, as he did the other day, a paen to the high-tax, union-heavy 1950s economy as if it’s a relevant model for 2012 America. Many liberals would love to believe that if only we sharply raised taxes on wealthier Americans and corporations and slashed defense, we could not only leave Social Security, Medicare, and Medicaid as is. Unfortunately for them, the math doesn’t work.
But it’s not just Krugman. During the campaign, President Obama argued that the economic policies of George W. Bush caused the Great Recession and Financial Crisis. Indeed, this was a major theme of the Democratic National Convention. “We can’t go back!” Talk about a teachable moment that was wasted. Understanding what went wrong in the 2000s is critical to avoiding such economic catastrophes in the future. But where were the liberal econ pundits going on MSNBC and myth-busting the idea that Bush’s tax cuts and deficits were to blame?
Or pointing out the role of the Clinton administration in financial deregulation and housing policy?
Or explaining that the Great Recession might have been just a mini-version of the Great Depression, and thus it was overly tight Fed policy that really sunk the economy in 2007-2009, not Bush or the banks.
That last omission is particularly troubling. Many liberal econ writers now accept the theory, most famously advanced by economist bloggers Scott Sumner and David Beckworth, that the Fed should conduct monetary policy by targeting nominal GDP rather than inflation or interest rate levels. (I buy it, too.) But a major part of this theory argues that the Fed blew it in 2008.
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