John Maynard Keynes ... Romney?
Mitt Romney yesterday,
taking the Keynesian position that in a sluggish economy, spending cuts reduce economic growth:
"If you just cut, if all you're thinking about doing is cutting spending, as you cut spending you'll slow down the economy," he said.
Romney's point seems to have been that if you don't cut taxes while slashing spending, the net effect will be a reduction in demand. That's not an entirely crazy thing to say, though cutting taxes is a far less efficient way to stimulate growth than
cutting increasing spending, and if you target your tax cuts to upper income folks who will merely pocket the savings, tax cuts won't do a thing. But regardless of the merits of what Romney said, it's a striking change from his message throughout the campaign, which has been that cutting spending by itself is an economic growth strategy.
For example:
We must cut federal spending to free up resources for productive investment.
And:
Runaway federal spending crowds out private investment. [...] We must cut government spending.
Therefore:
Under my administration, we will level with the American people about what it will take to truly cut spending.
Because:
We're going to have to cut spending.
To be clear:
As president, I pledge to reduce spending.
And the cuts will be severe:
Upon taking office, I will immediately cut discretionary spending.
So up until yesterday, Romney's argument was that cutting spending would, in and of itself, generate economic growth because it would free up resources for private investment. Now he says cutting spending would reduce economic growth because it would reduce demand. Those are two very different economic theories, and I'll bet you he doesn't even know why he decided to switch sides. But I'll guarantee you that by tonight, he'll have switched back.
Comments are closed on this story.