Thursday, July 02, 2009

Old Speeches, New Policies

For academics, it always a delight when some old, obscure thing we've written suddenly gets noticed. So I was pleased when econoblogger Mark Thoma decided to draw attention yesterday to a speech I gave six years ago (pdf version) to the National Association of Business Economists. I had not looked at that speech in years, but looking back at it today, I think that it holds up pretty well. So, please, feel free to follow the link and read the whole thing.

The part of the speech that Mark highlights on his blog is the defense of running budget deficits during a recession. I am a bit puzzled about why Mark picked up that piece, however. Mark seems to be suggesting that my speech can somehow be construed as a defense of Obama fiscal policy. Yet I don't think that aspect of current economic policy is controversial. As I wrote in the NY Times in March of this year, "Few economists would blame either the Bush administration or the Obama administration for running budget deficits during an economic downturn."

The controversial parts of current fiscal policy are, first, the relative reliance on spending hikes versus tax cuts as short-run stimulus and, second, the long-term picture. On the short-run issue, I explained my preferences here. On the long-run issue, the apparent willingness of the congressional leadership to give away most of the allowances under a cap-and-trade system for carbon is the most recent symptom suggesting either a lack of concern about the long-term fiscal imbalance or a willingness to allow distortionary taxes to rise significantly in the future to close the fiscal gap.