Wow, there’s a sentence I thought I’d never write. Alas, I’m thrilled that I get to live to see this day!
Recently on “Bloomberg Surveillance,” [renowned Columbia University economist] Jeffrey Sachs strongly disputed Paul Krugman’s Keynesianism. Sachs said:
Krugman has staked out a rather crude Keynesian position and unrelentingly so,” Sachs said today, referring to John Maynard Keynes, the British economist who advocated government spending to spur economic growth during the Great Depression. Krugman “knows one thing, which is stimulus, stimulus, stimulus and expand deficit spending…
Has Hell frozen over? As if to ensure that we did indeed hear him correctly, Sachs continues:
Paul has a powerful bully pulpit in his New York Times column, and he’s been on one [Keynesian] theme for three years,”
Did Sachs just do a complete, ideological 180? Just mere months ago, he was at the forefront of the hippie crowds, chanting along with the occupants down on Wall Street. He openly sympathized with the 99 percent as he urged for increased social welfare and taxation of the rich. Through his policy recommendations, which all rely heavily on high government spending, Sachs embodied the essence of Keynesian economics. And now Sachs is pointing out how stimulus policy only worsens the debt?
Sachs concludes on a high note:
Krugman has “under-emphasized the risks of growing debt, he’s over-asserted what we really know about the effects of these policies and he has underestimated the long-term need for public-sector change and reform…
I won’t hold my breath. After all, Sachs has taken us down this road before and it often ends in a train wreck. He is quick to base his long term solutions to public sector reform in fairness and equal opportunity for all — as paid for by the state (through heavy taxation of the rich). Usually long term public sector change for Sachs includes improved services, e.g. education, health, etc. And how are these improved? By the state spending more money on their improvement.
Keynes may have rolled over in his grave today, but if Sachs doesn’t soon connect the economic dots himself, Keynes will most definitely rest in peace.