Macroeconomics is not a religion
David Brooks writes a column with a pretty common theme: macroeconomics as morality tale. His overarching claim is that government is powerless to fight unemployment and near the end he sneers at those who expect some help from policymakers – “Many voters seem to think that government has the power to protect them from the consequences of their sins.”
I’m not much for the religious rhetoric, but if I had to identify any particular group of voters who had sinned, I’d argue that they have indeed been protected from the “consequences of their sins” by government.
I presume, though, that the sins Brooks has in mind is the big increase in household debt associated with the housing bubble? Again, if we’re identifying sinners, I’d nominate first the policymaking elites who didn’t just fail to see the housing bubble – they saw it and urged households to pile up more debt to keep it going. And I don’t see those guys facing severe consequences, outside of some mockery.
More important than the fact that his moral compass doesn’t seem to distinguish well between malefactors versus victims of the financial crisis, Brooks has the economics all wrong. Yes, household spending and residential construction collapsed when home prices fell, and the rest of the economy followed. What’s the “consequence” of this that government is allegedly unable to protect against? Less spending. Period.
Is the government really incapable of spending? It wasn’t that long ago that Brooks was lamenting the rise in spending in recent years. Or is it that government spending, unlike private spending, somehow doesn’t create jobs? But it does.
Brooks hand waves about how financial collapses in the past have led to long and brutal downturns as evidence that government is powerless. Actually, that’s just evidence that governments foolishly listened to counsels like Brooks in the past. We now know (or we should know) better.