La fin de Keynes?

Article intéressant sur le site de The Economist.

WHEN Republicans proposed slashing billions of dollars from federal spending this year, Democrats circulated predictions by economists that jobs and growth would be hit. John Boehner, the Republican speaker in the House of Representatives, countered with an economic expert of his own: John Taylor of Stanford University. “Nothing could be more contrary to basic economics, experience and facts,” Mr Taylor asserted on his blog, which Mr Boehner cited. By cutting government spending, he said, the Republicans would “crowd in” private investment and create jobs.

Mr Taylor, a prominent monetary academic, served under both George Bush senior and junior and advised John McCain during his presidential campaign. In the past few years he has become a strident and prolific critic of the monetary and fiscal stimuli deployed by the Federal Reserve and the Obama administration respectively, views that have received a warm welcome from House Republicans. For if there is one ideology that unites today’s Republicans, it is Keynesianism, whose nefarious influence they are determined to stamp out. “Young Guns”, the book-sized manifesto of Eric Cantor, Kevin McCarthy and Paul Ryan, leading Republican House members, devotes several pages to the evils of Keynesian activism and its exponents in the administration.

The budget Mr Ryan proposed on April 5th seemed to herald the return of supply-side economics, the notion that cutting taxes can generate so much more work and investment that tax revenues rise. In the 1990s Mr Ryan was a speechwriter for Jack Kemp, the effervescent congressman who, in the late 1970s and early 1980s, made supply-side economics a centrepiece of Republican electoral ambitions.

Perhaps that is why Mr Ryan turned to the Heritage Foundation, a conservative think-tank, to produce a wildly optimistic analysis of his budget’s economic impact. It did not say Mr Ryan’s cuts to personal and corporate tax rates pay for themselves; though it reckons they recoup a still hefty 50% of their costs. But it projected an investment boom that would lift output and drive unemployment down to 2.8%, a rate not seen for 57 years. Few economists dispute that lower tax rates boost labour supply and investment. But Menzie Chinn, an economist at the University of Wisconsin at Madison, reckons the Heritage Foundation assumes a boost five to eight times more powerful than conventional models.

Supply-side economics, though, is only one piece of Mr Ryan’s intellectual furniture. He has also paid homage to Ayn Rand, Milton Friedman, Friedrich Hayek and Robert Mundell, a Nobel laureate who champions the monetary straitjacket of fixed exchange rates. His budget cites approvingly the work of Carmen Reinhart and Kenneth Rogoff on how debt cripples growth and Niall Ferguson, a historian, on how it brings down empires. For on-tap advice Republicans regularly turn to Douglas Holtz-Eakin, a former McCain adviser who now runs the American Action Forum, a think-tank, and Mr Taylor, who keeps a flat in Washington, DC.

Republicans may have found intellectual satisfaction in their opposition to fiscal and monetary stimulus. Whether voters will thank them is another matter. The danger is that, when interest rates are stuck near zero, austerity is more likely to hurt growth than help.