Interesting to see that in the United States liberals seem to be more divided about fiscal policy than conservatives, but would conservatives push for if they engaged with the fiscal policy challenges?
Arguments for a renewed fiscal stimulus from authors such as Brad de Long and Paul Krugman encounter the fears of Jeffrey Sachs and even more that of nervous centrist Democrats such as William Galston. The Obama administration may have made a realistic estimate of the prospects of a further stimulus bill passing Congress but Kevin Drum is perhaps right:
Obama’s advisors might be in favor of further fiscal stimulus, but not by much. And the best explanation for this is that lefty or not, they’re genuinely afraid… that it would bring only marginal improvements at the cost of significant problems down the road.
On the right however the old mantra of faith in tax cuts as magic tool of economic recovery with no attention their budgetary impact still seems to be ascendant, Arthur Laffer has many more fans than Kevin Williamson, even if Williamson’s conservative critique of supply-side mythologies attracted much attention. The extent to which the Tea Parties are interested in deficit reduction is debatable. I think there may be a fiscal consolidation push particularly if the current inflated political hopes of the Republicans are not realised, but I would fear that low income Americans would particularly suffer under such a program, there would be little prospect of the Australian ‘restraint with equity’ that guided the 1983-96 Labor government’s fiscal consolidation. Would the Earned Income Tax credit be targeted by Republicans? This might seem likely but apart from Rand Paul has any other Republican candidate dismissed it as ‘welfare’ even although this equation is popular among some on the right? In Australia we have the conservatives prioritising interest rate reductions at the expense of unemployment