"Old Speeches, New Policies"

Greg Mankiw responds to this post, "Deficits are Worrisome, but Not as Worrisome as an Economy that is ... Rapidly Shedding Jobs" (or maybe it was this):

Old Speeches, New Policies, by Greg Mankiw: 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 part 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. ...

This speech was given in September 2003, just under two years after the end of the 2001 recession, but job growth remained sluggish. From the speech:

Growth had resumed after the end of the recession in November 2001, but the pace of growth was far from satisfactory. And of course the labor market remained, and still remains, lagging behind.

So what did they propose? As a follow-up to the "Administration’s tax cut in 2001 and the stimulus package of 2002," they proposed another stimulus package, and never mind the deficit:

Because further policy action was clearly needed, the President pushed hard for the passage of his Jobs and Growth initiative. The purpose of this initiative was not only to help push the economy back toward its potential but also to raise this potential by improving supply-side incentives for work and investment.

I'm sure the Obama administration will be pleased to know that, should this recovery be similarly jobless, or W-shpaed - if the recovery is listless or non-existent for any reason - that, rather than harping on the deficit and the potential problems it might cause, they can count on Greg Mankiw's support for another round of fiscal stimulus to try to turn things around. (And if a lot of the spending is on infrastructure, as it was this time, he should also be pleased with the long-run supply-side effects of these policies.)