Sumner Hasn't Changed His Mind But Has Changed His Framing

     So he explains to me. I had praised him for 'taking it down a notch.'

     http://diaryofarepublicanhater.blogspot.com/2015/06/scott-sumner-takes-it-down-notch.html

     He explains to me that he's not changing his mind just his framing. Well this goes to show that framing effects make a huge difference.

    Mike, My views are unchanged, it’s all about the framing effects.

   http://www.themoneyillusion.com/?p=29753

   
   Ok, well give credit where credit is due: there are impressive framing effects. He wrote a subsequent piece that does a very good job at unpacking some things. The title is Fiscal Policy isn't About Big Government

    "But big government can be about fiscal policy.  Let’s see why:

    "In 2001 President Bush said we needed to cut taxes to give the economy a boost.  Paul Krugman opposed the tax cut.  At the time I supported it for supply-side reasons, although in retrospect it was probably a mistake.  What can we infer from all this?"

    "1.  Fiscal stimulus need not involve any increase in the size of government.  Indeed it can lead to smaller government.  In the long run if the government collects less revenue it will have to spend less (yes, “starve the beast” is true as a long run proposition.)  From my perspective, what I now think made Bush’s tax cut a mistake was that it was a missed opportunity to do tax reform, and also he boosted spending sharply, running up substantial deficits during the boom years (when the government should run surpluses.)"

     http://www.themoneyillusion.com/?p=29763&cpage=1#comment-392797

    This is a good point. In theory you might say that Bush's tax cuts in 2001 were classic Keynesian stimulus and Bush himself sold it as that. Actually he shifted rationales depending on how the economy was doing. During the 2000 election he argued that there was a danger in a surplus! The rationale that Greenspan backed him up with was that the taxes had to be cut or it would be spent or the government might start picking winners and losers in the market. 

    However, when between the 2001 recession and his war ambitions the surplus was no more he argued that the tax cuts were needed for fiscal stimulus. He and his economic advisers must have had fun doing this as he could complain that this is what Keynesians say that want. However, as Sumner shows here this could be called FS yet it reduced the size of government and liberals like me didn't support it. 

   However when Sumner talks about Bush running a deficit vs. a surplus it's important to remember why this was: his War on Terrorism ambitions. 

    "But what about fiscal stimulus done in the form of more government spending, surely that means big government?  Not at all.  Suppose the government spends 4% more as a share of GDP during recessions than booms.  Thus instead of spending 22% of GDP all the time, it spends 20% in booms and 24% in recessions, where the average is still 22%.  A conservative Keynesian could easily argue for both small government, and also recommend that government projects like dams and highways should be built in recession periods, not boom periods.  You’d move spending around, without changing the average."

  "Some might argue that there is an asymmetry, as monetary policy is enough when you need to restrain AD, but fiscal policy is needed when you need to boost AD.  Doesn’t that bias you toward big government?  No, for the reason I just mentioned.  If government spending is countercyclical then it will be above average during recessions and below average during booms.  Why?  Because that’s what the word ‘average’ implies.  It’s logically impossible to have a fiscal regime where spending is above average during recessions and average during booms.  In any case, you can always cut taxes during recessions."

    The MMTers-Sumner and the MMTers will never break bread, of that we can be sure-actually argue for a job guarantee  that won't necessarily increase the size of government. Sumner I think it's fair to say won't support a JG unless there are flies on his face-a la Stephen King's The Shining. 

    But I do think that this newly framed discussion enables us to draw some better distinctions. Actually yu can make the argument that liberals don't really support bigger government than conservatives. 

   Conservatives like big government for foreign policy matters while liberals prefer big government for domestic policy matters. 

     Libertarians in theory might claim to be for small government across the board though many of them can't be taken seriously as they follow the conservatives on everything. By voting Republicans they are authorizing conservative military interventions whether or not they claim to agree with them. 

      A lot of the MMT types seem to want to make the argument that they are 'small government.' I wouldn't call myself pro small government. More agnostic. Let the size of the federal government be as large as it needs to be for our agreed upon purposes. 

     I don't see any in principle reason to want it larger or smaller all things being equal.  In principle there are things I would like the government to do more of-and so 'grow'-but also some things it should do less than or not at all-like the War on Drugs. So there's little reason to make a fetish of either small or big government.