Paul Krugman a while ago lamented that nobody understands Keynesian economics:
Let’s be realistic: the public doesn’t get Keynesian economics. The president could use the bully pulpit to try and change that, and I’ve been urging him to do that. But not two months before an election…
It’s too bad we’re at this place, but we are, and it would be unrealistic and counterproductive to demand that Obama try to shift the national discussion that far right now.
The problem runs very deep. First, the deficit doves–the spend now, reduce later crowd–has a bad message. If you tell a lot of people, we should spend now and cut later because deficits per se are bad, then many will simply argue, “Why not just get it over with now?” Especially if it’s not their asses directly on the line. ‘I wasted this morning mowing the lawn, might as well clean out the garage while I’m at it’ is the mentality.
Worse, by focusing on deficits per se when there is no need to do so, Krugman places himself in a deficit straightjacket. It prevents him and other deficit doves from discussing the bad consequences of various policies that could either increase or reduce deficits. That’s what most people care about: remember, people have to like this crap.
Instead, what is a nebulous (and ultimately nonsensical) problem–the deficit–is moved front and center, and crowds out everything else. If all you do is talk about reducing the debt, whether it be now or later, then people are going to focus on that. Focus on what affects people’s daily lives, and stop worrying about an account balance. Please.
People may not understand Keynesian economics — especially since a lot of them have been fed a lot of BS about it — but they do understand countercyclical policy. They remember the story of the Seven Fat Years and the Seven Lean Years. Nearly every state has balanced budget legislation, but people talk about Rainy Day Funds. In practice, reining in a booming economy is politically difficult. It is easier to provide automatic stabilizers when the economy turns down.
The problem is not Keynsianism per se. It is that people do not understand the Federal deficit. They think that the Federal gov’t can go broke. They do not understand that the deficit pumps money into the economy. Nobody tells them about that. People lie to them about that.
In the spring of 2010 the debt/deficit hawks launched a propaganda attack against the deficit, which eventually led to the sweep of the Tea Party into office. It wasn’t until 2011 that some mainstream economists began to object.
And it is not that Obama would use the Bully Pulpit to explain Keynesian economics to the public. Obama has drunk the Kool-Aid himself. He told CSPAN in 2009 that the gov’t had run out of money.