How Long Will It Take Keynes to Die?

You won't find out by reading America's newspaper of record.


It's been many years since I've read The New York Times. Like most readers, I got discouraged by the shrinking page size, the self-confident erroneousness that becomes apparent whenever America's newspaper of record covers a topic I'm familiar with, and the lack of a comics page. Sure there are occasions when you can't avoid it—usually when enough people are complaining about an article or when somebody I know is in the paper—but on a daily basis I follow the golden rule that life is just too short for The New York Times.

So imagine my surprise the other day when, challenged by a third-world Internet connection and enticed by an old-school six-column page width, I picked up a $2.65 copy of the International Herald Tribune, which partially reprints The New York Times, only to discover that the paper a) no longer bundles that day's edition of the Beirut Daily Star (my actual purpose in buying it), b) has jettisoned the last memory of its fabled Big Apple namesake by calling itself "The Global Edition of The New York Times" and c) features the kind of groupthink rarely seen outside a French parochial school.

While the rest of hyperconnected, interweb-powered planet Earth has now seen Keynesian economic intervention tested in real time and discredited beyond any intelligent doubt, the Times, I quickly learned, is a walled garden where the ideas of John Maynard Keynes remain not only viable but so evidently true as to require no factual support.

You may know Keynes as the brilliant mid-20th century economist whose general theory of employment was said to have undergone a revival in 2008, though in fact it had never gone away. You won't know Keynes very well from reading the Times, but only in the sense that you won't know Christianity very well if you never meet any non-Christians. Economic intervention is the air the Grey Lady breathes. In the opinion pages of the edition I looked at, perennially perturbed Nobel laureate Paul Krugman decries the "so-called urgent need to reduce deficits" and asserts without documentation that a "real response" to the global correction must involve precisely the medicine that has so far proven ineffective: stimulus for infrastructure and government schools, taxpayer-funded payoffs for mortgage deadbeats, and an "all-out effort" by the wildly popular Federal Reserve.

In a business column, It's a Wonderful Life star James Stewart compares 2011 with 1938, briefly debating whether Depression-era stimulus saved the economy or would have saved the economy if it were larger. Stewart ultimately decides that Franklin Roosevelt's spending cuts (prompted, naturally, by "strident calls" from Republican dead-enders) doomed a nascent recovery. Humorously, Stewart quotes disgraced former CEA head Christina Romer's two-year-old warning against "the urge to declare victory"—leaving readers to puzzle over what economic policy from 2009 could possibly have been considered a victory.

In another opinion page column on "outrage," somebody named Roger Cohen laments the plunging stock markets' effect on Europe's August vacation schedule while chastising Germany for growing "tired of others' problems" and turning "parochial at the very moment its leadership is needed." Cohen accounts for Germany's relatively strong economic position by noting that the country has "invested in a highly educated workforce" and also "fostered cooperation between labor unions and employers and between industrialists and the government in defense of German jobs." Missing from this equation is Germany's longstanding aversion to inflation, which has frequently placed communist-educated Chancellor Angela Merkel to the right of the American president on economic matters.

And in a front-page "News Analysis" (praise Allah we can still count on those!), reporter Jackie Calmes warns that despite the "boasts of Republicans" who may or may not have mildly slowed the growth of federal spending during the debt-ceiling compromise, "well-known economists, financial analysts and corporate leaders, including some Republicans…are expressing increasing alarm about Washington's new austerity." Not to be outdone by Stewart's citation of the career-dead Romer, Calmes brings in an actual corpse: cadaverous former Treasury Secretary Henry Paulson, whose panicked, catastrophic response to 2008's years-overdue financial correction should have disqualified him from commenting on anything more complicated than the Peterson Field Guide to Birds.

Even in the truncated version of the Times available in the IHT, there's plenty more like that, including this extended metaphor from Pimco's Bill Gross: "An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking." Nowhere in the percentage of the paper I finished (unlike the stingy Times, IHT carries the Jumble) was there any room for the anti-Keynesian sentiments the paper's news and opinion sections continually referred to without ever engaging. At no point did anybody ask the questions the rest of us have had to contend with for more than three years now:

Is it possible that the choice between budget-balancing and job creation is a false choice?

Does government actually create jobs?

Is there any reason to believe at least $2 trillion in fiscal stimulus and $2.9 trillion in monetary stimulus since 2008 have made a positive difference in the economy—especially considering that most economic indicators are worse than the worst-case scenarios that were made public when those spending decisions were approved?

How does a deal that contains no actual cuts, adds to an existing $14 trillion pile of public debt, and preserves spending for cowboy poetry qualify as an "austerity" budget?

And how many times can the Keynesian consensus fail the test of outcomes before it goes away for good?

Outside the airless chambers of the Times' fancy new headquarters (half of which the company had to sell at a fire-sale price just two years ago after completing the building), these questions have been active for some time now. I've been documenting the advent of the "true Keynesian" argument, in which acolytes claim the problem is not with the First Baron's theories but with a reality that doesn't fit them. Krugman, the doctor, attempted something like this the other day in this blog post accusing anti-Keynesians of misstating the master's theories.

That's a fair complaint, and Keynesian theory is considerably more nuanced than the cartoon version favored by both contemporary followers (who among other things ignore the admonition to reduce deficits during economic booms) and detractors (who tend to believe any waste of public money qualifies as Keynesian stimulus).

But even here Krugman's compulsion to ignore facts shows up in his description of "an economic model under which temporary increases in government spending can, under certain circumstances, help reduce unemployment." Whatever you want to call the American Recovery and Reinvestment Act (ARRA), or TARP, or the GM bailout, or whatever monsters the debt-ceiling compromise has created, they are all increases in public spending. In the case of ARRA the increase was arguably designed around and inarguably advertised as job creation. (Must we really go through the whole "saved/created/funded" dance again? That one stopped being funny two years ago.)

This is the kind of laziness that sets in when you never have to entertain a serious challenge to your ideas. It's remarkable given that the ballyhooed and short-lived return of Keynes was not merely rhetorical. These ideas were put into action, at a cost of trillions of dollars that will someday have to be paid back. The result was either a recovery too microscopic to notice or no recovery at all. Everywhere except the Times, people have noticed. The rise of the Tea Party, the three-fourths majority in favor of a federal spending cap, and the midterm election results were all evidence that Keynesian intervention is no longer a marketable idea. 

There are few things less relevant than a newspaper, but many people, possibly hundreds, still take The New York Times seriously, and they're being disserved when the paper misses an important shift in economic theory. The long-defunct economist was brought out for a final bow—a courtesy the Muscular Dystrophy Association won't even extend to Jerry Lewis—and the result left audiences cold the world over. Keynesian mysticism—with its fancy equations, its cramped vocabulary of "liquidity traps" and "irreducible uncertainty," and its pre-Copernican belief that a group of wise men in a central office can decide what "aggregate demand" should be among hundreds of millions of people—is over. At this rate the borough of Milton Keynes could be renamed Milton Friedman by the end of the year. To ignore that story is a serious dereliction by a publication that, with its tiny and nearly-square pages, has already failed in the most serious duty of any newspaper: providing material to make paper boats.

Tim Cavanaugh is a senior editor at Reason magazine.