DeLong On Deficits, Interest Rate

[Robert Vienneau <rvien@xxxxxxxxxxxxxx>]

Has anybody been following Brad DeLong's weblog lately? In many, many posts he
has objected to the recent Bush tax-cut-on-some-divends policy. DeLong's
objections
have been overwhelmingly on the following grounds:

(1) Higher deficits will ultimately raise interest rates. And economic
growth will be
slower as a result. It's all a matter of supply and demand, as taught in
the first weeks
of a freshman economics class. The laws of supply and demand have theoretical
exceptions, but there's no particular reason to expect  the bond market to
be special.
One cannot really argue otherwise.

(2) Glenn Hubbard, the head of the Council of Economic Advisors, believes
this, as
shown by his textbook. So he is being hypocritical in his public
statements, where
he says otherwise.

Paul Krugman has raised these points in his NYT column, too.

So much for New Keynesian and Stiglitz's macroeconomics, which I don't know
much about. I seem to remember some debate here about how open leading-edge
mainstream macroeconomists are to something approaching Paul Davidson's
views on uncertainty. Here's a data point.

And so much for Samuelson's acceptance of the Sraffian argument. It was not
about
the general logic of long run theory. But only about special cases not shown to
be of any empirical importance. No particular focus was given to markets for
capital.

I have brought up these debates, particularly the Cambridge Capital
Controversy,
in DeLong's comment sections. (I labeled DeLong's opinion as the Treasury View
in one comment.) Every time I have said I was not defending Bush or Hubbard. I
have made sarcastic comments about Bush's unstimulus package. Yet I keep on
getting responses about how absurd it is to say Bush or Hubbard is a Sraffian.

I guess it is good that Krugman criticizes the Bush administration's lies.
But I
cannot say I am comfortable with leading "respectable" spokesmen for my side
putting forward such trash about economics.

Robert Vienneau
rvien@xxxxxxxxxxxxxx
Rome, NY