The White House Finally Explains Keynesian Economics

By Derek Thompson

Larry Summers gave an interesting speech yesterday defending and explaining the White House's economic policy at the Johns Hopkins School of Advanced International Studies (SAIS). His thesis was classic Keynesian economics: "Appropriate short-run expansionary budget policy can make an important contribution to establishing the confidence necessary for sound growth," Summers said. In other words, deficits are good, for now, because heavy public spending in downturns is still required to juice long-term growth. Good for the administration for making that argument explicitly.

The Washington Post's Dana Milbank attended the speech. He chose to focus on the idea that Summers was being obtuse and boring:

It was the language of the PhD thesis: "Conditions for fiscal policy to have an expansionary impact are especially likely to obtain . . . considerations militating in favor of sustainable budgets . . . the ultimate consequences of stimulus for indebtedness depend critically on the macroeconomic conditions."

So, look. Milbank writes mainstream political columns that stir snark and analysis into something distinctive and popular, and that's his thing, and more power to him. But come on. This wasn't a major public address. It was a speech by a brilliant economic wonk to a graduate school for advanced degrees in government and international affairs. If Summers had stopped to explain to second-year Masters students the definition of a "multiplier effect" or a "catalyzing investment" (other terms Milbank mocks Summers for using), it frankly would have come off as pedantic.

Economic messaging is really important, and Milbank is right that the administration is still seeking a messenger mixing the panache of Austan Goolsbee with the gravitas of Summers. But it's unfair to bash Summers for speaking over the heads of "Americans worried about finding or keeping a job" when it's perfectly clear that his actual audience was much worried about getting an A in Advanced Topics in Monetary Theory.

This article available online at:

http://www.theatlantic.com/business/archive/2010/05/the-white-house-finally-explains-keynesian-economics/57218/