Kevin Drum - May 2011

Hard Keynesianism is Hard

| Mon May 2, 2011 12:36 PM EDT

Paul Krugman:

If you’re a serious Keynesian, you’re for maintaining and even increasing spending when the economy is depressed, even though revenue has plunged; but you’re for fiscal restraint when the economy is booming, even though revenue has increased.

In other words, you want to (roughly) balance the budget over the course of an economic cycle, running a surplus during the expansionary phase and a deficit during the recessionary phase.

Obviously there are technical disputes about whether this is the right way to manage the macroeconomy. But in a way, it hardly matters. In the same way that real Christianity is simply too hard for mere mortals to practice (thus the need for a merciful God), so is hard Keynesianism. In the real world, you're just never going to be able to persuade people to demonstrate the fiscal restraint that Keynesianism requires during boom times. And if, in the real world, Keynesianism is too difficult for human beings to practice during the 80% of the economic cycle taken up by expansion, then it's not much good. Economics, after all, doesn't feature a notably merciful God.

I don't know if anyone has ever proposed a feasible way to overcome this problem.

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Election Speculation

| Mon May 2, 2011 12:05 PM EDT

So does the killing of Osama bin Laden help Barack Obama's reelection chances? I doubt it. I'm not an economic fundamentalist when it comes to presidential elections — too many people read those economic models and forget the part where the authors explain that their model only explains about two-thirds of the variance — but it's still the case that economic conditions account for most of a president's chances of reelection. What's more, the election is still 18 months away. Even if bin Laden's death could play a role, there's no way it would continue to have much impact a year and a half from now.

But there are at least two ways in which bin Laden's death could still make a difference. First, the quality of opposition matters, and GOP contenders are making their campaign decisions now, not 18 months from now. It's possible that yesterday's news will tip a few high-quality candidates against running in 2012, and this would obviously make Obama's job easier.

The other way it could matter is a bit more subtle: bin Laden's death could, conceivably, lead to changes in U.S. foreign policy that make Obama's reelection more likely. Perhaps we'll now feel free to take a harder line with Pakistan. Perhaps Obama will be more aggressive about drawing down troops in Afghanistan. Perhaps al-Qaeda really will disintegrate somewhat after bin Laden's death and this will lead to further U.S. victories closer to the election.

Obviously this is all very speculative. But I guess that's what blogs are for. So feel free to speculate away in comments.

"Pakistan is the AIG of Nation States."

| Mon May 2, 2011 11:48 AM EDT

Steve Coll on Pakistan's role in keeping Osama bin Laden safe in a suburban mansion for half a decade:

It stretches credulity to think that a mansion of that scale could have been built and occupied by bin Laden for six years without it coming to the attention of anyone in Pakistan’s Army.

The initial circumstantial evidence suggests the opposite is more likely—that bin Laden was effectively being housed under Pakistani state control. Pakistan will deny this, it seems safe to predict, and perhaps no convincing evidence will ever surface to prove the case. If I were a prosecutor at the United States Department of Justice, however, I would be tempted to call a grand jury. 

....Outside of the Justice Department, other sections of the United States government will probably underplay any evidence about culpability by the Pakistani state or sections of the state, such as its intelligence service, I.S.I., in sheltering bin Laden. As ever, there are many other fish to fry in Islamabad and at the Army headquarters in nearby Rawalpindi: An exit strategy from Afghanistan, which requires the greatest possible degree of cooperation from Pakistan that can be attained at a reasonable price; nuclear stability, and so on.

Pakistan’s military and intelligence service takes risks that others would not dare take because Pakistan’s generals believe their nuclear deterrent keeps them safe from regime change of the sort underway in Libya, and because they have discovered over the years that the rest of the world sees them as too big to fail. Unfortunately, they probably are correct in their analysis; some countries, like some investment banks, do pose systemic risks so great that they are too big to fail, and Pakistan is currently the A.I.G. of nation-states. But that should not stop American prosecutors from following the law here as they would whenever any mass killer’s hideout is discovered.

More at the link.

Pakistan and bin Laden

| Sun May 1, 2011 11:51 PM EDT

So the operation against bin Laden was apparently carried out solely by U.S. forces. Obama called President Zardari after the operation was over. And the best joint statement they could agree on afterward was that this was a "good and historic" day. Is it just me, or does it sound like maybe Pakistan wasn't exactly as thrilled about all this as one might hope?

UPDATE: Steve Clemons provides a different picture that suggests Pakistan was deeply involved in the operation. We'll see.

UPDATE 2: CNN emphasizing that operation was carried out "with the cooperation" of Pakistani government.