Republicans Should Embrace Their Inner Cheneys and Ditch Austerity  

Dick Cheney, post-Keynesian hero.

Photo by Olivia Harris/WPA Pool/Getty Images

Speaking of Republicans and ideological change, I agree with Jonathan Chait that the most plausible reposition would seem to be a return to the Bush/Cheney “deficits don’t matter” posture. That’s sort of more moderate than the party’s current positioning but doesn’t really ask any interest group stakeholders to give up anything they care about.

What’s more, there’s a plausible case for this on the merits!

The key is to engage with the “secular stagnation” debate over why the economy’s had so much trouble over the past 10 years generating full employment. One school of thought says we need more aggressive monetary policy to boost investment. But Larry Summers says that will just create asset price bubbles and so we need public sector investment instead. A plausible conservative alternative, however, would be to say that we don’t need deficit financed public sector investment—we need deficit financed private sector investment. Cut the corporate income tax rate! Cut the dividend tax rate! Cut the capital gains tax rate! But there’s no need to link these regressive tax cuts to unpopular spending cuts. Just swap out the old “supply side” argument that the productivity boost will make the tax cuts pay for themselves in favor of a quasi-Keynesian argument that deficits are necessary to produce full employment.