Stimulus Tales - NYTimes.com

Dean Baker is upset with David Brooks — not for the first time. Let me just put in a word here.

The story of Keynesian economists and the Obama stimulus, as anyone who’s been reading me knows, runs as follows: When information about the planned stimulus began emerging, those of us who took our macro seriously warned, often and strenuously, that it was far short of what was needed — that given what we already knew about the likely depth of the slump, the plan would fill only a fraction of the hole. Worse yet, I in particular argued, the plan would probably be seen as a failure, making another round impossible.

But never mind. What we keep hearing instead is a narrative that runs like this: “Keynesians said that the stimulus would solve the problems, then when it didn’t, instead of admitting they were wrong, they came back and said it wasn’t big enough. Heh heh heh.” That’s their story, and they’re sticking to it, never mind the facts.

And what the facts say is that Keynesian policy didn’t fail, because it wasn’t tried. The only real tests we’ve had of Keynesian economics were the prediction that large budget deficits in a depressed economy wouldn’t drive up interest rates, and the prediction that austerity in depressed economies would deepen their depression. How do you think that turned out?