Leading economists OPPOSE the stimulus bill

Now it’s getting interesting.  For the first time that I can ever remember, the leading lights of academe in economics are coming out against a major government spending package (in this case, the Obama stimulus bill, or as it will be known here from now on, the Obamnibus).

Larry Kudlow has the details on his NRO blog (emphasis added):

In today’s Wall Street Journal, distinguished Harvard economist Robert Barro estimatedthat the so-called government-spending multiplier for GDP associated with peacetime government purchases would be “insignificantly different from zero.” While left-wing economist Paul Krugman rants on about opponents to Keynesian stimulus — calling them quacks — a growing list of prominent academic economists oppose the Keynesian approach. In yesterday’s Journal, economists Alberto Alesina of Harvard and Luigi Zingales of the University of Chicago rejected the Keynesian spending approach while suggesting that a capital-gains tax holiday would bring private investors back into the market.

Stanford economist John Taylor also opposes the stimulus package. So does University of Chicago’s Eugene Fama. So does University of Chicago Nobelist Gary Becker. So does New York University professor Thomas Sargent. And Harvard economist Greg Mankiw, who similarly opposes the Keynesian stimulus, has used his highly popular blogsite as a clearinghouse of opposition.

Why did I highlight Professor Sargent?  I did so because he was one of the pioneers of post-Keynesian economics.  It was his work that broke and then shattered the Keynesian consensus that Krugman, Obama, et al would like to believe is still in place.  Outside of the economist/academic community, he is little (if at all) known, but inside the community, he is practically a living legend.

In fact, the debate among economists in the academic sphere may have a lot to do with why I never managed to get so outraged about the PC takeover of American universities – because I so the exact opposite in my academic field – but that’s for another post.

Of course, it’s not just about saying “no”; Kudlow also offers the following prescription:

It really is time for the congressional Republicans to come up with a tax-cutting alternative that includes slashing the marginal tax rate for large and small businesses and individuals, and brings the investor class back into play. Not only with a cap-gains tax holiday, but also with a much larger capital loss deduction. Add to this immediate cash expensing for all businesses.

Right now capital is on strike. So are investors. Supply-side incentives will bring them back. This is where the GOP must go.

The last paragraph says it all.

The one reason I have not been willing to slip into gloom and doom mode is because I have noticed the economic “consensus” about government finally start coming apart.  There is actually a revisionist school of economic historians for the New Deal, the first time this has ever happened.  Now, with the above economists speaking out, the government-is-not-the-answer school has a reach and a depth that is frankly unprecedented.  Ronald Reagan could have had the political support to cut the budget in half if Harvard professors had been talking in his time the way Barro and Mankiw are now.

As it is, the new president really is in unprecedented political territory; for the first time, the pillars of left-wing economic thought are under serious attack from part the nation’s “elite”.  It probably won’t stop the Obamnibus, but it could mean future big-government boondoggles don’t have the political support everyone thinks they will.

The question is, can the national Republican Party get out of its crouch, shake off the hangover from the drunken spending binge, and do its part to build and represent the new limited government coalition?