Musk and Twitter (i)

I’ve been fascinated by Elon Musk’s acquisition of Twitter. My overall sense is that it was worth the acquisition price to avoid having to confess that he didn’t 100% mean everything he said early in the process of coming to own it. That’s a different post.

Musk’s more memorable early tweets as owner included the suggestion that the attack on Nancy Pelosi’s husband might just be a case of rough gay sex gone bad, and advice that voters cast their ballots for Republicans, on the idea that legislative gridlock is the optimal political situation.

Paul Krugman picked up on this last, in a NY Times opinion column. It’s worth reading.

His main point is that Musk is wrong in adhering to the commonly held view that legislative gridlock is the best outcome for the US economy.

How so? The central government has two policy tools to control overall economic growth: monetary policy (raising or lowering interest rates) and fiscal policy (public spending). During high growth periods, like the US experienced between 1980-2005 as the application of information technology spurred productivity growth, interest rates tend to be high, in order to stop the economy from overheating. Therefore, both raising and lowering rates is possible. That’s enough by itself to keep the economy chugging along. As secular IT benefits began to wane, and as rates dropped toward zero, monetary policy lost its power to stimulate growth. The only tool left was fiscal policy. But during the financial crisis of 2008-09, Republicans in Congress would only authorize about a quarter of the spending needed for the economy to recover. Hence, it took seven years for GDP to recover to pre-crisis levels.

So, Krugman concludes, we have a very recent instance where gridlock was a really bad way to deal with a crisis.

I can understand why Krugman didn’t elaborate any further. The situation back then had a lot of moving parts. And he’d made his case.

I’d like to add two things, though:

–Biden ignored his advisors in 2020 and crafted a pandemic slowdown-fighting fiscal package that turned out to be much too large. My guess is that he thought that too large was a risk but too small was a tragedy. He probably also thought that once the the crisis had peaked, Republicans would block any further spending, so he had to get the money for everything at once. I’m not a big Biden fan, but I think he did the right thing. Where he’s been wrong, in my opinion, is in not saying to the American people that he made a mistake and explaining his reasoning.

–the Republican stance doesn’t come out of nowhere. It arises instead from the neoliberal thinking (a reaction to the perceived excesses of the post-Great Depression welfare state) championed at the University of Chicago in the 1970s. The basic idea is that services the government provides can be performed better and more cheaply by the private sector. The most radical conclusion to this train of thought is that there’s no such thing as a public good.

The best/only way to achieve the efficiencies that come from a shift to the private sector is to take away from the government the money it has available through taxes and borrowing to fund its activities.

Among the unfortunate results of this philosophy have been public infrastructure in the US that visitors find reminiscent of the Third World, and increasingly mediocre public schools.

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