Can Congress or the Federal Reserve fix the economy by buying stuff? Keynesians say yes: Government spending gives people in the private sector more money to spend, which helps businesses and creates jobs. Same deal when the Fed buys up bonds or commits to keep interest rates low. Keynes critics, however, say no: Government spending and Fed action just drive up inflation and make the situation worse than it was before.
Economist Robert Barro thinks real recovery will only come from austerity. And not this weak sauce, supercommittee-and-discretionary-spending-cuts austerity. Real austerity. A consumption tax and an end to the mortgage-interest deduction and a rise in the retirement age and massive spending cuts. I don’t agree, but to each their own, obviously. The part of the op-ed that really confuses, though, is the grand finale: “This dream could become reality if our leader were Ronald Reagan or Bill Clinton — the two presidential heroes of the American economy since World War II — but Mr. Obama is another story.”