06/07/2012 05:02 pm ET Updated Jun 07, 2012

Romneynomics And The Aggregate Demand Denialism Problem

Over at the Plum Line, Greg Sargent -- in an effort to touch off some amount of grappling with the cumulative effects of Mitt Romney's economic policy proposals -- talks with two economists and asks them to rate the relative prognosis of the economy under Mitt Romney's leadership. The news is not all bad. His sources -- Macroeconomic Advisers chairman Joel Prakken and Moody's Analytics senior adviser Mark Hopkins -- say that Romney's proposals are "reasonable" and both offered support for his "long-term goals."

But the short term is a different story entirely, and in the sixth paragraph of the piece, a red flag shot up:

“Are [Romney's proposals] going to reduce the unemployment rate from eight to five in two years? No,” Joel Prakken, the chairman of Macroeconomic Advisers, tells me. He described Romney’s ideas as a “a bundle of reasonable policy proposals that could well stimulate the economy from the supply side over a number of years, but would do little to stimulate aggregate demand in the short run. The reason that unemployment is as high as it is is inadequate aggregrate demand, not inadequate supply.”

Emphasis mine. One of the problems that I feel we've been having is that unless you are Paul Krugman, or an actual small-business owner (as opposed to the phantom, straw-men small business owners whose mysterious existence actually forms the spine of policy discussions), or just someone who is generally enthusiastic about things that are painfully obvious, there's little attention being paid to the fact that we are in a crisis of aggregate demand -- by which I mean people are unemployed and/or struggling to stay in their homes, cannot purchase goods, and thus cannot spin the economy out of its rut.

Or, as Rick Poore, owner of Designwear Inc., told The Huffington Post's Zach Carter a year ago: "If you drive more people to my business, I will hire more people. It's as simple as that." (He adds, "If you give me a tax break, I'll just take the wife to the Bahamas," which is worth noting because even President Barack Obama is in Las Vegas today suggesting that the government can inspire hiring with tax breaks.) To "drive more people" to businesses, the government has the option of pursuing short-term economic stimulus policies that put money in the hands of consumers.

But there seems to be widespread aggregate demand-crisis denialism, which flourishes because the media tends to treat these matters as being subject to an epic debate among political elites, and because they have a strange and untimely obsession with the long-term deficit, a crisis we would better manage once we're out of the darkness in which we're currently submerged.

In general, when your house is on fire it's best to put off the larger philosophical debate over the long-term trajectory of household expenses and instead just pour water on the flames. In Hopkins' view, however, Romney's policies “on net ... do more harm in the short term. If we implemented all of his policies, it would push us deeper into recession and make the recovery slower.” So, a recipe for inferno, in the short term.

Unless, of course, Romney is a secret Keynesian, who -- unlike Obama -- can get a bunch of GOP votes for his Keynesianism where Obama can't. This is another part of the problem with Romney -- it's hard to pin down who he is exactly.

Which means the only thing to do is for the media to relentlessly press him on these matters. Will they do so? Sargent's economists sure provide the inspiration. (For more of their diagnosis of Romney's specific proposals, go read the whole thing.)

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