Mike Konczal Watches Alan Meltzer Play for Team Republican: Contrasting Alan Meltzer on Japan and the United States
I must say I don't think that Alan Meltzer is even trying to be consistent any more.
Contrasting Alan Meltzer on Japan and the United States: I, for one, really like the new emphasis conservatives are putting on so-called “social issues” over economic issues. When Rick Santorum says that he is worried about Satan attacking America, I believe that he believes that. His worry that Satan infested my brain with devils while I was at college uses reasons I can accept as legible under the ideal of public reason. However, I have no idea what conservatives economists like Alan Meltzer really think about the economic recovery – do they think their arguments are the best policy or are they trying to go after unrelated objectives?…
[T]his 1999 speech, "A Policy for Japanese Recovery", from Meltzer (h/t Market Monetarist) on what to do for the weak economy in Japan (stuck in a similar situation to the United States today), as it addresses all that directly….
Repeatedly, the message has been to reduce tax rates permanently and maintain the exchange rate for the yen in its recent range…. The problem… is that few would, and none should, believe that Japan can reduce tax rates permanently…. What is the alternative? Deregulation is desirable, but it will do its work slowly….
Monetary expansion and devaluation is a much better solution. An announcement by the Bank of Japan and the government that the aim of policy is to prevent deflation and restore growth by providing enough money to raise asset prices would change beliefs and anticipations…. The volume of “bad loans” at Japanese banks is not a fixed sum. Rising asset prices would change some loans from bad to good, thereby improving the position of the banking system…. Let money growth increase until asset prices start to rise.
I like targeting NGDP better than asset prices, but other than that pretty good, right? And I’m sure these recommendations have continued forward to the United States today, right?
I think you see where this is going.
What’s his take on current US policy?… WSJ, August 2011, "The Folly of Economic Short-Termism"….
Advocates of more short-term stimulus make several fundamental mistakes…. What we need most is confidence in our future…. Reducing corporate tax rates permanently…. Agreeing on long-term reductions in entitlement spending…. A five-year moratorium on new regulations…. An explicit inflation target between zero and 2% to force the Fed to pay more attention to the medium term and to increase public confidence that we will not experience runaway inflation.
It’s scary how well they match up as exact opposites…. That the quality of banking assets is related to overall economy and growth is something Christina Romer gets, and Meltzer got in 1999 as well. Perhaps Satan had gotten to him back then…