Are We All Milton Keynesians Now?
In an Instragam video over the weekend, Rep. Alexandria Ocasio-Cortez, a New York Democrat, mistakenly referred to economist John Maynard Keynes as “Milton Keynes,” mashing up his name with that of Milton Friedman—“a (very) different economist,” she later clarified, helpfully. But “Milton Keynes” is pretty good short-hand for how most Republican politicians have long acted. When times are good or they’re raising money from deep-pocketed donors, they preach the free-market gospel of Friedman, perhaps its greatest evangelist.
Everyone, however, is a Keynesian in a crisis: Even conservative politicians who otherwise talk up the wonder-working power of small government find cause to support deficit spending to boost the economy. The truth of Friedman’s famous declaration that “we are all Keynesians now” was on display during the Great Recession. Both Democrats and Republicans eventually proposed fiscal stimulus plans meant to quickly boost demand in the collapsing U.S. economy. (Republicans subsequently blasted the Obama stimulus as a “failed neo-Keynesian experiment.”) It was all Keynesian economics 101: When a lack of overall demand causes falling output and rising unemployment, governments should spur growth by increasing demand through tax cuts and spending increases. Budgets can return to normal, preferably accumulating fiscal surpluses, once prosperity returns.
But the arrival of Donald Trump into Republican politics seems to have caused a bizarre new mutation in the GOP’s Milton Keynes hybrid. This strange creature was on display in an interview Vice President Mike Pence did with CNBC on Friday. Pence—formerly a Tea Partier who believed in “cut to grow” austerity—offered an odd explanation for the Trump administration’s role in the rising federal budget deficit, up nearly 50 percent over the past two years. “The president came into office and he said, ‘First and foremost, we have to restore growth,’” Pence said. “That’s how we will deal with the long-term fiscal challenges facing our country. And deficits and debt are right in line. But it is first about getting this economy moving again and we really do believe the trajectory of this economy.”
One way to interpret Pence’s statement is that President Trump thought he faced a crucial decision early in his first term: prioritize economic growth versus emphasizing fiscal rectitude. And President Trump, not surprisingly, chose growth via big tax cuts that were meant to, in the president’s own words, “prime the pump.” Now that metaphor was never actually used by economist Keynes—nor invented by Trump despite his claim of authorship—but the idea it embodies is closely associated with his notion that activist government policy should attempt to kickstart a moribund economy.