Fiscal stimulus, more simply

I had a thought that occurred belatedly and probably partly as a result of my first stab and writing about fiscal “stimulus.” When people refer to stimulus, they do not always agree on what they are even talking about.

It tends to be the case among liberals that stimulus refers to fiscal efforts to raise aggregate demand per se.  Among conservatives, the definition can be a bit broader and include anything that might make the economy grow more quickly, including tax reform to stimulate initiative, etc. For example, Greg Mankiw refers to both supply- and demand-side influences when discussing how to “rev” the economy up.

The semantics distinction does not matter much, so long as we agree on what we are talking about.  My case against fiscal stimulus applies to the narrow sense of the term, which I tried to make clear in it.  But I could be a bit clearer.  For conservatives or Republicans, “stimulus” need not refer to the Keynesian sense.

I think Keynesian style stimulus now is a very bad idea. It is the wrong point in the cycle for it. Supply-side stimulus, if you must, might be a good idea, if that’s what the Republicans actually have on offer. But I see no evidence it is.

So far, by many accounts, this looks like just more crony capitalism plus an effort to redistribute income upwards.   There is no reason to believe that would make the supply side grow more quickly, but we shall see what emerges.