More on whether Romney is the Keynesian choice

Posted by Ezra Klein at 03:50 PM ET, 06/05/2012

WWJMKD: What would John Maynard Keynes do? (JR - Associated Press)

A lot of people took Monday’s column on the Keynesian possibilities of a Romney presidency as a commentary on who they should vote for rather than as an observation on the policy consequences of gridlock. So let me put it slightly differently.

There are two variables worth thinking about in the 2012 election: Who is the president? And is Congress divided? That gives you four possible outcomes: Barack Obama can win with a divided Congress or a Democratic Congress, and Mitt Romney can win with a divided Congress or a Republican Congress. Here’s how I’d rank the Keynesian possibilities of those four scenarios, in descending order:

1) Obama and a Democratic Congress;

2) Romney and a Republican Congress;

3) Romney and a divided Congress;

4) Obama and a divided Congress.

I think the only choice on that list that’s even mildly controversial is ranking Romney and a divided Congress above Obama and a divided Congress. But Romney clearly understands and agrees with the need for short-term Keynesian budgeting, and as Jon Chait has written, “Democrats don’t have any history of opportunistically abandoning Keynesian economics when the other party’s neck is on the economic line.”

Congressional Republicans, meanwhile, do have a history of opportunistically abandoning Keynesian economics when the other party’s neck is on the economic line. Making matters worse, the Obama administration believes, rightfully, that they can’t let Republicans continuously hold the economy hostage. At some point, this brinksmanship has to end. But that means that if the GOP insists on taking us over the cliff and breaching the debt ceiling, there’s a good chance Obama will let them do it, at least so long as he’s confident they’ll be blamed. So Republicans will be holding the line for contractionary policy, and there’s a high chance of fiscal/financial disaster. That’s terrible for the recovery.

Now, let’s rank those scenarios by their probability of occurring, at least according to the In Trade market’s betting estimates:

1) Obama and a divided Congress.

2) Romney and a Republican Congress;

3) Romney and a divided Congress;

4) Obama and a Democratic Congress;

The least Keynesian outcome is suddenly the most likely outcome. The most Keynesian outcome is the least likely outcome. But Romney and a Republican Congress — the second most Keynesian outcome — remains the second-most likely outcome.

Which is the basic point of my column: If you assume the only really likely outcomes are Obama and a divided Congress and Romney and a Republican Congress, the most Keynesian outcome is probably Romney and a Republican Congress. But that’s also the outcome that’s worst for the political system’s long-term health, as it will mean the Republican Party was rewarded for the incredibly dangerous brinksmanship of the past year, and if their victory is partially because the economy slows on fears of a crisis in 2013, based on their reckless promises of more brinksmanship next year.

The overarching point isn’t that I’m telling you who to vote for — that’s not my job, and this doesn’t say anything about whose long-term policies for the economy are better, or whose Supreme Court picks would be superior, or who is more likely to go to war with Iran, to name just a few considerations you’ll want to make — but that people need to understand the role strategic gridlock is playing in our economic problems. Right now, however, neither candidate has a persuasive plan for how they’ll end gridlock going forward. The only idea with even a possibility of working is if the American people delivered a clear verdict against its practitioners at the polls.