Mac(ro) Daddies

Brad DeLong wonders, perhaps rhetorically, Why Are Good Macro Policies Political Losers? Brad argues that the bailout and the stimulus prevented much worse things from happening, and wonders:

So we have a big puzzle: Just what is going on in America? Good policies that are working to boost production and employment without causing inflation ought to be politically popular, right?

Brad conjures up some possible reasons - an incompetent press, Chicago crackpottery, and the systematic dishonesty of the Republican party, but he somehow misses the giant beam in his own eye: employment and production have not been "boosted." Employment has continued to decline. Desperate people aren't interested in theoretical economics, they want results. It's easy to be complacent if you have a nice sinecure, but not so easy if you are the one losing job, home, or business.

DeLong's dismissal of the bonuses paid to the criminals who engineered the disaster as "a rounding error" is an astounding feat of political obtuseness for somebody who thinks he is teaching economic history. Trade and the economy ultimately depend on us being able to trust that we aren't being cheated. Being obviously cheated is a dagger in the heart of that trust. A couple of DeLong's commenters sum up the key points:
albrt said...

Perhaps your "good macro" policies are political losers because your definition of "macro" assumes that it doesn't matter who actually receives the benefits and who actually pays the bills, so long as a sufficient quantity of money is inserted into the economy. The rest of us have noticed that, despite this carefully neutral economic theory, it's always the bankers who receive the benefits and always the rest of us who pay the bills.

It took us multiple trials to figure that out, but now that we have figured it out we are not OK with it.

And Maynard Handley adds some psychological and anthropological perspective:

...Are you unaware that groups punish individuals who cheat, even at a cost to themselves, and that this behavior is not foolish, it is, in the grand scheme of things, eminently sensible, a way to limit future cheating?...

It was, for example, a very serious blunder for Geithner to not even insist on symbolic haircuts for AIG's CDS customers.

At some point Obama, the great strategic thinker, thought it was more important to have the trust of Wall Street than Main Street. Picking Wall Street's boys, Geithner and Summers, may or may not have mollified Wall Street. Main Street is not happy.