We are all Keynesians Now – Chris Matthews Recants

By William K. Black

On January 28, 2014, Chris Matthews told a guest on “Hardball” that his sources were telling him that the Obama administration was convinced that the U.S. economy needed additional stimulus.  Matthews told his guest:  “I’m a Keynesian; you’re a Keynesian.”  They talked about the difficulties of getting Congress to provide the necessary increase in stimulus.

On November 12, 2012, I wrote a column about Chris Matthews statements on his November 9 program about Matthews’ denouncing Paul Krugman because Krugman was (like us at UMKC) calling on the administration not to adopt an austerity policy in the form of the “Grand Bargain,” which is really the Grand Betrayal of the safety net.  Here is the key passage from my column.

 “On Friday, November 9, 2012, Matthews advised his viewers that it was essential to ignore Paul Krugman’s objections to the economic impact of the Grand Bargain because he was on ‘the far left.’  (Matthews then danced around that label.)  At no time did any of the MSNBC hosts ask anyone with economics expertise whether austerity and beginning to unravel the safety net would be harmful or helpful to the nation.  The logical incoherence I have explained was never mentioned.  The only time an economist was mentioned was Matthews’ fact and logic-free denunciation of Krugman.  Matthews did not explain why Krugman opposed the Grand Bargain.

Matthews claimed that it was essential for Congress and the public to ignore a Nobel Laureate in Economics’ warnings that what was being proposed was a bad plan that would harm our economy.  Matthews said that Obama (a lawyer and politician) must tell Krugman that he was going to ignore Krugman’s economics warnings because ‘I’m President, you’re a columnist.’”

There are two possibilities: Matthews has experienced a “Road to Damascus” conversion from an austerian to a Keynesian or Matthews is a parrot who mimics whatever policy position the Obama administration bleats.  We, Krugman, and most economists have argued for years that the Obama administration’s increasing willingness to adopt austerity was harming the economic recovery, and putting it at severe risk of collapse if there was a serious international shock.  Obama has pushed for, and implemented, increasing austerity since the Budget Control Act of 2011.  Treasury Secretary Timothy Geithner, who gradually became Obama’s principal economic advisor even though he is not an economist, was a fierce proponent of austerity.

Obama also wanted his “legacy” to be the Grand Betrayal.  Leaks from the administration have repeatedly reported that Obama is convinced that his willingness to act contrary to the needs and desires of his base to cut the Democratic Party’s most popular and successful programs (Social Security, Medicare, Medicaid, and Food Stamps (SNAP)) at a time when those programs are most needed will establish that he acted as a visionary statesman rather than a partisan politician.

In combination, Obama’s decision to embrace Geithner’s self-destructive austerity and the pursuit of the even more destructive Grand Betrayal has seriously damaged our economic recovery.  The irony is that if Obama had succeeded in reaching the Grand Betrayal in 2011 the resultant austerity would have thrown the Nation back into recession and Obama would have been a one-term President and Republicans would be in complete control of the federal government.

The context of Matthews’ November 9, 2012 denunciation of Krugman was that Krugman had explained (again) why austerity and the Grand Betrayal were bad ideas that would harm the recovery.  The Obama administration was eager to inflict greater austerity and Geithner and Obama were fed up with Krugman repeatedly and forcefully explaining why their actions were nuts and why Geithner was a tool of Wall Street.

MSNBC is the administration’s attack dog, so Matthews went after Krugman.  Matthews’ twin problems were that Krugman (and economists in general) were right and Obama and Geithner were horribly wrong and that Krugman (and economists in general) were far more knowledgeable about macroeconomics than Obama, Geithner, and Matthews.  The result was that Matthews fulminated against Krugman in a substance-free rant.  Matthews then gave Obama this wondrously lame advice on how to respond to Krugman (a Nobel Laureate in Economics):  “I’m President, you’re a columnist.”

Yep, that works.  Let’s try a variant.  A top electrical engineer writes a blog article warning people not to wire their homes in a certain fashion because it is likely to cause fires.  Geithner, who once plugged a lamp into a socket successfully, advises Obama to wire his home in the manner the engineer warned was dangerous.  Matthews advises Obama to follow Geithner’s advice and to flip off the engineer with the line: “I’m President, you’re a columnist.”

But that was 2012.  Now, in the same January 28, 2014 program in which Matthews announced “I’m a Keynesian”, Matthews explained why the weak recovery (slowed by increasing austerity) has crushed Obama’s approval rating.  He then warned that Obama’s unpopularity and several retirements by Democratic Senators in Red states make it likely that the Democrats will lose control of the Senate in the 2014 midterm elections.

The Obama administration has changed since 2012.  Geithner is gone.  The December 2013 unemployment figures were very poor.  Housing sales have been poor.  The international economy was traumatized by disturbing economic trends in China, Spain, Argentina, Turkey, and South Africa.  This is the context in which the Obama administration was leaking to Matthews that the U.S. economy would be helped greatly by increased stimulus.  Matthews’ announcement that he has converted to a Keynesian is great news because he is such a reliable propagandist for Obama (who gives him his “thrill” “up my leg”).

Matthews’ conversion to Keynes indicates that the Obama administration is beginning to recover from being Geithnered and rediscover economics.

14 responses to “We are all Keynesians Now – Chris Matthews Recants

  1. Excellent work, thanks. IMHO, your reading of Matthews/MSNBC w/r/t signaling shifts in the Obama administration is 100% accurate.

  2. Either we need more competition or price controls

    Mooresville patient stunned by $89,000 charge for 18-hour hospital stay

    • Par for the course really. If insurance companies actually worked for their customers rather than for the handful of cronies in charge, patients would have the bargaining clout they need to counter such crazy prices. As is, patients critically need what the hospitals sell and the hospitals know it and exploit it. The richest man in the desert is the one that owns the oasis.

  3. “There are two possibilities: Matthews has experienced a ‘Road to Damascus’ conversion from an Austerian to a Keynesian or Matthews is a parrot who mimics whatever policy position the Obama administration bleats.”

    Well. his nickname is “Tweety.” So, I would guess a parakeet.

  4. So Obama may have rediscovered economics. I wonder if or when he will discover MMT. Let’s hope before the elections of 2014 and not after those of 2016.

    • The era where Keynesianism really hit a bump was the late ’60s and the ’70s. I’d guess that the commentators of that era didn’t sufficiently recognize they were living in a supply constrained situation rather than the demand constrained situation they were used to. The Vietnam War and the Great Society were huge generators of demand with limited, if any, supply generation schemes to offset that increased demand. Then, the OPEC oil cartel hit and there was no quick way to counter it.

  5. “Matthews’ conversion to Keynes indicates that the Obama administration is beginning to recover from being Geithnered and rediscover economics.”

    Hope springs eternal. But my 2 cents’ worth is not to hold your breath. Any “economics” this presidency “rediscovers” will have been OK’d by Wall Street.

    In any event, Prof. Black, your columns are always appreciated.

  6. Matthews is a bloviating gasbag that not even his own network takes seriously. Thankfully, they recently cut him down to only 1 hour/day. I don’t know how he can dare to disagree with real economist like Krugman….and this guy is considered a “liberal”. At least there is Chris Hayes.

    • I completely agree with your assessment of faux newsy Matthews, but calling Krugman a real economist is quite a stretch: he claimed that the banksters were really against QE I, II, etc., and also described the top banks as being very healthy (evidently Krugman believes their $90 trillion in credit derivatives of a questionable nature (shadow banking) to be “healthy”?).

      Chris Hayes once “debunked” the Transnational (NAFTA) Superhighway, even though said information came directly from the CFR web site and the state chamber of commerce of Indiana (the central point facility planned). His payoff was a network TV show, hurrah ….hurrah!

      I would definitely take everything Hayes says with a ton of skepticism, just as I would be suspicious of Anderson Cooper, not just because he’s a Vanderbilt, but because he interned at the CIA during his summers at Yale.

  7. Of course, “I’m President, you’re a columnist” coming from the television analogue of a columnist does create an interesting logical exercise: if the President were to follow Matthews’ advice, then he would be obligated not to follow it.

  8. The thing is, there has only been austerity for the 99%. Since Paulsen & Bush started the 1% raid on the US Treasury, Obama and Bernanke have continued the raid and even dramatically expanded it with QE. The result is Bloomberg News reporting in 2012 that there is 32 Trillion hidden in offshore accounts, while the safety net has more holes than ever. MSNBC, FOX, CNN, the networks – all are under the editorial control of 1% minions. Which is why they all support deficit reduction and don’t know MMT from candy. Eighty-five billion a month in QE to the 1% and as for the 99% – well, good luck with that incremental minimum wage hike thing.

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  10. Keynes advised using government spending to tweak economies, but first there had to exist an economy. I am 1,000% against any austerity scams, as it is designed to benefit the super-rich while screwing the rest of us.

    But how well will any stimulus work since they’ve dismantled the economy, and substituted a fantasy finance process in its place?

    When Gary Locke was governor of Washington, he offshored jobs at 49 of 51 state agencies, then as commerce secretary, he signed numerous waivers on the Federal Stimulus exempting them from the much water down “buy American” clause. These processes, under so-called “democrats” and democratic administrations, aren’t helping.

    Nor does it help when they continue to offshore jobs, offshore technology and offshore investment to China (and elsewhere).

    Such stimulus must be locally oriented, instead of at the corporate or bankster level, which has been the case with the Obama administration, and never “trickles down” to the working people of this country.