The president is in a situation in which virtually none of his considered beliefs–in Keynesian economics, in the power of redistributive populism, in coalition politics, in his own oratorical skill–is being affirmed by the real world. It’s like the period Thomas Kuhn talks about in his famous Structure of Scientific Revolutions, when scientists are working along within the old “paradigm” but the data start coming back funny. Most scientists just ignore the discordant data and keep plodding along. A few start to question the “paradigm.” You’d want a President in tough times to be one of the latter, no? You’d expect someone like Obama to undertake some reevaluation. As Bret Stephens noted recently, genuinely smart people know what they don’t know–or in this case they know what they used to know but now aren’t so sure about anymore. Take Keynesianism. I’ve always assumed that Keynesian remedies–e.g. government deficit spending–worked. Certainly deficit spending seemed to work for Ronald Reagan in the early 1980s. And Paul Krugman may well be right that the only problem with Obama’s stimulus is that it wasn’t big enough. But you can’t say that anymore with certainty, can you? The data–big stimulus,weak recovery–hardly reinforce the paradigm with anything like inarguable clarity. And there are some respected economists–Kenneth Rogoff, and Greg Mankiw, to name two–who question whether the classic Keynesian paradigm still holds in the current slump. Has Obama read them? Consulted them? No need to make a show of it like Carter. He can do it quietly. But has he?Here's the problem. It's not just the Democrats who need shift in economic thinking, the Republicans do too. Economies change shape. What works 30 or 50 years ago may not be as effective today. Both parties are transfixed on sparking the "magic moment." For Democrats, it's the FDR New Deal and Republicans are transfixed on the Reagan Revolution. Truthfully, both are stuck in a nostalgic universe with happy thoughts from times that may be more of a fantasy than reality.
Stimulus spending works, if applied in the right places. Tax cuts can have an economic impact, if only temporary. Policymaking is difficult work and politics does not move with the wonky world of policymaking. New studies present refreshing insights that are often ignored by both parties. You can't live Einstein universe of physics with Newtonian principles, you don't learn anything. Unless we find a way to get creative and merge our economic ideas to create real reform, the economic system will stay stalled. Unfortunately, the political party system must move past fixed ideologies. That's a paradigm shift that could take years or decades to happen. Unless that happens, no changes will be made.