In a recent post by Paul Krugman he laments the lack of serious arguments against a fiscal expansion. I think that this is a bit extreme on his part – but I think that his criticism of John Taylor indicates the exact value judgment that makes him feel this way:
You’ve got John Taylor arguing for permanent tax cuts as a response to temporary shocks (emphasis mine)
Notice that he not only rejecting the anti fiscal stimulus policy – he is rejecting the belief that part of the current crisis is the result of a permanent shock. If the current crisis is the result of a temporary shock then fiscal stimulus could help to dampen the impact. However, if the shock is permanent any fiscal stimulus will merely be a costly way of delaying the inevitable.
Of course, we have a bit of both – there are a range of shocks, some permanent, some temporary. Given this, some type of fiscal stimulus could be seen as necessary – however, the required stimulus would be a lot smaller than the fiscal stimulus crusaders are supporting. Again, it all comes back to our forecasts of potential output …