By Kindred Winecoff
You're So Vain, You're Probably Think This Article Is About You
Krugman and DeLong need to read more carefully. When Ned Phelps wrote "Keynesian economics, which had been nearly forgotten inside the macro field, has found new voices from outside" (bold added) he wasn't talking about them, unless they think that they are outside of macroeconomics. He was talking about non-macroeconomists who don't understand Keynes and misappropriate him to advance political agendas. Which is why he put "Keynesians" in sarcastic scare quotes.
Krugman says that "nobody, and I mean nobody" holds the position that fiscal stimulus is effective in all kinds of slumps. And yet here is Robert Reich a decade ago:
No discussion of monetary policy, or liquidity traps, or any of the conditions Krugman laid down. In fact, he applies the argument to Germany in the late-1990s, which was very far away from the zero-bound on monetary policy.
Keynes’ basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That’s because the private sector won’t invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.
Want more? Here is Krugman accusing Keynes' biographer Robert Skidelsky of missing Keynes' best point (and in the process accusing Keynes himself of the same thing). And here is Brad DeLong saying that the Romers believe that "all types of fiscal stimulus are more potent than conventional estimates would lead us to believe" (in this paper, in which the words "liquidity trap" and "zero-bound" are not found, and monetary policy shocks are controlled for), but the period under study contains no occasions of a liquidity trap.
I could go on but the point is that many people, including some macroeconomists and many non-macroeconomists, do believe the things that Krugman says nobody believes and many other things besides. Phelps was talking about them, not Krugman or Mankiw.