The Unshakable Confidence Of Those With Fancy Hair

from Ezra Klein:

Big government shrinks recessions:
My colleague Philip Rucker had a great piece today on Mitt Romney and Rick Perry’s lack of specifics on job creation. The closest thing you get to a plan from either of them is a general commitment to shrink government. “The right answer for America is to get government smaller,” Romney put it in a speech.

Many if not most experts would object to that prescription in the short-term. As Congressional Budget Office head Doug Elmendorf has said, cutting spending during a recovery tends to hurt growth. But it’s also not a long-term prescription. In fact, there’s a substantial body of economic research suggesting that if countries with bigger government actually do better at weathering recessions.
Jordi Galí, a Spanish economist, kicked off this line of research in 1994 with a paper finding that Organization for Economic Cooperation and Development countries where government spending is a larger share of the economy, such as the Netherlands and Sweden, experience less “output volatility” (that is, the size of swings in GDP growth) than ones with lower levels of spending, like Japan and Portugal.
Antonio Fatás and Ilian Milov replicated Galí’s findings in 2001, as did Daehaeng Kim and Chul-In Lee in 2007. The findings are not uncontroversial, especially given that they contradict popular “real business cycle” models of the economy. And while many studies find a straightforward linear relationship, others, as Xavier Debrun, Jean Pisani-Ferry, and André Sapir note in this literature review on the subject, suggest there could be a tipping point at which bigger government makes the economy more, not less volatile. But overall, the evidence indicates that bigger government makes for less sharp economic swings, including smaller recessions.
Of course, a stable economy isn’t everything. Most economists believe that sufficiently big government can slow down growth, though obviously the composition of spending matters tremendously. Slower growth with lower volatility may or may not be a good trade, depending on your preferences. But all else being equal, the data suggest that bigger government leads to less severe recessions. So playing up smaller government as a way to fight downturns doesn’t make a whole lot of sense.

In other words, if government employees are laid off, jobs are lost.

It is deeply appalling that those on the right cannot grasp this.