Scott Sumner: Out of Touch With Most Americans

     Sorry, but he did ask for it. While I have attempted to engage him in good faith his frequent answers in bad faith make me suspect that he approaches things in general in bad faith. I have in the past indicated that the NGDP targeting concept that he has popularized-though it's Geroge Selgin's brainchild-sounds like a fruitful and promising approach to monetary policy in the environment we find ourselves in-gridlock in the U.S. Congress and worse in the austerity loving Eurozone.

    I still think it sounds like a good idea and note that the leading New Keynesians think it has promise too-Ygelsias, DeLong, Krugman. So I'm not criticizing NGDP. Still Sumner's comments about both fiscal matters and his what you could call "philosophy of life" sounds pretty skewed. Again in my dealings with him he seems to operate in bad faith-while to his credit he answers all comments individually he seems to have his guard up when he answers mine-perhaps because he knows I'm not on the Right or perhaps he objects me leaving my link on his site and feels my site is "beneath him." If so other economists worthy of as much if not more respect than him don't feel that way.

    Indeed his mentor himself, George Selgin put in an appearance here and while he had a complaint of the way I had characterized him, he was quite gracious. I decided that he was actually right and stated so in my next post.

   For the history of the economists who have visited Diary of a Republican Hater please see

   http://diaryofarepublicanhater.blogspot.com/2011/12/scott-fullwiler-mr-mmt-drops-by.html

   For the time George Selgin visited http://diaryofarepublicanhater.blogspot.com/2011/12/george-selgin-checks-in-with-us.html

  For the bad faith of Sumner-it's not just about me I see him do this when others offer him a valid criticism perhaps he can't answer like Mike Kimel- let me give an example. He recently put up this post

  http://www.themoneyillusion.com/?p=12198#comments

  It was basically an attempt to argue that unemployment goes on too long at 99 weeks-though its currently 86-and the minimum wage at $7.25 is problematic on a structural basis. He argues that he would like to see the poor with "more skin in the game." Now on the face that may sound ok. Let's listen to his argument:

   "Both liberals and conservatives seem prejudiced against the proletariat, but in slightly different ways.  Some conservatives seem to think the unemployed are lazy, not willing to work hard.  This outrages liberals, but I find their defense of the unemployed to be just as offensive.  They seem to concede that if UI did increase unemployment, then the accusation of “laziness” would be valid.  That’s easy to say if you have a nice, cushy, interesting white collar job that pays well."

   "I used to do various construction jobs like painting and roofing.  It’s work I can do.  Suppose I lost my six figure job and was offered a job paying $20,000 a year doing roofing.  Would I take it?  No, I’m too “lazy.”  I’d keep collecting those UI checks and keep looking.  Now consider those lucky hotel maids that were offered jobs paying something like $20,000 for the privilege of cleaning toilets and watching naked IMF chiefs parade around.  And let’s assume they didn’t need the money because their husband had a job and they were also getting UI checks.  And maybe they had kids they wanted to spend time with.  How’s their decision any different from mine?  Don’t we all follow self-interest?  How does all this moralizing advance the positive issue of how many people are unemployed due to the 99 week UI maximum."

   "I don’t think anyone claims it’s the reason for all unemployment—large numbers of unemployed don’t even collect UI insurance.  My guess is that around 1 out of every 100 Americans are current unemployed due to extended UI and higher minimum wage rates.   Casey Mulligan seems to think it’s 2 or 3 out of 100.  I think that’s too high, that AD is still a big problem.  But we ought to be able to have a civil debate without descending into personal attacks.  It’s an empirical question, and until we understand it that way we won’t be able to make sensible policy judgments.  My hunch is that the Danes have already reached this understanding."

  "Now for a curve ball.  I’m not calling for less UI right now.  I’d like to see more monetary stimulus, and then gradually reduce the maximum UI benefits as jobs become more available.  So I have “progressive” views on the AD question.  But just because AD matters doesn’t mean AS stops mattering, no matter what the new-old Keynesian models tell us, and no matter how squeamish we are about talking about the issue."

   "In the long run we should reform UI to give workers more “skin in the game” (and idea progressives seem to hate.)  If it’s going to worsen inequality, then accompany it with actions that make the payroll tax more progressive."

    Now I don't know that progressives hate the idea in principle of "more skin in the game." Ultimately though I would agree that as a progressive I'd be cautious till I get where he is going with it. I remember "ending welfare as we know it" which turned out to be simply ending welfare.

    http://diaryofarepublicanhater.blogspot.com/2011/12/clinton-90s-consdiered.html

    I actually like the idea of making the payroll tax more progressive. As for UI benefits it may well be that once the recession ends the weeks will be cut anyway. I responded with these remarks to Sumner:

   "Scott consider though what you get is so low that it would not be worth giving up gainful employment."

     "The cap on weekly benefits right now is $405. There’s no way you can live off that. The maid you speak of are married women. Only if your unemployment is part of some other money you get would that enable you to live off it. "

   "Think of someone who gets say $150 a week-pretty typical, I would guess that that’s at or even above the median of beneficiaries."

    "If you offer him a job at Dunkin Donuts, you would have to say that its reasonable for him to turn down the job. Because for one thing few service jobs like that give you full time hours when you just walk in. Someone new will get maybe 15 hours if they like him."

     "So waht is 15 times the minimum wage? About $108 a week before taxes. So even before taxes they make less than they would with UI."

      "On the other hand even if they did get say 30 hours which is a lot more than is typical these days. At abotu $217 a week before taxes, you factor in taxes and then they make slightly more after taxes than they would have by collecting UI."

      "I do like the idea of making the payroll tax progressive. It seems most conservatives are not interested in that kind of tax cut or change."

      "What do you think of the idea-that interested some Republicans at one time-about doing what the state of Georgian did and allowing people back to work to continue to collect UI for a time?"

      "I know that’s the opposite of what you’re calling for-you want to cut the number of weeks not expand them-but you did say that you’re not calling for it right now."

     "What I find unusual about you to the extent that you are conservative is that you even acknowledge the demand side of economics. I associate conservatives with solely being interested in the supply side-they are kind of bastardized versions of Say’s “supply creates its own demand”

    He fires back this missive: "You’ve got to be kidding. Of course I could live off that. I’ve lived off much lower wages, even talking inflation into account. That’s $20,000 year! And you forgot about savings. I had savings even when I worked poverty level jobs. I’m not sure I understand the point about marriage, as lots of people are married or have boyfriends. So it supports my argument, not yours. "

   "I don’t see the point of your Donut example, it seems to support my point. UI should be paid in a lump sum, if you actually believe it’s “insurance” and not “welfare.” When you have a car accident they don’t give you $X dollar per week until your car is repaired, they give you $Y dollars. But again, I prefer a system where the workers have some skin in the game."

   "If you keep finding me non-conservative on issue after issue, you might want to consider the possibility that I am NOT A CONSERVATIVE."

    Well on the fact that he even admits that there's a demand side to economic questions at all this is unusual for conservatives. But the cluelessness he shows here is very much the usual for conservatives. I don't know what he calls himself-for me "conservative" and "libertarian" is a distinction without a difference the two words mean the same thing as that recent great series out at Naked Capitalism shows. The key is that in the views of someone like Herman Hoppe the libertarian aspect only applies to economic issues not social ones-Hoppe actually sees a real libertarian society as one where social discrimination increases rather than decreases.

    http://diaryofarepublicanhater.blogspot.com/2011/12/what-is-libertarian-paradise.html

    But whatever Sumner calls himself or does not call himself he sounds clueless. He is out of touch with the lives of most Americans and for that reason he ought to consider jumping into the Republican primary. Maybe if he can get into the December 27 debate moderated by Trump, the Donald will declare at the end "You're elected."

    I have no idea when he may have worked these "poverty level jobs" of his but in this day and age in most metropolitan regions in any event $20,000 does not go far. In NY the median rent level eats up most of that. Besides the "$20,000" he seizes on-he multiplies $405 by 52-misstates things anyway. The $405 is the most anyone can get. It is not what most people get. It's simply the cap. Why seize on the outlier? I would say as someone who knows from experience that in today's dollars $20,000 doesn't take you far.

   But the median recipient doesn't get anywhere near that. Sumner ignores my much more typical example of someone who works at Dunkin Donuts for $7.25-the minimum wage he thinks is so extravagant. If it's possible for someone to live off $20,000 a year-it would be difficult in most metro areas for the average person-I will venture to say it's impossible for anyone to live solely on the roughly $108 a week that a typical new Dunkin hire would make a week-in this day and age you will get about 15 hours if they like you(that is full time in today's service sector) and at $7.25 that's $108.75 a week total-I just punched it on the calculator my estimate in my comment to him was pretty close-and that's before taxes. My point is that if someone receives $140 a week on UI in that case-I'm actually sort of agreeing with him in a way on incentives though not agreeing that therefore they should be cut-it would not be in their interest to work the "full week" in Dunkin Donut hours. Bear in mind of this princely sum of $108.75 from today's minimum wage that Sumner thinks so high we haven't even figured on the payroll taxes yet. In a way I'm agreeing with him that it's true that maybe the unemployment benefits are better than working 15 hours a week at a Dunkin Donuts at Sumner's very high wage of $7.25 an hour.

    For more on Sumner's aversion to the poor getting over on the rest of us see

    http://diaryofarepublicanhater.blogspot.com/2011/11/sumners-worried-minimum-wage-is-too.html

    Specifically he worries it might stop us from returning to healthy growth

     Sumner in his comments shows an obtuseness that must be deliberate-for his own sake I want to believe it's deliberate. What is hard to understand about the Dunkin Donuts example? And his claim that I forgot about savings is just the point-many today have no savings. That's my point about his anecdote about married maids-" you forgot about savings. I had savings even when I worked poverty level jobs. I’m not sure I understand the point about marriage, as lots of people are married or have boyfriends. So it supports my argument, not yours. "

    The point about marriage is that these maids, as married maids can count on their husbands income. So they have a choice not to go back to work because of their husbands substantial income not meager UI. If you have savings then of course you don't have to take any job no matter how meager. In Sumner's years of "living rough" back when he worked "poverty level" jobs, the fact that he had savings makes my point not his. Anyone who has substantial savings is in a different category.

   Think about it-if you make $100,000 a year and lose your job you probably wont get a job at Dunkins and the $405 per week you could "live off of" but that's only because your six figure salary has afforded you savings. Sumner shows he's out of touch by assuming most Americans have savings today. Many Americans don't today. If someone has savings of say $25,000 and work a job at minimum wage and "survive" it's misleading as it's not the $7.25 that's enabling them to survive. If they lacked the savings they couldn't survive. Finally his attempt to sidetrack the issue by attacking UI as welfare " UI should be paid in a lump sum, if you actually believe it’s “insurance” and not “welfare.” Realy whether it is or is not welfare is besides the point to the discussion. It isn't actually welfare anyway as it is taken out of your check every week-everyone knows that the employer contribution is really yours.

    I didn't want to go here Scott but mess with the bull you get the horns.