On Fiscal Policy Here's a New Idea: Let's First Do no Harm

     Today's numbers were definitely encouraging.

     http://diaryofarepublicanhater.blogspot.com/2013/05/dow-crosses-15000-for-first-time-with.html

     While we can't quite declare victory as Scott Sumner's is doing there is grounds for cautious optimism:

      "The monthly jobs report for April is encouraging for what it says about the economic recovery — but it’s also a reminder of the degree to which Congress is holding the recovery back. The economy added 165,000 nonfarm payroll jobs, and the unemployment dropped a bit to 7.5 percent. The upward revisions to the two previous months are key: Together they mean that in February and March, 114,000 more jobs were added than previously reported."

     "The upward revisions raise the possibility that today’s number will also be revised upwards, and suggests the possibility of gathering strength — but only the possibility of it. As economist Betsey Stevenson put it: “This report isn’t enough to conclude that the labor market recovery is accelerating. Enough to hope, but not to conclude."

   

    "On the bright side, today’s report suggests that recent bad economic data is notnecessarily the sign of something deeply troubling, as some economists had feared.

     http://www.washingtonpost.com/blogs/plum-line/wp/2013/05/03/the-morning-plum-the-economy-is-slowly-recovering-in-spite-of-congress/

     Still Sumner's victory lap is hard to figure. Is he arguing that we would have had fewer jobs created in today's report if there hadn't been the sequester? If not, why the snide declarations that the "Keynesian multiplier" has finally been discredited for good? 

      In fact even Sumner admitted the other day that the sequester is contractionary-he's not quite at the level of those who believe in expansionary austerity. For those see:

      http://krugman.blogs.nytimes.com/2013/05/03/playing-whack-a-mole-with-expansionary-austerity/

      In the business community they have much more modest goals for fiscal policy. Just don't make things worse:

     "Whatever the data ultimately show for April, economists like Diane Swonk, chief economist for Mesirow Financial in Chicago, say the economy would be showing much more momentum if it were not for the combination of higher payroll taxes that went into effect in January, as well as the process of automatic spending cuts known as sequestration that began to bite last month.

     “What’s the biggest drag on the economy? The government,” Ms. Swonk said. “If the government simply did no harm, we could be at escape velocity.”

     "Without the impact of federal cuts and higher taxes, Ms. Swonk estimates, annual economic growth would be close to 4 percent, above the 2.5 percent pace she is expecting in 2013."

     http://www.nytimes.com/2013/05/03/business/economy/government-spending-cuts-contribute-to-slower-growth.html?_r=1&hp=&adxnnl=1&adxnnlx=1367575960-oV5Kemw+wunc5SXkxRdXGg&

     This goes beyond Sumner's usuall sophistry about the fiscal multiplier. What we have here is a contraction in spending. Wether we need to increase govt spending is another discussion but do we want to cut it now? Sumner's answer is not so much "yes" as chiding those why say no.