Sumner sniffs that some people claim he is "pro-austerity."
"There are some people claiming that I am “pro-austerity.” That’s a bit misleading as my position has always been more nuanced:
"There are some people claiming that I am “pro-austerity.” That’s a bit misleading as my position has always been more nuanced:
1. I favor monetary stimulus combined with fiscal austerity.
2. If the central bank continues to stubbornly target inflation, I’ve advocated cuts in employer-side payroll taxes and/or the VAT as a way of reducing inflation, and encouraging more monetary stimulus. So if monetary policy refuses to play ball I’ve advocated effective forms of fiscal stimulus. I don’t favor ineffectivestimulus, such as bloated military spending merely to give us more “empty GDP calories.”
Well my ears are burning. After all, I'm undoubtedly one of these people he has in mind.
"Mike, There is no “passion for austerity” among market monetarists. There is a passion for the truth. I favor certain forms of fiscal stimulus, such as employer-sider payroll tax cuts, and in Europe VAT cuts."
See also
Speaking for myself, the reason I claim he's pro-austerity is because he's pro-austerity. He continues to declare victory over all things Keynesian. It's over. Done:
"Here’s Mark Sadowski from the comment section:
Tax change multipliers used used by private forecasting firms and by government models such as the Federal Reserve’s FRB/US suggest that about half of the ultimate level economic effect of the payroll and income tax increase should be felt by the second quarter. Similarly government purchase multipliers suggest that two thirds of the ultimate level economic effect will be felt during the first three months (in aggregate) of the sequester, which is now more than two months old. See Appendix A for example:In November 2012 the CBO estimated that the maximum level employment effect would be a decrease of about 200,000 jobs, 640,000 jobs (80% 0f combined payroll and UI effect of 800,000 jobs lost) and 800,000 jobs for the high income tax increase, payroll tax increase, and sequester respectively:In other words, according to these estimates, the sequester should already have decreased employment by over 500,000 jobs relative to baseline, and the tax increases should decrease employment over 400,000 relative to baseline by the next employment report at the latest.What happened to the liquidity trap?
"There is no such thing as a liquidity “trap.”
"And how many jobs have actually been lost? Zero. If we get a lousy employment number next month how many jobs will have been lost? Still roughly zero. We are far enough above the 2012 trend in job growth that we could get a mediocre report next month (131,000 jobs), and the Keynesian multiplier model would still have been a complete failure—predicting huge job losses where there were none."
Meanwhile we have 2 months until the second quarter ends. I for one don't see how Keynesianism is in trouble unless we have lots and lots of job losses, pronto. Unless you believe that we would have had fewer jobs had we done the sequester what is it that Sumner thinks is so earth shattering? Interestingly, the Fed thinks the sequester is slowing the recovery:
"Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable."
With Sumner itching to play the counterfactual game as prematurely as possible, what exactly does he believe the numbers would be with no sequester?
I've complained that while I enjoyed Krugman's recent tweak of Sumner he ought to do it more often.
In a piece today, does Krugman give an oblique reference to Sumner?
"The overwhelming fact about our current situation is that conventional monetary policy is played out, with short-run interest rates at zero. This means that there is no easy way to offset the contractionary effects of fiscal austerity (maybe there are exotic ways to do something, but they’re tricky and unproved). And this in turn means that austerity right now is a terrible idea: any fiscal savings come at the expense of reduced output and higher unemployment. Indeed, even the fiscal savings are likely to be small and maybe even nonexistent: lower output and employment reduces revenues, and may inflict long-run economic damage that actually worsens the long-run fiscal position."
Sumner clearly is on a mission and I think Krugman should now and again keep him honest.
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