Marcus Nunes, Salim Furth and the Case for Austerity

     I see that Marcus has given me an actual answer to my point about Market Monetarists as advocating austerity. In the past he has seemed content to just lash out without providing the substantive case.

    http://diaryofarepublicanhater.blogspot.com/2013/06/marcus-nunes-has-suggestion-for-new.html
  
   He gave me a link to a new piece by Furth who tries to strike back at Senator Whitehouse-who was just brilliant in questioning him in the Senate recently. It's no surprise that Furth is trying to come back from that meeting. 

    "On Tuesday I testified to the Senate Budget Committee about the effects of the debt on our country’s growth expectations. These tend to be dry, academic affairs, but this one had a bit of drama."

     "At one point, Rhode Island’s junior senator, Sheldon Whitehouse, rose to question my numbers and to call me meretricious, which is an SAT word for lying. Turns out the mistake was on his part, though I won’t question his honesty and will instead chalk up his error to an obvious unfamiliarity with economic data.

Senator Whitehouse, to put it simply, badly misread an OECD report."

     http://www.nationalreview.com/corner/350528/senator-whitehouses-austerity-mistakes-salim-furth

     Well, it's a good thing that for once it was more than a dry, academic affair. After all, these questions are life and death for the people who suffer in a poor economy or when the government implements savage budget cuts because folks like Furth love them so much. It shouldn't be dry so that he's able to spread his austerity agenda unquestioned. 

    The supposed errors of Senator Whitehouse go back to the same argument that Austerians have been trying to make ever since this budget hearing. That Whitehouse didn't know what he was doing and looked at the wrong data. 

     "The main reason our numbers did not match was that they pertain to different time periods. We were debating over whether European countries have engaged in fiscal consolidation, and whether their consolidations have been composed of mostly tax increases or spending cuts. The OECD data I used to examine the fiscal adjustments reflect what has already happened since 2007, the actual record. His numbers ignore the spending governments added in 2008 and 2009, and consider data from 2010 to 2015, relying mainly on promises of future spending cuts."

      Steve Landsburg made this same arugment in much more colorful language last week-Sumner was impressed by this and feels that Krugman's intellectual honor is at stake and that he must respond to it. 

      "There are a couple of legitimate reasons why Furth’s and Whitehouse’s numbers don’t agree. The first is that they’re for different time periods. Furth’s are for the years 2007-2012, while Senator Whitehouse’s are for the years 2009-2016. That’s right, 2016. Which brings us to the other reason these numbers differ: Furth’s come from the historical record, while Senator Whitehouse’s come from somebody’s ass."

      http://www.thebigquestions.com/2013/06/07/lies-and-lying-liars/

      Again, Sumner quoted this approvingly while claiming that Krugman's problem is that he is, as Reinhart-Rogoff are always whining, 'remarkably uncivil.'

      First of all, Furth and his defenders are quite willfully misleading on the importance of forecasts and projections. They are not illegitimate and certainly don't 'come from somebody's ass.'

     Furth's numbers are misleading because he has years 2007,2008, and 2009, which are before austerity started-they were during the time when there was some stimulus used in EU countries. It's like saying that the recession we've had hasn't been so bad by including years 2005-2007 in your GDP and employment data. 

    What this is really about is that for whatever reason Sumner and Marcus are trying to legitimize austerity. They don't argue for it but they criticize anyone who criticizes austerity and they seem to oppose ending the Republican sequester-or at least they oppose anyone who wants to end it. 

    Marcus, if you're reading this can you explain why this is?

    BTW, not all the Market Monetarists seem to be trying to justify austerity. Nick Rowe doesn't seem to at all as best I can tell. Nick, if you're reading maybe you can elaborate your position. 

   David Glasner has admitted there's no reason to make the kinds of categorical claims Sumner makes on what he calls the 'Keynesian multiplier.'

   http://diaryofarepublicanhater.blogspot.com/2013/05/david-glasner-fiscal-multiplier-could.html

   Sumner, for his part, has a piece today that claims that he's not an absolutist about fiscal policy. 

    "As for whether my arguments are “callous” I think it depends whose making them.  I happen to think that fiscal stimulus does a modest amount of harm, in a couple ways.  It increases the level of future distortionary taxes, and it makes it less likely that effective monetary stimulus will occur, by muddying the waters.  But I also recognize that lots of people who are smarter than me (Krugman, DeLong, Yglesias, Avent, etc) disagree."

    "Here’s my bottom line. If I was someone like Abe, I’d look at the intellectual dispute and make the same pragmatic decision that FDR made; try a little of everything.  So I agree with Garcia that it would be “callous” of policymakers to ignore any tool with widespread support among economists.  That doesn’t mean they must do everything recommended by economists, but at least they should give the argument serious consideration, if widely held.  (Even if I disagree.)"

    "My role is different.  I’m not a policymaker; I’m inside the academic debate.  I see my role as telling the truth as I see it, and let the chips fall where they may.  If my arguments convince other academics and pundits to come over to my side, that’s great.  If not, then I’ll just be one small input into a vast policymaker apparatus, which is as it should be."

    "I’m playing a longer game—hoping that if my view eventually prevails then in the future we will DEMAND that central banks stabilize the expected path of NGDP.  My fear is that if we use fiscal policy today, we’ll have to use it in the future.  But the best outcome is an expected NGDP growth path where fiscal policy isnever even called for.  That’s my long term goal, and it’s why I maintain my “purist” stance.  (Which given that I favor employer-side payroll tax cuts, is actually not all that pure.)"

     http://www.themoneyillusion.com/?p=21821#comments

   One problem is that maybe it's just coincidental-though I'm skeptical of coincidences-but Sumner's preferred fiscal stimulus is a regressive tax cut. As for the worry about future taxes, that depends on whether we insist on paying for it or not. Ideally, we want deficit spending rather than spending now that's paid for later-though there may well be something to the New Keynesian argument that tax smoothing mitigates the impact of any future higher taxes. 

     It seems to me that Sumner can relax. We've had no fiscal stimulus in 4 years. Obama and his team were certainly wrong about the chances of going back to Congress for more. If I were Sumner I wouldn't lose any sleep that there could be more fiscal stimulus. All Keynesians are saying is why not get rid of the sequester? Why does Sumner and Marcus have a problem with Keynesians who make this argument?

     P.S. I have no doubt that Sumner is playing a longer game. The question though is whether or not I like this game. The continued defense of austerity-the latest being claiming that the U.S. did more-so austerity must work-is making me skeptical.