I guess it falls to me to have to respond as no other Keynesians of any stripe seem to want to take a whack. He's clearly all but begging for a response.
"Yesterday I reported that RGDP growth in 2013 was running ahead of the pace for 2012, using either the official figures or the new Philly Fed GDPplus estimates. Today we received another strong jobs number, which means that employment gains in the first ten months of 2013 are running at over 186,000/month, versus less than 183,000/month last year and 175,000/month in 2011."
"Yesterday I reported that RGDP growth in 2013 was running ahead of the pace for 2012, using either the official figures or the new Philly Fed GDPplus estimates. Today we received another strong jobs number, which means that employment gains in the first ten months of 2013 are running at over 186,000/month, versus less than 183,000/month last year and 175,000/month in 2011."
"Given the predictions of the Keynesian model, anything even close to 2012 results would have been a win for MM. The Keynesian model predicted a sharp slowdown from the higher income/cap gains/dividends taxes, payrolls taxes, sequester, government shutdown, etc, etc. But we are running ahead of 2012, and even if the last two months are weak we will be essentially even."
"And yet on the Keynesian side of the aisle I hear a deafening silence. Where is the discussion of this great “experiment?” Could it be that academics and pundits only like to discuss experiments that validate their priors?
In the comments section he only had gotten 6 comments after a while so he complained:
"Only six comments, for my most important post of 2013?"
Then a MM commentator suggested this is because he has shattered the filed:
"Critics are silenced? Repost monthly."
Why is is the most important of the year? Because he's not like the people Krugman talks about here:
"I’m sorry, but I think that when S&P complains about lack of reform, it’s actually complaining that Hollande is raising, not cutting taxes on the wealthy, and in general isn’t free-market enough to satisfy the Davos set. Remember that a couple of months ago Olli Rehn dismissed France’s fiscal restraint — which has actually been exemplary — because the French, unacceptably, are raising taxes rather than slashing the safety net."
"So just as the austerity drive isn’t really about fiscal responsibility, the push for “structural reform” isn’t really about growth; in both cases, it’s mainly about dismantling the welfare state."
"S&P may not be participating in this game in a fully conscious way; when you move in those circles, things that in fact nobody knows become part of what everyone knows. But don’t take this downgrade as a demonstration that something is really rotten in the state of France. It’s much more about ideology than about defensible economic analysis."
Similarly Sumner's talk about NGDPLT is less about a real interest in demand stabalization than providing a rational for fiscal austerity.
The fact that GDP was 2.8% in the third quarter doesn't tell us anything about what it would have been without the sequester. If it would have been at least as high how is this a victory for Sumner much less his most important post of the year?
Here's the response: Total government spending in 2013 has been higher than 2012. The Keynesian model has not failed anyone. Please see Daily Treasury Statement for FY 2013 ending Sep 30. Here. So despite the sequester and tax increases, total spending has still been higher than 2012. I'll just give you the numbers: FY 2012 $4.18T vs FY 2013: $4.2T.
ReplyDeleteThanks a lot Mike! We'd still be better off if there were no sequester because in this case govt. spending would be even higher.
ReplyDelete