He's as relentless on this as he's wrongheaded. He also seems to be 'going Brad Delong'-as Delong is often accused of erasing comments and two of mine just disappeared over at Sumner's. He decides to pick on Kevin Drum this time to show that MM is right that fiscal austerity has no ill effects because of QE.
"We correctly pointed out that fiscal austerity in 2013 would not slow growth in the US because of monetary offset, whereas in a poll of 50 elite economists by the University of Chicago, all but one gave answers implying it would slow growth."
http://www.themoneyillusion.com/?p=28430#comments
It's interesting. Here is someone who throws tomatoes at people like yours truly, claiming we're not 'real economists' like him and on the question of austerity, he totally glosses over the question of causation vs. correlation. I mean because you have fiscal tightening and 2.2% growth-the average during the 4 year period of austerity 2010-2013-you assume obviously austerity had no ill effect. This is how Sumner reasons and he poises as an arrogant economist?
What he does is give himself a very small lift and then declare victory. It's like someone bench pressing 5 pounds and declaring themselves the strongest man in the world.
"In early 2013 Keynesians like Mike Konczal and Paul Krugman predicted that fiscal austerity would slow growth. Indeed they were so confident that this would occur that they suggested 2013 would be a “test” of the market monetarist proposition that monetary stimulus would offset the effect of fiscal austerity. If GDP in 2013 kept growing as fast as in 2012, the Keynesians would be proved wrong. It didn’t grow as fast, it grew considerably faster. Keynesians tend to cite real GDP growth, which accelerated from 1.60% in 2012 to 3.13% in 2013 (Q4 over Q4.) Nominal GDP growth (the variable Keynesians should use to analyze austerity) rose from 3.47% to 4.57%."
"We correctly pointed out that fiscal austerity in 2013 would not slow growth in the US because of monetary offset, whereas in a poll of 50 elite economists by the University of Chicago, all but one gave answers implying it would slow growth."
http://www.themoneyillusion.com/?p=28430#comments
It's interesting. Here is someone who throws tomatoes at people like yours truly, claiming we're not 'real economists' like him and on the question of austerity, he totally glosses over the question of causation vs. correlation. I mean because you have fiscal tightening and 2.2% growth-the average during the 4 year period of austerity 2010-2013-you assume obviously austerity had no ill effect. This is how Sumner reasons and he poises as an arrogant economist?
What he does is give himself a very small lift and then declare victory. It's like someone bench pressing 5 pounds and declaring themselves the strongest man in the world.
"In early 2013 Keynesians like Mike Konczal and Paul Krugman predicted that fiscal austerity would slow growth. Indeed they were so confident that this would occur that they suggested 2013 would be a “test” of the market monetarist proposition that monetary stimulus would offset the effect of fiscal austerity. If GDP in 2013 kept growing as fast as in 2012, the Keynesians would be proved wrong. It didn’t grow as fast, it grew considerably faster. Keynesians tend to cite real GDP growth, which accelerated from 1.60% in 2012 to 3.13% in 2013 (Q4 over Q4.) Nominal GDP growth (the variable Keynesians should use to analyze austerity) rose from 3.47% to 4.57%."
"Ryan Avent was right that what people really care about is jobs, and in the period since December 2012 the unemployment rate has fallen considerably faster than during the previous three years. Of course after market monetarism passed Krugman’s “test” with flying colors, he denied that any test had taken place. But you can be sure that if there had a been a recession in 2013, Keynesians would not now be saying that the increase in income taxes, payroll taxes and budget sequester of 2013 weren’t really all that important."
Sumner is just doing what he does so well here-cherry-picking data. Check out the numbers
http://www.tradingeconomics.com/united-states/gdp-growth-annual
His numbers are very selective to give it the best gloss possible as Mike Konczal shows:
http://www.nextnewdeal.net/rortybomb/what-happened-2013-two-clarifications-among-current-debates
UPDATE: As Konczal says if you're argument falls apart if you were to move one quarter back or ahead, there's something precarious about it. Note that the 4th Q 2013 GDP that Sumner crows about is bookended between 2.3% and 1.9% growth.
UPDATE: As Konczal says if you're argument falls apart if you were to move one quarter back or ahead, there's something precarious about it. Note that the 4th Q 2013 GDP that Sumner crows about is bookended between 2.3% and 1.9% growth.
Who said there would be a recession in 2013? You see what I mean about Sumner setting the bar so low. If there's no recession MMers are right. He obscures the point that there was austerity during the entire 2010-2013 period-you have to factor in state spending as well-and we had GDP growth of 2.2%. As Simon Wren-Lewis points out this hardly means there would have been no room for improvement.
http://diaryofarepublicanhater.blogspot.com/2015/01/what-it-would-take-to-disprove.html
WL did a thought experiment: what if there were a multiplier of 2. Of course, Sumner would deny it could be so high but that's just the point. If you find a multiplier of 2 consider that if you assume that, there would have been a 3.7% GDP rate had there been no austerity. That number is actually much closer to what you'd expect to see in a recovery, historically speaking.
Here's the asymmetry between us Keynesians-of whatever stripe-and Market Monetarists. I have no problem saying that while the 2.2% number was weak, it would have been weaker without QE. However, I also believe it would have been still stronger-and closer to what you'd expect to see in a recovery from a recession this deep-if we hadn't had all that austerity-not just from the sequester but starting in 2010-you have to factor in state spending as well.
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