It's another Sumner Rule-along with monetary offset.
"Marcus Nunes directed me to a very interesting piece by Jonathan Chait in theAmerican Prospect, from 2001. It begins by pointing out that by the early 1990s American liberals had turned against the deficit spending policy of Ronald Reagan. Then it moves on to the Clinton Administration"
http://www.themoneyillusion.com/?p=28466
In other words, if they were for deficit spending then they must always be so. In reality if there was a different opinion then than now what have you proven? Shouldn't people be willing to change their views if facts change on the ground or if they come to a better understanding? Of course, not if you're George W. Bush who was all about 'staying the course' whatever the facts but overall changing a position doesn't prove anything malign except in Sumner's mind-if a liberal does it. That the GOP used to be the party of deficit reduction until Reagan-Cheney then said 'deficits don't matter' shows that it's not only Democrats who have shifted their view through the years. Again, so what?
"Recall that unemployment was pretty high when Clinton took office, much higher than today. Of course today’s liberals would point to one key difference, interest rates were not stuck as zero. (But that’s also true of the eurozone, circa 2008-12.)"
It might have been 'pretty high' then but that was a much shorter recession and quicker recovery than 2008 to say the least.
"As recently as 2007, the conventional wisdom of American liberals (on fiscal policy) was essentially market monetarist—they believed in monetary offset. The fiscal multiplier is close to zero. Deficits are bad. And yet I get many Keynesian commenters who don’t know this. They act like I’m propounding some sort of weird theory. They tell me that:
"So “obviously” more G will boost GDP. In fact, it is post-2007 liberals who are the “weirdos,” who have rejected the successful policies of Clinton and replaced them with the failed policies of Obama. (Remember, this is the president who 5 years into the recovery was arguing that unemployment was still so bad that we needed to enact an “emergency” unemployment program.)"
"Some of my critics point out that GDP data is noisy, and that the speed up in growth in 2013 wasn’t particularly significant. Agreed. But the Keynesians didn’t just need a single, they needed a home run. They needed a sharp slowdown. The evidence in favor of monetary offset was becoming increasing persuasive. The Fed doesn’t stop doing monetary policy at the zero bound. If you are going to reject the previous liberal conventional wisdom, reject views held as recently as 2007, ask the public to spend a trillion dollars, you better damn well have a good reason. They desperately needed a slowdown in 2013, and got a speed up in growth instead. That’s why 2013 was so devastating. Not because it was definitive, but because fiscal stimulus was already on its last legs, increasingly rejected even by liberals such as Jeffrey Sachs. Once 2013 went against them, it was game over."
"Marcus Nunes directed me to a very interesting piece by Jonathan Chait in theAmerican Prospect, from 2001. It begins by pointing out that by the early 1990s American liberals had turned against the deficit spending policy of Ronald Reagan. Then it moves on to the Clinton Administration"
http://www.themoneyillusion.com/?p=28466
In other words, if they were for deficit spending then they must always be so. In reality if there was a different opinion then than now what have you proven? Shouldn't people be willing to change their views if facts change on the ground or if they come to a better understanding? Of course, not if you're George W. Bush who was all about 'staying the course' whatever the facts but overall changing a position doesn't prove anything malign except in Sumner's mind-if a liberal does it. That the GOP used to be the party of deficit reduction until Reagan-Cheney then said 'deficits don't matter' shows that it's not only Democrats who have shifted their view through the years. Again, so what?
"Recall that unemployment was pretty high when Clinton took office, much higher than today. Of course today’s liberals would point to one key difference, interest rates were not stuck as zero. (But that’s also true of the eurozone, circa 2008-12.)"
It might have been 'pretty high' then but that was a much shorter recession and quicker recovery than 2008 to say the least.
"As recently as 2007, the conventional wisdom of American liberals (on fiscal policy) was essentially market monetarist—they believed in monetary offset. The fiscal multiplier is close to zero. Deficits are bad. And yet I get many Keynesian commenters who don’t know this. They act like I’m propounding some sort of weird theory. They tell me that:
GDP = C + I + G
"So “obviously” more G will boost GDP. In fact, it is post-2007 liberals who are the “weirdos,” who have rejected the successful policies of Clinton and replaced them with the failed policies of Obama. (Remember, this is the president who 5 years into the recovery was arguing that unemployment was still so bad that we needed to enact an “emergency” unemployment program.)"
As usual he asserts all kinds of 'facts' not in evidence. What policies of Obama's have 'failed' exactly? In any case deficits have fallen preciptiously since 2009 so what's Sumner's quarrel exactly?
http://www.usatoday.com/story/news/politics/2015/01/26/cbo-report-budget/22353147/
As for my quarrel with Sumner, I've never seen someone so willfully refuse to engage with the facts.
As for weirdos, if he never heard of GDP=C+I+G before 2007 then he's the weirdo.
Again, politics have led both parties to assert conflicting things through the years. The Democrats for years had been the party of deficit spending. Then Reagan came along and they found religion on deficit balance. The GOP no longer cared about deficits. In the 90s deficit reduction was a big achievement of Clinton-though the GOP claimed they deserved the credit.
That quote of Chait was during the time of Bush running on blowing up the deficit again with huge tax cuts for the rich. One thing that conservatives like Sumner and Cochrane never seem capable is any sense of context or nuance. I remember Sumner praising some putrid WSJ editorial page piece of Cochrane's which saw a contradiction in Democrats believing in deficit spending and yet opposing the Iraq war.
If you believe in deficit spending you have to approve anything that raises the deficit including a war you disagree with for other reasons. I guess a liberal can't oppose the Holocaust and be conssistent-after all it raises spending.
Now Sumner moves on to his favorite illusion: he proved anything meaningful in 2013.
"Then Keynesians claimed that even the Fed didn’t believe in monetary offset. That theory lost a bit of force when (in late 2012) Fed officials said they were doing aggressive stimulus (QE3 and forward guidance) partly to keep the recovery going as Congress moved to austerity in 2013. By early 2013 it was clear that if this new form of liberalism, this rejection of Clintonomics, was going to have any plausibility they needed to be able to show that the Fed could not or would not offset fiscal austerity. And calendar 2013 was the perfect test, as all sorts of austerity came together at the same time. The budget deficit fell by $400 billion in fiscal 2013, but that year begins on October 1st. The tax increases didn’t start until January 1st, 2013, and the deficit fell by an astounding $500 billion during that calendar year. A near perfect test."
"Some of my critics point out that GDP data is noisy, and that the speed up in growth in 2013 wasn’t particularly significant. Agreed. But the Keynesians didn’t just need a single, they needed a home run. They needed a sharp slowdown. The evidence in favor of monetary offset was becoming increasing persuasive. The Fed doesn’t stop doing monetary policy at the zero bound. If you are going to reject the previous liberal conventional wisdom, reject views held as recently as 2007, ask the public to spend a trillion dollars, you better damn well have a good reason. They desperately needed a slowdown in 2013, and got a speed up in growth instead. That’s why 2013 was so devastating. Not because it was definitive, but because fiscal stimulus was already on its last legs, increasingly rejected even by liberals such as Jeffrey Sachs. Once 2013 went against them, it was game over."
Another Sumner Rule is you simply refuse to engage with any facts that don't support you're overstated claims. This is not a 'new form of liberalism'-if anything Clitonomics was much newer than national income accounting-and Clinton has explicitly embraced Obama's policies anyway-Sumner is next going to claim he didn't give that big speech for Obama at the Democratic convention in 2012.
He claims it's a 'near perfect test'-then admits there was considerable noise-so how's it perfect? It's worse than just noise, Sumner basically cherry-picked the data. If you moved either one quarter before or after his preferred data point, his 'win' falls apart totally. It's John Stuart Mill's nonsense on stilts. Again, this need for a home run exits only in his own mind. They didn't need a sharp slowdown to show that a drop in G is a reduction in GDP.
The only way to claim that Market Monetarism proved anything meaningful in 2013 is to set the bar absurdly low. What Sumner would need to show for Keynesians to be wrong in 2013 is that growth was faster with the austerity than without it. Otherwise they're right to argue against austerity.
The trouble with Sumner is he keeps trying to make such absurdly strong claims that can only be made with willful obtuseness. For all his throwing tomatoes at us alleged noneconomists, his hyperbole is hardly befitting a real economist-from what I understand most real economists are embarrassed by him these days.
No comments:
Post a Comment