Conservatives tend to be very rash in declaring victory which is also demonstrated by the recent hubbub over the Oregon Medicaid study. The real question that needs to be asked there is whether this report shows that health insurance in general is useless-as beneficiaries are no more healthy than those who are uninsured or just that Medicaid is supposedly useless.
I mean has anyone give this test for private health insurance or Medicare? Then what exactly are the policy implications? Not that conservatives let this worry them. They are declaring victory. Liberals who support Medicaid are refuted. states should reject ObamaCare's funds for expansion. Case closed.
http://theincidentaleconomist.com/wordpress/oregon-medicaid-experiment-is-a-rorschach-test-of-peoples-views-of-the-aca/
In monetary policy Sumner is doing the same thing. Yesterday's numbers were good though not great. So case closed the Keynesains warning against the sunset of the payroll tax holiday and the sequester are decisively refuted, once and for all.
"Well you guys had a nice little run, but it’s all over now. Monetary offset stands triumphant."
http://diaryofarepublicanhater.blogspot.com/2013/05/dow-crosses-15000-for-first-time-with.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29
Of course, he wasn't done. Later we hear more about a "Keynesian embarrassment."
"I think the recent jobs numbers are a huge embarrassment to Keynesians. If we’d gotten 50,000 jobs a month for the first 4 months, they’d be crowing that their model is vindicated. So what’s the criterion for testing it? Are we to assume that favorable data can prove Keynesianism and discredit other models, but unfavorable data is inconclusive? That’s a recipe for never rejecting Keynesianism. Which is exactly the point I guess."
http://www.themoneyillusion.com/?p=21028
I don't know what the criterion for rejecting Keynesianism might be but it needs a lot more than opportunistically grabbing hold of one headline.
Although he approvingly quotes other MMers, if anything, they are more careful than Sumner. Here he quotes Josh Barro:
The Fed should have done more in late 2012, but did enough to offset the expected fiscal austerity:
"This is misleading, as the main issue in late 2012 was the fiscal cliff. The tax increases were expected to shave about 1.5% off growth. The sequester came later, and may have been partially unanticipated by the Fed. It’s now pretty clear that economic growth in 2013 is not going to fall by 1.5%, rather it looks like it will be similar to 2012. Indeed so far job growth is ahead of the 2012 pace. Of course other things are never equal, but the main “other thing” has been the very disappointing performance of Europe, even worse than expected. That’s a “headwind.” It’s increasingly clear that the main difference between the US and Europe is monetary policy. So why not do even more?"
The trouble with this is can Sumner tell us that the numbers yesterday would have been weaker without the sequester? If the answer's no there's no embarrassment for the Keynesians. Sumner keeps dropping this 1.5% drop in GDP as if it cinches the defeat of the "Keynesian multiplier."
I don't know that Keyensians were predicting any 1.5% drop in GDP. Interestingly some analysts in the business community think there may be a 1.5% drop-off what we otherwise would have had:
"Whatever the data ultimately show for April, economists like Diane Swonk, chief economist for Mesirow Financial in Chicago, say the economy would be showing much more momentum if it were not for the combination of higher payroll taxes that went into effect in January, as well as the process of automatic spending cuts known as sequestration that began to bite last month."
I mean has anyone give this test for private health insurance or Medicare? Then what exactly are the policy implications? Not that conservatives let this worry them. They are declaring victory. Liberals who support Medicaid are refuted. states should reject ObamaCare's funds for expansion. Case closed.
http://theincidentaleconomist.com/wordpress/oregon-medicaid-experiment-is-a-rorschach-test-of-peoples-views-of-the-aca/
In monetary policy Sumner is doing the same thing. Yesterday's numbers were good though not great. So case closed the Keynesains warning against the sunset of the payroll tax holiday and the sequester are decisively refuted, once and for all.
"Well you guys had a nice little run, but it’s all over now. Monetary offset stands triumphant."
"PS. I should clarify that the big story is the revisions. We are adding 196,000 jobs per month this year, which is actually more than last year, despite the austerity."
http://diaryofarepublicanhater.blogspot.com/2013/05/dow-crosses-15000-for-first-time-with.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29
Of course, he wasn't done. Later we hear more about a "Keynesian embarrassment."
"I think the recent jobs numbers are a huge embarrassment to Keynesians. If we’d gotten 50,000 jobs a month for the first 4 months, they’d be crowing that their model is vindicated. So what’s the criterion for testing it? Are we to assume that favorable data can prove Keynesianism and discredit other models, but unfavorable data is inconclusive? That’s a recipe for never rejecting Keynesianism. Which is exactly the point I guess."
http://www.themoneyillusion.com/?p=21028
I don't know what the criterion for rejecting Keynesianism might be but it needs a lot more than opportunistically grabbing hold of one headline.
Although he approvingly quotes other MMers, if anything, they are more careful than Sumner. Here he quotes Josh Barro:
The Fed should have done more in late 2012, but did enough to offset the expected fiscal austerity:
The results so far are good but not great. Job growth is steady and economic growth is modest but positive. Sequestration’s human impacts are real, but a macroeconomic drag is not yet apparent. This looks a lot better than Europe, where the central bank hasn’t been so aggressive and many economies have slid back into recession.Yet we should worry about the limits of the market monetarist approach. Monetary and fiscal policy are both constrained by political forces, not just economic ones. A full year of sequestration cuts amount to 0.5 percent of gross domestic product, which is significant but substantially less than the degree of fiscal tightening than Ponnuru and Beckworth advocate.
"This is misleading, as the main issue in late 2012 was the fiscal cliff. The tax increases were expected to shave about 1.5% off growth. The sequester came later, and may have been partially unanticipated by the Fed. It’s now pretty clear that economic growth in 2013 is not going to fall by 1.5%, rather it looks like it will be similar to 2012. Indeed so far job growth is ahead of the 2012 pace. Of course other things are never equal, but the main “other thing” has been the very disappointing performance of Europe, even worse than expected. That’s a “headwind.” It’s increasingly clear that the main difference between the US and Europe is monetary policy. So why not do even more?"
The trouble with this is can Sumner tell us that the numbers yesterday would have been weaker without the sequester? If the answer's no there's no embarrassment for the Keynesians. Sumner keeps dropping this 1.5% drop in GDP as if it cinches the defeat of the "Keynesian multiplier."
I don't know that Keyensians were predicting any 1.5% drop in GDP. Interestingly some analysts in the business community think there may be a 1.5% drop-off what we otherwise would have had:
"Whatever the data ultimately show for April, economists like Diane Swonk, chief economist for Mesirow Financial in Chicago, say the economy would be showing much more momentum if it were not for the combination of higher payroll taxes that went into effect in January, as well as the process of automatic spending cuts known as sequestration that began to bite last month."
“What’s the biggest drag on the economy? The government,” Ms. Swonk said. “If the government simply did no harm, we could be at escape velocity.”
"Without the impact of federal cuts and higher taxes, Ms. Swonk estimates, annual economic growth would be close to 4 percent, above the 2.5 percent pace she is expecting in 2013."
So if you're going to do a counterfactual it can go the other way as well: how do you know the numbers wouldn't be better without the sequester? Matt Yglesisas says this regarding yesterday's numbers:
"Does that mean austerity is wonderful and fiscal stimulus is bunk. No, it doesn’t. The standard critique of fiscal stimulus is that since the Federal Reserve has such a large role in steering the macroeconomy, monetary policy will offset any attempted fiscal expansion with deliberate monetary contraction. The plain text of the Evans Rule is a temporary suspension of this principle. If fiscal stimulus causes both an increase in real growth and an increase in the price level, the Fed will smile upon that conclusion as long as the impacts are modest. The Fed has given Congress a very effective parachute to counteract the fiscal plunge, but Congress could enact a jetpack that would be even more potent."
Sumner doesn't like this as he does believe that 'austerity is wonderful and fiscal stimulus is bunk.'
"I agree with much of Yglesias’s post, but not the final paragraph I quote. And the reason is nicely explained in the Avent quotation—the Fed is steering in both directions; more QE or less, it all depends on how the economy is doing."
So Sumner perhaps believes that austerity can be expansionary in the sense that the more fiscal tightening the more it forces the Fed to do to offset. If Sumner's right what we have is a Fed that will always offset deflation but no more. So in his view austerity is good as it increases monetary easing and perhaps lowers government debt.
I often feel like the voice in the wilderness against Sumner. Many Keynesians like Unlearning Econ or Greg get so revolted by Sumner's antics that they can't bear to read him. I think that if someone the stature of Krugman were to call him out it would be huge. I know Krugman doesn't want to get into too many foodfights but this is a fight I think he should way in on at least once.
I'm glad there are a few other souls trying to repsond and fill the vaccuum.
Even Sumner's fellow arch MMer, Beckworth says this:
"With all that said, the stable employment and AD growth is far from what is needed for the economy to reach escape velocity. Therein lies the shortcoming of QE3 and the other, previous asset purchasing programs of the Fed. They have been enough to stabilize growth, but not enough to shore up a robust recovery. And that is frustrating to watch."
If we aren't getting enough bang out of monetary policy for the Fed's timidity why do we want the sequester? This is the trouble as I see it. Unless you can say-as Sumner insists on the counterfactual game-that we would have seen fewer jobs created without the sequester where's the embarrassment for Keynesians?
Next they'll be claiming that poor people are actually happier with chronic hunger.
ReplyDeleteDid you see the clip of that "outreach to minorities" session led by a black "Frederick Douglas" Republican at CPAC... who got some push back from a white member of the audience implying that slaves were actually happier when they were being cared for by their benevolent white masters? Those aren't exactly the words he used, but that was the implication!
Yeah. The GOP usually says a way from racial dialogue but once they get into it you see the method in their madness
ReplyDelete