dagblog - Comments for "There Is No Center"

Okay, I yield the point. The

Doctor Cleveland — Mon, 08 Nov 2010 01:01:44 +0000

In reply to Well, Keynes himself is of

Okay, I yield the point. The arguments are between people using one economic model and those using no economic model at all. I get that.

But that certainly doesn't leave any room to compromise. You can't concede, say, Megan McArdle's world view when it's based on ignorance and innumeracy.

Nope

Flavius — Sun, 07 Nov 2010 16:54:32 +0000

In reply to Well, Keynes himself is of

Nope

Well, Keynes himself is of

Obey — Sun, 07 Nov 2010 15:01:35 +0000

In reply to I agree and I don't, Obey. I

Well, Keynes himself is of course ancient history by now. By 'Keynesian' I meant the standard Neoclassical synthesis. People make too much of the fresh-water/salt-water divide, imo. Most of the objections to stimulus spending are coming from people who aren't even macro-economists - either finance people or historians posturing as amateur econo-pundits. The only macro people objecting that I've seen are Kevin Murphy and Tyler Cowen, and they do so within pretty standard models, they just plug different values for variables such as efficiency of government spending and multiplier effects - values that, by the way, are quite absurd unless you're channeling your inner Schumpeter and his religious faith in creative destruction. But, again, nobody's disputing the models. Maybe I've missed something though...

Great blog post, Dr. C. You

SleepinJeezus — Sun, 07 Nov 2010 11:57:47 +0000

In reply to Great comment, Chuck. Here's

Great blog post, Dr. C. You make a very cogent argument against this "compromised" fiscal poicy for recovery that tries to "take a little from here and a little from there" to appease everyone. It probably becomes most glaringly ludicrous when you start encountering compromise demands that allow for the spending of "stimulus" funds, but only after first agreeing to spending cuts to pay for them.

The President's quote about government belt tightening hit me like a ton of bricks when he made it. It was the point I began to really wonder if he had the skills and the courage to actually stick with a disciplined approach to fixing the economy. Or would he allow himself to be "compromised" into an ineffectual waste of tax dollars on half-measures accompanied by feignts into the "fiscal responsibility" arena advocated by the Republicans?

What we got was the worst of all possible outcomes. It seems we got all Keynesian with Wall Street and the Financial Sector, pouring hundreds of billions into them without strings attached to ensure the monies would be stimulative of the overall economy. (e.g. targeting funds for home mortgage cramdowns, reduction of interest on consumer debt, etc.). Then, we pulled in our horns after a couple half-hearted attempts and decided we couldn't afford to spend any monies that might more directly stimulate the Main Street economy.

The argument against extending unemployment benefits during a time of nearly 10% joblessness really becomes ludicrous. One thing that gets lost in the discussion of "jobs" is the definitional difference between "something to do with your time" versus "something that economically sustains yourself and (heaven forbid!) your family."

Those who insist we eliminate the unemployment safety net consider a job to be a job, nothing more. In fact, I suspect most would welcome the downward pressure on "labor costs" caused by a sudden race to the bottom on wages. "You say you will work for a loaf of bread? Too bad. Your buddy here says he'll work for half a loaf. And tomorrow, I know that the guy with the family up the street will do it all for whatever crumbs I can scrape from the table. We just gotta' starve 'em into a degree of desperation sufficient to make it all happen. And - joy to behold! - just look at how this dynamic is reflected in the labor cost indices and in the numbers measuring productivity. We're win/win here, I tell you! Unemployment numbers are down significantly! Profits are up! Costs are down! We have at last found the path to economic recovery!"

Listening to some of the economists such as Zanny Minton Beddoes and others, the arguments that ignore the impact of this recession on the "little people" become nearly so ludicrous as I've outlined above.

Ultimately, I agree with your premise that there are some inescapable realities that can't be addressed with compromise solutions. To extend your metaphor, you can't determine someone is a witch by dunking, with the determinative outcome being only a witch would survive the test. It is every bit as ludicrous to pretend that we can fix the economy with application of both stimulus and "fiscal belt-tightening."

History - and most respected economists - have shown that economic stimulus is required if we are to ever pull out of this tail-spin. What is required is leadership in Washington that has the courage to stay the course AND (most importantly!) the communication skills required to let the American people understand how it all works.

I agree and I don't, Obey. I

Doctor Cleveland — Sun, 07 Nov 2010 04:28:44 +0000

In reply to Great blog, Doc. I had

I agree and I don't, Obey. I know at least one economist who recently got mocked by colleagues when they saw him with a copy of Keynes (which he was checking out for his spouse), along the lines of "What are you doing reading that crackpot?"

And there is, as I understand it, "efficient markets" scholarship that claims that everything's fine and the downturn should be allowed to run its course. Of course, there is no Austerian economics that can be turned into anything like reasonable policy, except around the edges.

And, of course, Ron Paul, who wants to go back on the fershinlugger gold standard, is about to be chair of the House committee that oversees the Fed. Bad times.

I agree with you, Chuck. I

Doctor Cleveland — Sun, 07 Nov 2010 04:21:16 +0000

In reply to I think that I understand a

I agree with you, Chuck. I think the idea that most people who are still drawing unemployment after 23 months don't *want* a job is totally divorced from reality: it's an attempt to hide from unpleasant reality by scapegoating people.

I think that I understand a

chucktrotter — Sun, 07 Nov 2010 03:04:33 +0000

In reply to Great comment, Chuck. Here's

I think that I understand a majority of Americans...They base their self-esteem upon their productivity. Yes, I have also dealt with generations that survived "on the take" -- always taking what the government would provide for them. Their numbers were minute. I despised them, but I went on believing that man was, basically, productive and honest. Perhaps, that makes me a Patsy, but I prefer to remain delusional

Chuck

Great blog, Doc. I had

Obey — Sun, 07 Nov 2010 01:55:21 +0000

In reply to There Is No Center

Great blog, Doc. I had inchoate thoughts along the same lines regarding the whole 'return to the center' meme. But this is just beautifully laid out.

On the particular question of Keynesian vs Austerianism I do have a niggling kind of objection, though. The objection being: NO ONE, absolutely NO ONE amongst right-wing economists, is actually Austerian. The proof lies in their op-eds back in 2001, or for the ones in government, their actual 'deficits don't matter' policy at the time. Everyone in academic economics is Keynesian. Everyone holding the presidency is Keynesian. It's the only accepted theory. There is no right-to-left spectrum on that question.

If the GOP take the presidency in 2012 they will deficit spend like madmen. I don't think anyone can have serious doubts about that.

More importantly, their current appeal for fiscal prudence does not come from a desire to improve the economy. All their incentives, and their sociopathic singleminded desire for power, point towards destroying the economy one way or another before 2012. They know that is their only chance at winning. They fly the flag of Austerianism, not because they believe it, but precisely because they know it is incredibly damaging.

And most important of all, people who imagine that their big-business backers will force them to be reasonable are, imo, completely delusional. Those backers see a much bigger prize in retaking the reins of power than in modestly improved growth leading to a relected Dem administration not interested in yet more laissez faire.

Great comment, Chuck. Here's

Doctor Cleveland — Sun, 07 Nov 2010 00:40:57 +0000

In reply to Ed Schultz, the liberal talk

Great comment, Chuck. Here's one of those either-or questions:

Do extended unemployment benefits keep people from taking jobs?

The current "conservative" answer is generally yes. It's very easy to hear conservative officeholders, columnists, and bloggers claiming that extending unemployment is a "disincentive" to work. In that model of reality, people running out of benefits is going to be TEH AWESOME!!1! because people will take jobs they wouldn't otherwise stoop to and the jobless rate will decline.

The other model is that people are still unemployed after 100 weeks because there are not jobs for them. In that model, cutting off benefits doesn't get anyone a job. It just makes people destitute. And when they're destitute, they stop spending on things like, say, groceries, which means other people in their community get poorer.

One of those models is basically true.

Ed Schultz, the liberal talk

chucktrotter — Sat, 06 Nov 2010 20:49:29 +0000

In reply to There Is No Center

Ed Schultz, the liberal talk show host, has coined the term - -The 99ers. The term refers to those who have received 99 weeks of unemployment compensation which is the maximum period of eligibility. Attempts to extend the period were stymied in Congress. Since unemployment continues, I must assume that the 99ers have had to resort to Medicaid and food stamps. Many are experiencing foreclosure on their homes. I see continued gloom in the years ahead. State and Federal budgets are (or will be) soon depleted. Yet the presses at the treasury are running at full speed as we print more and more currency with less true value. For those collecting the various free benefits, I'm certain many able-bodied people would rather be gainfully employed. Some would happily live their entire lives drawing "Free Money" and services, but I believe that many unemployed Americans would love to be doing productive activities again. As the value of our dollar plummets, we must receive some results from the generous benefits which we so freely provide. This is the time to act. A program similar to the Emergency Relief and Construction Act must be implemented as was enacted during the Great Depression. To respond otherwise could cause a world-wide collapse of the financial structure. A new WPA may be our only hope. Sitting on the fence has accomplished nothing!

http://en.wikipedia.org/wiki/Works_Progress_Administration

I sense that the GOP would gladly see our economy (and middle-class) collapse if inaction assured that Obama would not become a two-term president.