She who is always wrong™ may want to check on what her
September April call-ups are doing. Here’s Adam Ozimek in McArdle’s space pointing out four things upon which just about all economists agree, and among them he lists the virtues of the stimulus:
Economists may differ on whether the American Recovery and Reinvestment Act was worth the cost overall, but they are in solid agreement that as of the end of 2010 it lowered the unemployment rate. Very few disagreed with or were uncertain about this. In contrast, a significant number questioned whether the recovery act was worth the cost. Importantly, in the space for comments, Stanford’s Pete Klenow emphasized what Scott Sumner and others would say is the central issue: “how much was it offset by less aggressive (than otherwise) unconventional monetary policy?” But even stimulus skeptics should keep their criticisms in perspective: economists strongly reject the idea that stimulus is to blame for our economic woes.
In addition, economists strongly agree that the bank bailouts also lowered the unemployment rate. Of course as Austen Goolsbee commented: “the fact it was necessary doesn’t mean we should be happy about it.”
McArdle, canny as she is, has been careful not to go too far into the weeds on this one.
She doesn’t seem to have said that stimulus as a concept could only fail — as some notables (cough-cough, Mitt) on her side of the aisle have done and continue to do. But she has consistently said that only a Platonic ideal of a stimulus had a hope, and that any real world attempt is a waste of time. (Bonus question for those who follow that link. Spot and name the dire distortion of the history that lies behind her carefully tweezered quote from Paul Krugman.)
BTW: here’s what Krugman actually had to say about the stimulus in 2010:
The good news from the new GDP report is that the fiscal stimulus seems to be working just about the way a sensible Keynesian approach says it should. The bad news from the new GDP report is that the fiscal stimulus seems to be working just about the way a sensible Keynesian approach says it should.
Josh Bivens at EPI has a good overview of the evidence that the stimulus is working. As he says,
“A serious look at the evidence argues that this debate should be closed: ARRA has played a starring role in pushing the economy into positive growth.”
And here’s Krugman this spring:
On the policy side, major new stimulus may not be in the cards — but there is a real divide in the US between modest stimulus proposals that have some chance of getting implemented and major austerity moves that also have some chance of being implemented. The difference between those two policy variants could be the difference between unemployment below 7 percent two years from now and unemployment back above 9 percent. So this argument has real short-term policy relevance.
So much for McArdle’s bravura, data-less claim that
…we have had two major cases that massively favored Keynesian economics [the New Deal and the Obama stimulus] but Keynesian politics failed both times.
And as for her conclusion that
…at some level, there’s no point in spending a lot of time designing policies which can’t be enacted in any conceivable democratic polity.
…well, if by “any conceivable democratic polity” you mean one in which one of two major political parties had decided to transform itself into an authoritarian cult, then yes — the GOP, using the procedural rules of the US Senate, certainly limited what was possible. It requires a heroic act of willed blindness to the elephant in the room, though, to see that outcome as an inescable, sadly necessary cost of democracy.
But just on the merits of this one guest post, I’d say that McArdle runs a serious risk if her audience gets used to even occasional economically literate commentary. Perhaps even that Amen Chorus might notice a lack of couture bedecking the empress.
Image: Henri Rousseau, The Equatorial Jungle, 1909
Cross posted at the Inverse Square Blog.
Dyspepsia broke mah sous vide.
Didn’t you swear to go cold-turkey on McMegan?
not sure about this statement:
‘ Stanford’s Pete Klenow emphasized what Scott Sumner and others would say is the central issue: “how much was it offset by less aggressive (than otherwise) unconventional monetary policy?” ‘
Bernanke has repeatedly asked for more fiscal stimulus to help out his monetary policy with sustaining recovery, not complaining that the stimulus was creating problems for him implementing monetary policy he thought was more effective.
The political argument is a little bad faithy, IMHO. In other words, some prominent economists go rogue (and outside their field of expertise) and make wild and false statements about elementary macroeconomics, and hack pundits give spotlight to them, and then the pundits complain about what is politically possible, as if their bad efforts did not affect what is or is not politically possible with the Very Serious People in charge.
And seems to me that the very unconventional monetary policy stimulus needed for this deep recession is NOT immune from political factors either. Remember the nonsense from the GOP about ‘debased currency’ and insane gold buggery?
Is standard monetary policy more immune from political obstacles than fiscal policy? I think so. But there is nothing standard at all about the monetary policy that Summer has been calling for.
None of the economists surveyed disagreed that the gains to freer trade are much larger than any costs
“Freer trade” being defined as, what?
These ultra-scientific polls always lose me.
Lemme guess… FDR didn’t follow Keynesian theories in 1933 because Keynes didn’t publish his “General Theory” until 1936?
Has it been six months already?
My how the time flies.
I would also like to point out Megan’s opposition to the auto bailout was severely wrong on many levels.
Wait, the New Deal failed? Did FDR lose WWII in her alternate reality as well?
on the bright side, Adam will not be invited to sample Blenderella’s bechamels and will therefore not be mugged in her gentrifying too slowly neighborhood whilst walking home like yglesias did.
@dmsilev: I failed. 12 more steps for me.
@jl: Yeah–Ozimek didn’t claim the economists were all correct — and what is notable anyway is that, as Krugman points out here even if the freshwater types aren’t going to admit their mistakes, the argument is moving away from them.
Her commenters are below hopeless.
Once she wrote :
“It is all a statement of faith; the empirical estimates of any of this stuff are shaky. The model that tells you spending cuts are stimulative is the same model that tells you tax cuts are stimulative; any difference between them is an empirical question we haven’t answered.”
6 of her minions loved it. Then, pushed, she stealth edited spending cuts to hikes – no more love from the fans.
I dived into some reviews of 2007 recession by real business cycle and new classical macroeconomists last weekend. The more straightforward reviews said that, basically ‘Man, this thing stumps me’. The less straightforward were threw alot of correlations and calibrations up against the wall and tried to argue that some of it might stick, as more data come in.
I think Krugman was right that Keynes/Hicks, supplemented with Minsky/Fisher are the only theoretical approaches we have that have any explanatory or predictive power at all, or any guidance for policy, other than wait for the storm to pass so we have the data we need to recalibrate.
So, the choices are to go DeLong/Krugman road and argue for gap between current and potential GDP, and advocate stimulus to get better macro numbers and increase welfare. Or, you go Mankiw, and say you might advocate stimulus to get better macro numbers, which may or may not increase welfare depending on extent of gap between current and potential GDP, and are cagey on how to determine the size of the gap.
Judas Escargot, Your Postmodern Neighbor
Paul Ryan: Raised and educated on Social Security money. Seeks to destroy Social Security.
Megan McArgle: Childhood privilege, funded on taxpayer dime. Opposes most public works spending.
I do not fucking understand these people.
Huh? Like McMegan, I am not an economist, but even I know that Keynesian-type policies worked as intended during the Depression and it certainly worked during the Recession. The only reason it wasn’t as successful as it could have been either time, but especially this time around is that fucking assholes who are about as economically literate as Ms. Vitamix wouldn’t pass legislation that actually would make a big difference.
Oh, and Tom? I just absolutely adore Rousseau. My favorite Post-Impressionist.
I always think of this whenever I see his work. Crank it.
Also, too, I never tire of “Blenderella.” Cracks me up every time.
Defined as “trade policies that lower working class wages via global labor arbitrage, do little or nothing to decrease rent collecting by elites, and increase the ambit of rent collection via greater international recognition of so-called intellectual property rights, all for a putative increase in GDP according to theory, while ignoring potential increases in economic inequality because blah blah blah Pareto blah blah blah.”
The republican economic plan, set to music:
These kids would probably even let the various GOP douchenozzles use the song for their campaigns if the money is right.
so sadly, this will never happen. too much truth in it.
@geg6: It’s a classic reject-the-parents lifestyle choice. Ah, rebellious youth, rejecting their parents’ lazy, immoral liberal lifestyle.
See? The pink Himalayan salt and the $350 bottles of wine are acts of defiance.
This sounds wonderful! My almost 5 year old wants so badly to learn to play the piano like his big sister. We will definitely try this!
@Judas Escargot, Your Postmodern Neighbor:
I do, if by “understand” you mean “recognize them as stunted, selfish pricks.”
@Judas Escargot, Your Postmodern Neighbor:
Just typical assholes wanting to pull the ladder up behind them.