As others have noted, conservatives who'd like bash the president on the economy are having an awfully hard time right now, as the recovery proceeds apace. Too slowly apace, for sure, but no objective observer can miss that the trend is our friend and that even the job market, while still far too weak and with conspicuous downsides (intractable long-term unemployment), is improving.
So, they're stuck with "yeah, things are getting better, but if we were in charge, they'd be even better!"
This, of course, is the flip side of a rap with which I'm intimately familiar: "sure, things are bad -- but without our actions, they'd be even worse!"
Neither are convincing to most people, because most people don't engage in the economist's counterfactual: the path the economy would have taken absent your interventions. It's the "compared-to-what" in the above statements.
Thing is, I know and believe, within confidence intervals, my counterfactual. It comes from tried and true modeling based on the historical relationships of how advanced economies respond to stimulus.
Or, if you don't like that sort of thing, you can derive a counterfactual from simply projecting the course the economy was on before you did your policy thing, and compare that to the actual path of growth and jobs (you can see that approach here -- see discussion around Table 3). [Note: the fresh-water economists, who continue to willfully ignore critical lessons of our past, deeply disdain the Keynesian multiplier models -- but I haven't heard their objections to this other, much less theoretical approach, as in Table 3 in the above doc.]
What I don't get is their counterfactual. Other than unconvincingly waving hands, muttering how things should be better, how the EPA and OSHA rules are killing businesses, yada, yada -- let's see some analysis.
Gov. Romney's got real economists on his team. If he wants to make the case that things would be better if we followed his plan -- which actually looks pretty Hoover'esque to me -- explicitly anti-stimulus re: jobs and liquidate the housing market -- let's see the model. True, most people won't believe it anyway, but those of us familiar with counterfactual analysis would like to see if there's anything there, or is this just disgruntled smoke-blowing.
I'm not saying we (when I was with the admin) or the Federal Reserve got everything right by a long shot. But what I don't see is anything approaching a coherent argument about how things would be better otherwise.
This post originally appeared at Jared Bernstein's On The Economy blog.
The long term goal is to continue to roll back social spending programs, especially Social Security but also Medicare and Medicaid. The right wing wants to halt any new social spending that might require a fight to eliminate it later.
Arguments are made to discredit good economic policy or at least cast enough doubt to erode the necessary political will or give cover to cowardly politicians by confusing the public. Stimulus and job creation requires political will and positive action. Stopping stimulus only requires that opponents create enough misinformation to cast doubt on the policy and erode political will.
- Hoover attempted to control wages and prices
- Hoover increased the size of government and federal spending
- FDR campaigned AGAINST the excesses of Hoover's policies
- Hoover was a big-governÂment man, not laissez-faÂire
Hoover: "we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world."
Roosevelt on Hoover: "reckless and extravagant spending" ... wrongly thinking "that we ought to center control of everything in Washington as rapidly as possible" and "the greatest spending administration in peacetime in all of history."
Roosevelt's running mate Garner on Hoover: "leading the country down the path of socialism."
What it means is that non keynsian economics was applied by Hoover, with even a balanced budget in 1930, and decreased budget in 1932... and the Depression did not fix itself... by doing little or nothing as Austrian/Paul economics and repubs state... s/b the result over a 4 year period.
Hoover did believe in the efficnyc of centralization of Government, whihc by the way is proven by highly cetrailized reguklatory systems, education and helathcare beating us. .
Roosevelt like Paul or anyone can say one thing, but when faced with the actual situation... must then wash the idealogy away and get things done... something that Paul has never done nor had to do.
Kenedy ran on a nonexstant missle gap as I recall.
In fact Roosevelts mistake was going back to his Fisical conservative nature, with repoubs in 1936, such that we fail back into the depression in 1937...
..
Regards
Reagan ran on cutting the government and cutting spending, and doubled the size of government and trippled the debt.
Regards
Getting into a strictly data-based argument with an econometrician is like getting into an arm-wrestling contest with an octopus. Having lost sight of the fact that the numbers are results, but not necessarily causes, the argument will be long, messy, and unsatisfying. To a great extent, the economy is a mathematical cipher: easy to calculate going in one direction but almost impossible to crack going back the other way.
Yes, it's important to quantify, to measure results. That's how we know what's happening. But that measurement can't be depended upon to tell us why.
The counterfactual here is that government policy should work toward human responses that foster prosperity: a) family stability, b) preparing the citizen for gainful employment, c) confidence and optimism, d) rational risk-taking, e) self-sufficiency through individual saving and investment (capital creation).
Keynesian stimulus without Keynesian budget balance over the business cycle and without Keynesian balance-of-trade works to undermine these human reactions, so it leads us away from sustainable prosperity.
More dialectic and fewer equations would work wonders.
It's pretty clear that conservative pundits claim Obama's economic policies have made the economic situation we are in worse, or, are making the recovery slower. And, dialectic argument can only occur insofar as the opposing viewpoints participate in rational discussion.
Clearly, those with the hypothesis that the administration's stimulus policy improved the economic conditions have, as a part of their argument, statistical RESULTS that confirm the hypothesis. Statistically significant results, although not confirming causality, is a far more rational approach to test a hypothesis than the RHETORIC that fiscal conservatism is somehow better.
While both sides CAN try to rationalize their two fundamentally different hypotheses, regarding economic theory, with discussion, eventually - because of their incompatibility - they will have to start discussing the truth of situations with evidence. Here, again, statistical evidence and arguments would be helpful.
But as the author of the article says, "But what I don't see is anything approaching a coherent argument about how things would be better otherwise."
The argument that fiscal conservatism would have better consequences on the economy is tired rhetoric and, as a counter-factual, pales in comparison to that second quarterly report.
1) Germany has not only not done anything like our stimulus, they in fact have imposed fairly severe austerity upon themselves, and the general consensus is that Germany has a stronger economy than we do;
2) We can know with a certainty that our nation debt has increased from ~$10T to ~$15T, increasing the service on our debt from $200B/yr to $300B/yr;
3) We have for a certain fact that nobody has offered an explanation how stimulating the leakiest economy in the world is going to create a sustainable economic recovery in America (although it's doing wonders for China);
4) Nobody has even bothered to address the other two legs of Keynesian policy that are required to make the 'stimulus' part work; Ie; balancing the budget over the course of the business cycle and regaining a balanced current account (both of which Keynes insisted on).
5) We can know from observation that whatever gains have occurred in the economy are due to a) individual citizens reallocating capital and labor, and b) monetary policy at least as much as any fiscal policy coming out of DC.
Accusations add no information to the discussion.
The numbers can be tortured to confess any admission that the interrogator desires to extract
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"Bad economists are still economists. Even if they're wrong and foolish, we have a right to ask for a better explanation of what they'd do differently and how that would theoretically work so that we can point out the flaws in such a plan.
posted Feb 8, 2012 at 12:53:17
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It was censored I was unable to write back. Why? What was possibly wrong with this post? Where is the standard to proceed in this joint?
It does not meet any of the citieria of a depression, thats why no one has heard of it! It was not a depression, , it was cyclical and the norm post war situation .. It did have a breif shpar asste /price devaluation period...
Its the Ron Paul norm of re writing history to prove his opinions and making fools of his followers.
regards
The biggest increase in spending under Hoover, was under 300 million... not much stimulus when in that same year, the GDP dropped by over 4 billion! of coure repubs will not show the actual amounts.. but the percenatge swing.. so very misleading... but thats thier intent.Yet inspite of these rops in tax revenue Hoover had asuplus in 1930... so Hoover did not stimulate the economy in any meaningful way.
And Hoover deficits were because tax revenue due to the drop in GDP fell by 50%, not becuas of spending increasae, the highest being under 300 million!!!!.
Regards