Thursday, May 23, 2013

Dept. of Missing the Point (Kinsley ed.)

A wonderful example of the myopia of the deficit scolds...

The background is that Michael Kinsley wrote a particularly bad column last week about "austerity," a key point of which was based on factually incorrect memories of what went wrong in the 1970s; as you can imagine, this earned him plenty of corrections and dismissals from people who used access to accurate economic and government policy statistics. 

Kinsley was quite taken aback by this, apparently, and wrote a follow up to defend himself. Dan Drezner has already pointed out that Kinsley is still relying on the same inaccurate memories that got his first column into trouble, but I actually found a different part of Kinsley II more interesting, in which he thinks he's caught Paul Krugman in a contradiction.

Kinsley writes:
Paul Krugman takes credit for good economic news whenever it happens. On Krugman’s blog site (“The Conscience of a Liberal”) last week were two bits of prose side-by-side. One was an ad for his latest book, End This Depression Now! “How bad have things gotten?” the ad asks rhetorically.” How did we get stuck in what now can only be called a depression?” Right next door is Krugman’s gloat about the recent pretty-good economic news. “So where are the celebrations,” he asks, “now that the debt issue looks, if not solved, at least greatly mitigated?” Greatly mitigated? By what? Certainly not by anyone taking Paul Krugman’s advice. He has been, in his own self-estimate, a lone, ignored voice for reason crying out in an unreasoning universe.
What's the problem? The linked post by Krugman isn't a gloat about good economic news! It is, to be sure a gloat; it's a gloat about deficits...Krugman goes so far as to call lower deficits "progress," although as I read it he's really just saying that lower deficits should be counted as progress from the point of view of the deficit scolds.

What's happening here is that Kinsley is projecting onto Krugman a classic deficit scold mistake; Kinsley is conflating the federal budget deficit with the economy. Krugman isn't doing that; it's purely Kinsley's invention.

It gets, however, to exactly why Kinsley was buried under a large pile of abuse after his first column. Well, in part; the other part, as Krugman notes elsewhere, is "the existence now of a policy blogosphere...which makes bluffing harder." Say something factually inaccurate these days, and you're going to get slammed; it seems that some pundits who preceded that development find it hard to get used to it.

But the other part is conflating the federal budget deficit and the economy is really a pretty big deal. It might even explain, by the way, Kinsley's faulty memories of the 1970s; if bad economic times are synonymous with large budget deficits, then there "must" have been deficits back then. It's less of a argument about deficits causing bad times than a tautology about deficits meaning bad times.

And the problem is that outside the myopia of deficit scolds, there are real policy choices about fiscal policy. Which are extremely difficult to make well when a large part of the political culture is trapped inside, well, deficit nonsense.


  1. It's also embarrassing that Kinsley holds Krugman responsible for ad copy related to a book that came out more than a year ago.

    Kinsley was once kind of a hero of mine, and it's sad to see what he's become.

    1. Ditto this. Or is it sad to think I was an idiot too?

    2. The fact that Kinsley was once a kind of hero of yours is depressing.

      He has always been a mindless contrarian.

      He finds counter-factual sh%$ to say, and uses it to make himself appear informed and intelligent.

      I call such mindless contrarianism "Michael Kinsley Disease".

  2. Awesome. I thought of the deficit = economy fallacy too.

  3. Krugman says, "the existence now of a policy blogosphere...which makes bluffing harder." This idea is in nearly exact contradiction to Hitler's "The bigger the lie, the more people believe it". In this one case only, I think Hitler was more right than Krugman.

    First, Kinsley: yes, Kinsley is not careful about distinguishing between the debt and annual deficits. He's got good company: just about everyone. When he talks about the debt (e.g. his title: "Anti-austerians: Probably wrong about the debt..."), he has good supporting evidence - Reinhart-Rogoff's infamous spreadsheet.

    Reinhart and Rogoff recently published an errata to their infamous paper, which concludes:

    median growth rates for countries with public debt over roughly 90 percent of GDP are about
    one percent lower than otherwise.

    No one much disputes this, no one can really argue that the 90%+ debt:GDP countries never do much better than America's current middling GDP growth forecast - the thing about Krugmania is that you just totally don't have to care. At all. You just look at each other, roll your eyes sadly, and plow forward with policy prescriptions (driving up debt for America 2013 will push GDP growth much past the current ~2.5% forecast) that have no empirical basis in reality.

    So Krugman thinks that the existence of the blogosphere will stop people from believing in prescriptions that are totally divorced from reality? (e.g. big debt adds for a 100% debt/GDP country can drive growth past 3%). Ha, ha, good one, Professor.

    1. "No one much disputes this, no one can really argue that the 90%+ debt:GDP countries never do much better than America's current middling GDP growth forecast"
      This is simply not true. Some countries did well with high levels of debt. Some did very badly. The question is, did the high level of debt cause the bad dtimes, or did bad times (or, in some instances a major war) cause high levels of debt. Until you can prove the former, the numbers are just an interesting correlation.

    2. CSH, I believe Japan's debt:GDP ratio is on the order of 300%, and its economy picked up almost immediately after the application of fiscal and monetary stimulus in recent weeks. I wouldn't advocate building the debt up to that level, but allowing the economy to stagnate can actually get you there, too. I think that's pretty much how Japan did it. Better to do something to get your GDP up so that you're then in a position to get your debt down.

  4. Both Kinsley and CSH raise an interesting issue. Do any of Krugman's critics bother to read and understand what Krugman is saying? It seems most of Krugman's critics can't be bothered and end up blathering a bunch of nonsense and attacking a Krugman straw-man. CSH, please read Krugman's posts from the last month to see why Reinhart and Rogoff paper might not be a valid guide to GDP growth.

  5. Not only does CSH need to update his reading comprehension of Krugman, he needs to do that for his reading of Bernstein too:

    "First, Kinsley: yes, Kinsley is not careful about distinguishing between the debt and annual deficits."

    No, that isn't the point. Kinsley isn't having a problem distinguishing the *deficit* from the *debt*, he's conflating the deficit/debt with the *economy*.

    He talks about"Krugman’s gloat about the recent pretty-good economic news". No, Krugman is discussing (he isn't really gloating) about recent deficit reduction. As Krugman and others have pointed out, at this point in the recovery, good *deficit* news is actually bad *economic* news.

    So Kinsley is saying, mistakenly,that reduced deficit = good for the economy. That ain't necessarily so.

    1. I read him, he says stuff like "real policy choices about fiscal policy...are extremely difficult to make well when a large part of the political culture is trapped inside, well, deficit nonsense". Trapped inside deficit nonsense, here, equates to noticing that, on the Reinhart-Rogoff spreadsheet, as you move to the right (toward higher Debt:GDP), the resulting GDP growth goes down, and no country above 90% Debt:GDP averaged much higher than our current 2.5% or so GDP growth. Maybe, as many have suggested, none of those other countries thought of more deficit spending to solve the problem of their debt overhang; maybe John Maynard Keynes was some sort of mysterious lost figure to history until Paul Krugman found his textbooks, dusted them off, and looked through them.

      I think the Cheney-esque "deficits don't matter" argument bugs me because it implies a certain annoying effete, liberal, East Coast elitism that sees the rest of America as Homeric (Simpson) morons. Cause, y'all don't say deficits don't matter, as we recall, Krugman (unlike Bush) thinks the debt overhang is a really big deal, and soon enough we will take significant measures to fix it.

      As a result of said measures, folks like Krugman would almost certainly not hire here (if they were small businesspeople), on the obvious understanding that the big budgetary changes to come will be a bigger problem if they've staffed up. They would not react that way, but Joe Ambulatory Hamburger will get a bunch of liquidity in his hands and go out and hire, because unlike the lords of effete liberalism, Joe Ambulatory Hamburger can't tell what's coming.

      Backslash sarcasm - sorry guys, arguing (as Krugman does) that you can borrow a bunch of money, here on the brink of wrenching change, and get a bunch of knuckle-dragging losers to expand their businesses by making long-term hiring decisions - what a waste of money.

    2. CSH, did you just imply that Dick Cheney is guilty of "a certain annoying effete, liberal East Coast elitism..." for his "deficits don't matter" argument?

    3. Heh. Actually, massappeal, your question is a good illustration of my point, as I said "Cheney-esque", which means "somewhat like Cheney but not exactly the same". For the difference, we need look no further than Krugman's own reconciliation of his shift from a sky-is-falling deficit hysteric (in the modest debt:GDP days of 2003) to his new, smoke 'em if you got 'em attitude in these much more alarming debt:GDP times.

      Paraphrasing Krugman's explanation, the reason why the liberals of today are only Cheney-esque is, unlike Cheney, the liberals' deficit mania is time-limited. Cheney, Krugman tells us, didn't give a shit, he was just spend spend spend without a care, and Krugman knows the debt overhang is a problem, he knows the spendy madness must stop, and really pretty soon...

      ...but in the meantime, eat, drink, be merry and grow your businesses, flyover country morons, and try not to notice that tomorrow it may all die away.

    4. CSH, it's Krugman who's worried about Homer Simpson, and the effete coastal elites who downplay unemployment, hence actual quality of life, in flyover country. That's one of the points he's constantly making. (Krugman, I mean, not Homer Simpson.)

      Also, what "spendy madness"? Total government spending as a share of GDP is back where it was in '92 or, if you prefer, '07 or thereabouts:

      I look at figures like this, and especially the current trend line, and for some reason my blood does not run cold with terror.

    5. Actually, Jeff, if you change the end year on that chart to 2013, you'll see that current FY spending is a higher % of GDP than any year back to 1990. But that's only half the story, as we all know: revenues are way down due to tax cuts and malaise (I've argued here for returning at least to Clinton-era rates, and maybe even a bit higher: in my experience that was about as popular as pitching Geoff Colvin at a Steve Sailer convention).

      I do thank you for your comment, and wish to clarify that the discussion makes me self-conscious, because I sound awfully trollish, given the composition of the community. If people want to push for big stimulus when debt is small, say less than 30% of GDP, knock yourself out. Not sure I'd support that, frankly, as while the current ~2+% GDP growth environment is hardly gangbusters, I think I'd give the animal spirits a chance to breathe. But there's nothing inherently alarming about stimulus when the debt overhang is small.

      In fact - I'm even the guy who argued that, if you could assume total transparency of motivation from politicians and citizens, it would make sense to borrow every last dollar Chinese and Japanese people are willing to lend at essentially 0% interest.

      Setting aside ideology and Keynes and partisanship, what this conversation simplifies to is whether you believe that Krugman's position of "big borrowing today" is the solution to getting Joe Little Guy hiring again. IMHO, Krugman's further argument of "significant budgetary readjustment tomorrow" pretty much answers that question. I swear that's not ideological; its just how I see it.

    6. OOPS - I meant to say that current FY spending is a higher % of GDP than any pre-financial meltdown year back to 1990...

    7. Right, I shouldn't have said "is back to," I should have said "is rapidly getting back to." But that seemed to me the important data point. Also, it bears noting that the recession spike is as big as it is partly because GDP was down, not just because spending went up.

      But the key issue, if I understand you, is what would bring about more hiring. There have been surveys on this; here's the most detailed recent analysis of those that I could find:

      The bottom line seems to be that the big problem for businesses has been lack of sales. The Keynesian answer is: put money in people's hands; people want stuff, so they will then start buying; sales will pick up, and unless the business people in these surveys are lying, this will induce them to hire -- which then becomes a virtuous cycle, because the people being hired also then have money and want stuff, etc. (Secondarily, help households pay down their debts faster by allowing moderately higher inflation. This will divert some household spending from debt service to buying stuff.)

      And yes, the government could do this with money borrowed at 0% interest or close to it. Meanwhile, (a) there is no sharp dropoff in growth when debt reaches 90% of GDP (that claim of R-R's was apparently just wrong), and (b) we're seeing federal debt stabilizing at under 80%, says the CBO:

      To bring this back to the point of the OP, Michael Kinsley, what I found fatuous about his piece last week was the suggestion that economic proposals should be judged on how "sincere" the people making them are. That really does seem like effete elite self-indulgence -- all very fine, I suppose, when you're pals with people who keep making wrong predictions, you want to help them look good and feel better, and your own income and retirement are secure. But it's maddening to those of us who have been struggling these last few years. (Full disclosure: I spent much of 2011-2012 living on unemployment benefits.) Who gives a crap how sincere those people are or how badly Paul Krugman hurts their feelings? Kinsley outright said that "we have to pay a price for past sins." That's just amazing. If that that sentence read, "the most vulnerable among us, but not me, have to pay a price for past sins," would he ever put his byline to it? If not -- and I say this with all due respect to Kinsley, whose writing I usually like -- it's a piece of trash.

    8. I'm totally with you, Jeff. CSH, you're not thinking clearly about this. Let's say that the feds agreed to borrow money from the Chinese at 0% and built a bunch of infrastructure: bridges (ahem) and railroads, and invested money in research and technology.

      Companies that got the contracts would go out and hire people to service them. The economy would grow. This isn't rocket science, man.

    9. "If people want to push for big stimulus when debt is small, say less than 30% of GDP, knock yourself out."

      CSH, you're right to put the debt/deficit issue in context--as opposed to the common "always good" or "always bad"--but your're putting it in the wrong context. What matters is the level of GDP growth. It's low/stagnant growth in recent years that calls for more spending. It would certainly be better to be doing it against a background of low existing debt; that's exactly why Krugman complains about Bush-Cheney not paying down debt in 2003 when they had a chance and why he says we should pay down debt after the economy improves. He's not being inconsistent by saying in each case that you have to match the policy to the problem at hand.

      By the way, I don't think China is buying that much US debt these days. It's being sold here.

    10. It's low/stagnant growth in recent years that calls for more spending - We've been down this road before, Scott, but I'm not sure that's right. As has been mentioned, Rogoff-Reinhart found not a single case of a country in our unfortunate 90%+ Debt:GDP category that averaged much more than our current FY GDP growth. I don't know what policies those countries followed, and I don't know the variance within those data points, but pending more information I remain skeptical that anything beyond our current fair-to-middling GDP performance is accessible at the extant debt levels.

      You also mentioned Japan a while ago, and I think the Japan case is also an instructive contextual example. To me, it is understandable that a country like Japan can sustain higher debt (with the necessary government interventions) than the US. Somewhat unlike America, Japan is for the Japanese; expect for a few Koreans, there is no diversity there. Other high debt/high socialism countries succeed where diversity is low (e.g. Denmark).

      I'm not even thinking of racism; I'm thinking that lack of diversity means everyone is related and thus has natural skin in each other's game. For example, Jeff mentioned unfortunate difficulties of late; I quite like (and have confidence in) Jeff, and so I have no concern with largesse sent his way in times of struggle. If we were Japanese, we would be probably third cousins or so (at most distant), and that confidence would come more or less naturally.

      I think such things don't work as cleanly in the US, which factors greatly into the perceptions folks have of government action, and (imo) goes a long way to explaining why TARP+payroll tax cut+historically permissive monetary policy+everything else have all greatly underdelivered vs. liberal promises.

      In any event, none of this is simple or clean - the answer clearly is: it depends.

    11. CSH, it seems to me that if anything is going to foment division, it's continued stagnation.

    12. CSH, I spent the American public's "largesse" principally on booze and women, as you might expect. But it did help me muddle through. :-) I was certainly a better customer of the businesses in my neighborhood than I would have been if I had just been living off savings. This was economic activity that helped produce tax revenue, so the public got some of it back that way. It's all the Great Cycle of Life, right?

      But my actual point is that you really should lose the R-R "90%" thing. It's been refuted. Higher debt correlates with slower growth (correlates; doesns't necessarily cause), but not in the "nonlinear" way, with a sharp break at 90%, that R-R claimed. The details are here:

      And anyway, we're not at 90%. We're hovering somewhere just south of 80% if I read the CBO figures correctly. Not ideal, but also not apocalyptic.

    13. I find it hard to understand how anyone could think our economic problem is primarily caused by a flagging of the "animal spirits." We're dealing with the destructive aftermath of the last great successful stimulus, which saved us from pain after the tech bubble burst, but replaced it with a housing bubble. Current Fed efforts to revive the economy have given us a stock market that no one really trusts and a housing market that's not much better. Sometimes you just need to let an economic slump run its course -- it's the economy's way of reallocating resources to more productive uses. But more unsustainable consumer spending is certainly not the answer.

      Regarding fiscal policy, remember that the CBO said that going over the fiscal cliff would actually boost growth past the short term:

      "CBO projects that the significant tax increases and spending cuts that are due to occur in January will probably cause the economy to fall back into a recession next year, but they will make the economy stronger later in the decade and beyond. In contrast, continuing current policies would lead to faster economic growth in the near term but a weaker economy in later years."

    14. Jeff, I grant that the R-R dropoff post-90% is smoothed somewhat when you correct their errors. Not sure if that matters, as the trend line is still pretty clear. It appears from the linked Table 2 that we can expect about 2.5% GDP growth (if we're 80% or so Debt:GDP) and maybe 2.1% (if we're 90%+). We're currently forecasting about 2.5% or so GDP growth in FY 2013, which obviously raises the question of what upside there would be in jacking that Debt:GDP ratio up another 10% with a huge new round of stimulus. As I recall from R-R, that 2.1/.5% is not accompanied by much variance; the max was around 2.9%.

      What Krugman is arguing (though never exactly quantifying) is that huge new stimulus can recover the lost productivity from the Great Recession. Though he won't exactly say it, he's talking about GDP growth way north of 2.5% when we get all those UIC recipients, at home with their booze and loose women, off the couch and back on the job.

      Keep in mind, though, that no country in our high debt circumstance has ever much routed our current GDP forecast (on average). So Krugman pushing the Keynes argument on our high-debt economy seems to suggest that no one else ever thought of that; that no other high debt country ever noticed that (say) a 40% drop in productivity bounces back at +66% (do the math). On the safe assumption that none of the high debt countries got that way intentionally, its hard to fathom that just about all of them didn't at least put forth the college try to borrow back to where they were.

      Which, really, is the moose on the table from the R-R spreadsheet: if countries that have seen a significant dropoff in demand, creating high indebtedness, can simply borrow a bunch of money to replace the lost demand, why don't we see it in the data? Why isn't there an outlier among the +90% crowd that averaged, idk, 12% growth (because their big borrowing to replace lost productivity worked)? Remember that the percent gain on the way back up is always higher than the percent lost on the way down. Except we never see that percent gain. Ever.

      Is Krugman just the smartest guy in history?

    15. Aside to Scott - the wife and I saw the movie "This is 40" the other night, and it was fairly mediocre, but your last comment made me think of a subplot in that film: Paul Rudd (lead actor) has a moocheriffic father who has glommed something like 80 grand off Rudd's character. Rudd doesn't like that, of course, and he attempts to stop it, but in that half-hearted way that we often do when family is involved.

      Its clear the Rudd character thinks he's pretty much in control of that situation (though he's obviously not), and if not in control, at least he endorses it, cause it's dad. With due apologies to Couves and the animal spirits, its not realistic to think that the mooching of his dad would at all impact Rudd's investment decisions with his failing business (beyond the lost capital).

      Replace the dad with some faceless person to whom the Rudd character feels no connection, and the proverbial animal spirits might easily get overwhelmed by a sense of learned helplessness, it seems to me.

    16. So CSH, are you saying that weak consumer spending and concerns of a new stock market bubble reflect "learned helplessness"?

    17. More lagging hiring, which to some extent prefigures the consumer spending situation.

      Lose money because of a mooching relative, and you will feel like you own that. Lose money because of (what you perceive as) a mooching government, well, that's a less empowering situation.

    18. CSH, my understanding is that the high-debt countries in the R-R analysis include some extreme outliers whose effect is exaggerated when we average the numbers -- on the same principle that if Bill Gates walks into a bar, the "average" patron there is suddenly worth millions. But look, at some point, not being an expert, I have to decide whether to put my chips on Reinhart-Rogoff and their ilk, or on Paul Krugman, Brad DeLong et. al. For whatever reason, intellectually or temperamentally, the latter seem to me to make sense, indeed to be stating the intuitively obvious. To you, the debt hawks seem to be doing that. I guess we'll just have to see how it all ends up playing out.

    19. CSH, I'm not sure it was empowering when either the stock market or the housing market crashed. The private sector tends to burn everyone when things go bad (DC and Wall Street excepted).

    20. Another awesome Plain Blog conversation. In reply to Jeff's last, here's a (lengthy) explanation of why I think the DeLong/Krugman position is intuitively unlikely.

      Things are bad in the Kingdom of Florin. Demand has fallen off a cliff (of insanity). The decline in demand has devastated revenues, and the kingdom has had to borrow significant dough to keep itself afloat. As a result, Florin finds itself in the unenviable Debt>90% of GDP column on the Reinhart-Rogoff spreadsheet. Worried, Prince Humperdinck comes across the blogs of Krugman and DeLong and believes that massive stimulus (~20% of GDP worth) can restart demand, which has fallen by 40%.

      In speaking with Krugman and DeLong, Humperdinck expects the stimulus (at 20% of GDP) can easily restart the demand that has declined by 40%. Humperdinck at an absolute minimum expects to replace half the lost demand, as he could have just spent the money himself and achieved the same result. As it happens, only 25% of the lost demand is replaced, and Humperdinck is devastated, and sends nasty emails to Krugman and DeLong.

      Though Humperdinck is devastated, his year-on-year GDP growth is, relatively, good. GDP growth is not the same as demand, but its probably not a bad proxy; if demand goes from 0.6Xnormal to 0.7Xnormal, that's an increase of 16.7%. Devastating, but still a +16.7% data point.

      So if Florin has five other 90%+ Debt:GDP years, we know that the average GDP growth of those other five can't be much higher than, well, 0%, since the total of all six can't be higher than about 2.9%, which is the highest average on R-R's spreadsheet in the 90%+ column.

      Back to reality, the problem with the Krugman/DeLong position is that it shouldn't take much to get above-average year-on-year GDP growth when the base has been badly depressed by demand shock. That you don't see above-average year-on-year growth in the high debt cases - I mean, ever - is a pretty strong argument against stimulus when debt is too high.

      Or said yet another way, stimulus is a tailwind when demand is depressed; and high debt is a headwind (per R-R). However often the two have clashed, it looks like the headwind always wins, even though the low base should favor the tailwind.

      Which, in conclusion, doesn't speak well for the tailwind capability of stimulus when debt is high.

    21. CSH, I'm not sure what answer Krugman would give to that example, but I guarantee you he's already thought it through. He may even have worked out equations for Florin specifically. One thing that often happens is that he or DeLong or one of their comrades link to some critic who thinks he's found a flaw in the IS-LM position. Then follow links to the papers or posts where that point has already been answered, usually long before. These are smart guys, they think about this stuff all the time, I just don't think any of us here is going to stumble on some criticism they haven't anticipated. (If I had to guess, based on my long reading of Krugman, I'd say that he would answer that you're dealing with bigger numbers than anyone's actually been proposing, and that what might work at one level of debt or stimulus won't necessarily work at others.)

      The big counterpoint, in any case, remains this: the risks of higher debt are theoretical; we have low inflation (too low) and historically low interest rates. But the risks of continuing high unemployment are obvious, present, real and disastrous. The burden of proof needs to be on whomever says the problems of the present should take a back seat to hypothetical worries, especially when predictions of those future costs have repeatedly been made over the last few years and repeatedly proven wrong.

    22. Yeah, I hope my commentary doesn't sound like I think I'm smarter than Krugman or DeLong (! - maybe the loosey goosey blog comment style sounds that way?). I can think of at least two possible issues with my argument: that demand drops much more than GDP during a shock, or that R-R were taking medians by country, and not means. I am sure there are more; there's every chance I am dead wrong here (as always).

      Setting aside the hype, I am legitimately curious that the 90%+ column (or, for that matter, all the high debt columns) are so universally inferior for GDP growth. If the year of the demand shock started at "not terrible" debt GDP (and thus lands in that column), it would seem that - at least once - the resulting dead cat bounce would show up on R-R's spreadsheet.

      Dead cats do bounce, don't they? At least once in a while?

    23. Dead cats do bounce, don't they?

      Do I look like a zoologist?


  6. There are two very important points that austerians miss:

    High debt does not cause slow growth, slow growth causes high debt. Figure 3 @

    Look at Europe. Has any country austere'd itself to lower bond rates? No. How about when the ECB steps in? Yes. Budget tightening is making those nations' situations worse, and even making Germany's situation worse. Are there serious problems in the periphery? Yes, bad banks and too high wages. Squeezing government budgets doesn't address the first, and doesn't address the second.

    Policy prescriptions have consequences, and austerity in Europe is wreaking havoc. Those advocating for austerity need to own the havoc.

  7. A consistent critic of Krugman's covered the same post ... more effectively:

    1. backyard, thanks for the link. I'm not sure what the OP on that blog is based on. To his credit, the blogger links to this Krugman post:

      He seems to think Krugman has been inconsistent, claiming credit now for the effects of policies he opposed, or something. What he's been doing is conducting a political debate with people who favor austerity, were warning about runaway deficits and debt, were predicting (hypothetical) very high interest rates and/or inflation, and meanwhile were ignoring (actual, real, present) unemployment. He never said there would be no recovery, ever again, without further stimulus. He said it would be very slow, a "lost decade," when the right policies could have given us a recovery that would already be in full flush by now, greatly benefiting the unemployed and reducing the chances that some of the long-term unemployed would lose their marketability and just be shut out of the labor force forever.

      I'm not seeing where either the facts he's now reporting or anything further that he's said contradicts any of that. The debt Cassandras' predictions have been wrong. That tends to discredit their policy prescriptions and vindicate Krugman's. It suggests we could take on some higher debt, if need be, to speed up the recovery, and the sky wouldn't fall. It strongly suggests that proposals like the Ryan budget would be terrible mistakes. Those proposals aren't dead yet, and as a political matter they still need to be fought against. So he's continuing to do so. Where's the inconsistency?

    2. Jeff,

      I disagree about the reasonableness of the treasury issuing more debt, but that conversation's going nowhere. I agree that Murphy's post isn't amazing, but it's better than the Kinsley whiff.

      Murphy's is the only Austrian blog I would recommend to progs because he's funny and not a total dick. He also can think and write well as a Keynesian, Monetarist, etc. because he focuses on understanding opposing arguments.

    3. OK, thanks, good to know, I will check out Murphy from time to time.


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