Sunday, July 19, 2015

Free-market ideology and the burden of proof


I am extremely flattered that John Cochrane considers me "the other Smith" - an honor I certainly don't deserve, with all the other econoSmiths out there. But unfortunately, John was not a big fan of a post I wrote for Bloomberg View, entitled "Growth Fantasy of Tax Cuts and Small Government". Now, remember that I don't get to choose (or even approve) my Bloomberg View post titles, and they are almost always clickbaity - in fact, I don't think tax cuts and small government are always a growth "fantasy". Personally, I'd recommend tax cuts for Europe, smaller government for both Europe and Japan, and corporate tax cuts for the U.S. And I'm also worried that the U.S. has become over-regulated in a number of areas. Personally, I believe that some of the policies Cochrane suggested in his earlier post - for example, an end to agriculture subsidies, more immigration, and the removal of many occupational licenses - would be good for growth, though others (like school vouchers) would reduce it. So the title Bloomberg View gave my post did not reflect the nuance of my personal views. Nor should it be expected to.

My post was about expressing skepticism. We always hear big promises from rightward-leaning economists about the growth-enhancing powers of tax cuts and deregulation, but these policies often fail to deliver. In my post, I noted a prominent example of this - the ALEC rankings. It's not the only example. The Bush tax cuts were followed by a decade of extremely disappointing growth. The Clinton-era financial deregulations don't seem to have done us any good. Why should we trust more of these promises? Why should we keep trusting the people who keep making the promises? Instead, I say we should look to serious, evidence-based analyses by economists who are neither knee-jerk free-marketers nor knee-jerk interventionists. 

Fortunately - and here let me go off on a brief tangent - those sober, middle-of-the-road economists comprise a solid majority. Here's an excerpt from the abstract of a 2007 paper by economists Daniel Klein and Charlotta Stern, entitled "Is There a Free-Market Economist In the House?":
We surveyed American Economic Association members and asked their views on 18 specific forms of government activism. We find that [only] about 8 percent of AEA members can be considered supporters of free-market principles, and that less than 3 percent may be called strong supporters. The data are broken down by voting behavior (Democratic or Republican). Even the average Republican AEA member is “middle-of-the-road,” not free-market.
So most economists are supporters of a mixed economy. Now granted, some of those economists may support government intervention for reasons not related to economic efficiency. But some of the questions in the survey are pretty clearly not just about redistribution - for example, one question asks about government production of education. There is also other evidence. The Chicago Booth IGM Forum poll of top economists found that 73 percent either agree or strongly agree with the following statement:
Because the US has underspent on new projects, maintenance, or both, the federal government has an opportunity to increase average incomes by spending more on roads, railways, bridges and airports.
Only 3 percent of surveyed top economists disagreed with this statement. 3 percent! For reference, about 26 percent of Americans say that the sun goes around the Earth. So there is overwhelming consensus among top economists that more government provision of public goods would boost economic efficiency. Hardline free-marketers are a small but loud and influential minority. 

But this is a bit of a sidetrack. Let's get back to Cochrane's post.

John writes:
My surprise in reading Noah is that he provided no alternative numbers and no alternative policies. Well, if you don't think Free Market Nirvana will have 4% growth, at least for a decade as we remove all the level inefficiencies, how much do you think it will produce, and how solid is that evidence?
As for numbers, I don't really feel I need to produce an alternative to a number that was made up as a political talking point. Why 4 percent? Why not 5? Why not 8? Why not 782 percent? Where do we get the number for how good we can expect Free Market Nirvana to be? Is it from the sum of point estimates from a bunch of different meta-analyses of research on various free-market policies? No. It was something Jeb Bush tossed out in a conference call because it was "a nice round number", after James Glassman had suggested "3 or 3.5".

You want me to give you an alternative number, using the same rigorous methodology? Sure, how about 3.1. Wait, no. 3.3. There we go. 3.3 sounds good. Rolls off the tongue.

(Ed Prescott, after conducting his own quantitative analysis along with Robert Lucas, politely told Jeb that the economy's "maintainable" rate of growth was only 3 percent. But Prescott is undoubtedly just an incorrigible pessimist.) 

As for justifying the 4 percent number by appealing to past growth, that doesn't make a lot of sense, since our current opportunities for policy-based efficiency improvements will be different from the ones in the past. But we can do that exercise, sure. Here is 10-year trailing annualized real U.S. GDP growth:


In an earlier post, Cochrane showed a similar graph that showed 10-year arithmetic means. I think geometric means are pretty obviously the correct meaning of "average growth". But even if you just eyeball the yearly growth graph, it's obvious that we haven't hit 4% very often since the 1960s. We briefly spiked above it in the early 80s, lingered above it in the late 90s, and never even hit it in the 2000s. 

So...maybe Free Market Nirvana would get us there. Maybe. But it seems to me that even beneficial types of market liberalization, like every other policy improvement, are subject to diminishing returns - the low-hanging fruit gets picked first. The Kennedy tax cuts seemed to produce a burst of growth, the Reagan tax cuts a more modest bump, and the Bush tax cuts basically nothing. There's no reason to think the same isn't true of deregulation. 

And keep in mind that we're facing slower population growth than in the 80s and 90s, and slower productivity growth than in the 90s and 00s. In other words, Free Market Nirvana Version 2.0 will have to do a lot more than Version 1.0 did, when a priori we should probably expect it to do less.

John then takes me to task for not suggesting alternative policies:
More deeply, Noah suggests no alternative policies. He does not claim that more government wage controls,  unions, stricter labor laws (Uber drivers must be employees) heavier and more politicized regulation, cartelizing more industries beyond health and finance, raising taxes to confiscatory levels, larger welfare state, boondoggle public works and so on -- the alternative path in the current policy debate -- will get us back to 4% growth.
To this I reply:

1. There's no logical reason to assume that anything can get us "back" to 4 percent growth, short of a massive increase in immigration (which is politically impossible, thanks to the GOP, but which I would dearly love to see, especially if it were heavily tilted toward high-skilled immigration). 

2. John waves away the idea of public goods provision being a potential source of growth, which seems like it would put him in the 3 percent minority in that IGM poll.

3. If I had to suggest alternative policies to the ones John suggests (and keep in mind I like some of his), I'd recommend A) spending more on road, rail, water, electrical, and broadband infrastructure while dramatically cutting costs, B) spending more on basic and applied research, C) reforming the patent system, especially with regards to software and business-process patents, and D) reforming urban land-use policy, especially by means of land value taxes or close equivalents.

So there you go.

John then accuses me of pessimism:
So, one must only conclude that Noah -- and others voicing the same it's-not-possible complaint -- believes 4% growth is not possible. 2% or less is the new normal. Sustained growth, of the sort that made us all healthier and wealthier, if not wiser, than our grandparents, is a thing of the past.
But my post is all about skepticism. I am not certain that the 4 percent number, pulled out of Jeb's posterior, is unachievable in theory. I merely recognize that free-market "structural reformers" have made many growth promises in the past that have not been kept. And this makes me heavily distrust their current promises, and long for verification by less ideological folks than the people at the conservative think tanks that feed Jeb his talking points.

Also, why is 2% per year such a crappy outcome for living standards? Given that a lot of our headline growth slowdown since the 60s has been due to lower population growth, the per capita slowdown has been much more mild, and it's per capita that we really care about when we're talking about living standards. Total factor productivity - which should include the effects of government policy - is growing faster than it did during Reagan's term in office, and I expect it to continue doing so...so why is John calling me a growth pessimist??

John then says that I'm denying a useful role for economists in society:
If the absolute best economic policies anyone can imagine -- and, again, Noah offered no alternatives -- cannot return us to 4% growth and sustain that growth, why bother being economists?
I kind of see it the other way around. If economists have already figured out The Answer to Everything - if it's just a bullet-point list of simple free-market policies - then why don't we pack up and go home? Why sit there analyzing repeated games, or making DSGE models, or finding natural experiments to analyze, when it's all been figured out and boiled down to a simple canon? 

John continues:
They do not call us the "dismal science" because we think the current world is close to the best of all possible ones...("Dismal" only refers to the fact that good economics respects budget constraints.)
Actually, the name "dismal science" came from a guy making fun of Malthus was invented by a guy making a case for reintroducing slavery in order to regulate the labor market! But anyway, budget constraints seem to me to be exactly the reason that we can't just pull numerical growth targets out of thin air and assume that we can always hit them if we just have the will to do so.

John closes with a potted ideological history of the American economy:
Noah's tired pot-shot has been going on a long time. In 1980 Ronald Reagan announced some pretty radical growth-oriented policies, at least by the standards of the time. (Not much new since Adam Smith, of course.) The standard liberal commentators made the standard objections: voodoo economics, numbers don't add up, it will take generations of unemployment to lower inflation, the debt will explode, and so forth. (Plus, the Soviet Union will be there forever, we might as well get along.)  Reagan offered optimism; won, malaise ended, we won the cold war, and there was an economic boom.
Well, you know, personally I do think Reagan's liberalizations, on balance, were good for the economy. They didn't actually get us to 4 percent growth, even with favorable demographic tailwinds. They didn't end the TFP stagnation (at least not until the mid-1990s, if you want to posit 14-year lags). They luckily coincided with Volcker's taming of inflation. They indeed caused a massive runup in the national debt. But I think that on balance they were necessary and good, and I hope Japan emulates them to some degree in the near future.

But like I said, Reagan probably picked a lot of the low-hanging fruit. Should we expect further government-slashing to do much more than it did for Reagan, as it would have to in order to get us to sustained 4 percent growth? Or should we expect it to do much less? I'm willing to be convinced by evidence, but my prior is on "much less." 

So to sum up, I think we - by which I mean Americans - have repeatedly bought into the promises of free-market ideologues, outlier economists, and conservative think tanks, even as their chosen policies have yielded conspicuously diminishing returns since the early 80s. I'm just saying that before we buy any more such promises, we had better have some solid evidence in favor. The burden of proof is on the free-market ideologues at this point, and "Reagan Reagan rah rah rah" is not proof.

193 comments:

  1. "No. It was a random number Jeb Bush tossed out in a conference call"

    -I thought it was pretty clearly based on Amity Shales' 4% Growth Project at the (you guessed it) George W. Bush Presidential Center.

    http://www.bushcenter.org/free-form-tagging/4-growth

    ReplyDelete
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    1. Check out the article I linked to.

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    2. Her name is Amity SHLAES, not Shales. I despise her but at least I know how to spell her name.

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    3. Roger, that's a funky name. How do you even pronounce it?

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  2. "The burden of proof is on the free-market ideologues at this point, and "Reagan Reagan rah rah rah" is not proof."

    -Alright. Which first-world real countries have been the fastest-growing since 2007?

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    1. This can serve as a starting guide:
      http://www.politifact.com/truth-o-meter/statements/2014/jul/23/barack-obama/obama-us-has-recovered-recession-better-almost-eve/

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    2. Recovery from recessions has much more to do with short run demand side policies, particularly monetary policy, rather than long-run supply side oriented policies. Social democracies are failing to recover quickly because the ECB screwed up in 2011, not because of their large governments. Try pre-2007 and adjust for the fact that the free market developed countries (USA, Switz, HK, Singapore) start from a higher baseline, as countries that have higher GDP Per Capita tend to grow slower, and I think the case can be made that free markets tend to produce more growth. But even that in itself does not warrant that the 4% goal can be hit for a prolonged amount of time.

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    3. I don't dispute that the ECB has generally been too tight since 2011, but I don't see why that shouldn't have affected all countries equally or, as in the Great Depression, haven't had just as large impact on the price level as on RGDP.

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    4. Guys, I think we should follow the strategies of Taiwan, Australia, and Israel. Sound like a good idea?

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    5. Sure, policies designed for countries 1/12th (or 1/30th) the size of the U.S. will no doubt work great. Let's just have Texas laws and policies apply to the entire U.S. Policies designed for rural oil producing areas should work great in New Jersey.

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    6. Cesium, that's a really interesting concept you brought up there. It's a surprise no one else has mentioned it. Not all policies are optimal for all situations. Who'da thunk?

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  3. The longer I read this, the more I just felt like I was watching Noah Smith beat up on John Cochrane. This really sealed it:

    "But anyway, budget constraints seem to me to be exactly the reason that we can't just pull numerical growth targets out of thin air and assume that we can always hit them if we just have the will to do so."

    It's interesting watching arguments with his intellectual equals. I learn a lot. John Cochrane just isn't one.

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    1. Anonymous2:08 AM

      Total nonsense, Cochrane is one of the smartest economists out there and his points are very well presented.

      Delete
    2. Anonymous12:56 PM

      Noah's article demolished his points.

      And I don't care about how smart Cochrane is - the fact that a dishonest BS artist is smart doesn't make him honest, or his BS true.

      -Barry

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    3. @Barry
      -Noah's article didn't demolish anything. It just listed complaints, some legitimate, some not.

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    4. Nonsense. Noah is a big Cochrane fan.

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  4. Just the prof in me: why do you say that "dismal" refer to Malthus while your link says otherwise?

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  5. What about ending the prison industrial complex and providing equal protection under the law? Might that result in 4% growth?

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    1. And what do you mean by "unequal protection under the law", anyway?

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    2. Fred Fnord12:39 PM

      One might imagine he meant the bit where black people are incarcerated on average MUCH longer for the same crimes? Or the part where rich people mostly escape punishment for their crimes? Or the part where as long as a crime was committed on behalf of a company, almost no one is ever held responsible for it, and the only punishment is a fine that has no deterrent effect upon the company or anyone working there? Or...

      If you are unable to see deep, systematic injustice in the U.S. today, it's no longer a case of myopia: these days you must be utterly blinded by an ideology.

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    3. Nope for your first claim.
      http://slatestarcodex.com/2014/11/25/race-and-justice-much-more-than-you-wanted-to-know/

      [citation needed] for the rest.

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    4. Anonymous4:10 PM

      @pithom: The first sentence in summary of the article you linked to:

      "There seems to be a strong racial bias in capital punishment and a moderate racial bias in sentence length and decision to jail."

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    5. Not what Fnord said.

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    6. Anon, there is a large racial bias in the decision to charge and that is where the rubber meets the road. The rest is detail.

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    7. Anon, there is a large racial bias in the decision to charge and that is where the rubber meets the road. The rest is detail.

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    8. "Anon, there is a large racial bias in the decision to charge"

      -LOL. [citation needed].

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  6. @Noah
    Thx. The only times I had heard of the 4% Growth project before this year was in relation to Shales and Coolidge. I didn't think the conference call was that early, but I guess I was wrong.
    @Ben Wheeler
    -No, 'cause crime.
    @Cherepko
    "It's interesting watching arguments with his intellectual equals. I learn a lot. John Cochrane just isn't one."
    -Yeah, he is. Noah's posts, while making good points, just aren't as concise as John's.

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    1. Anonymous6:14 AM

      When I see one person making half the comments on a post, I think "versatile intellect", certainly not gibbering confirmation bias.

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    2. Fred Fnord12:32 PM

      Concise? Really? Doesn't matter if he's right or wrong as long as he's pithy?

      Not a huge fan of Noah but Cochrane's only skill is to make economic arguments that those who don't know economics might find convincing.

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    3. You haven't shown how John is wrong. Noah has made some justified points against him, but most of his post here says very little.

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  7. I think a lack of regulations played a key role in the Great Recession. Perhaps, we should be a little more careful about deregulation in the future.

    I also think that some of the free market policies have worsened inequality.

    ReplyDelete
    Replies
    1. Lack of regulations also played a key role in every auto accident because the government didn't regulate cars out of existence.

      OMG, the free market has worsened inequality in comparison to Communism.

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    2. You respond as if the Great Recession was nothing at all.

      There's quite a spectrum between no regulations and asphyxiating regulations.

      There's quite a spectrum between the free market and communism.

      I suppose you are effectively arguing that traffic would be far more efficient without any rules at all. No stop signs. No stop lights. No lanes.



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    3. No, I'm not arguing no traffic rules are necessary, though the effectiveness of stop signs and lights should be researched.
      The Great Recession was between 1/3 and 40% tight money. It definitely wasn't "nothing at all", but had the Fed not done tight money, at least we would have had a clearer picture as to its origin.

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    4. Over the last 30 years, the finance industry has had a lot of deregulation. Wall Street was very highly leveraged and we effectively had the mother of all bank runs. IMHO, these calamities are the down side of Laissez Faire/free market.

      Cochrane skips over all of that as if he learned nothing in 2008.


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    5. MaxUtil5:39 AM

      @pithom "The Great Recession was between 1/3 and 40% tight money. It definitely wasn't "nothing at all", but had the Fed not done tight money, at least we would have had a clearer picture as to its origin."

      These are pretty bizarre claims. And do you really think that the crash is some sort of mystery that no one understands? People can debate the best way to avoid similar events in the future, but I think we pretty much know what happened (hint: it wasn't poor people buying houses they couldn't afford.)

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    6. @ BradK
      Cochrane has done a lot of stuff on bank run prevention; much more than Noah (or you). No, these are not the "downside of Lassiez Faire". You shouldn't comment on this if your ignorant of even the existence of Cochrane's stuff on bank run prevention.

      @MaxUtil
      "And do you really think that the crash is some sort of mystery that no one understands?"
      -Yeah, sure, I get the malinvestments and credit freeze and the tight money and the commodities price spike and all. But all recessions should, under proper monetary policy, manifest themselves in high inflation, so economists can know which supply problems to look at.

      Also, are you denying poor people bought houses they couldn't afford? That was pretty much the crux of the housing price fall.

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    7. Anonymous12:47 AM

      "Cochrane has done a lot of stuff on bank run prevention"

      The sort of remedies John Cochrane proposes require tight regulation - I would have thought these sorts of things were anathema to him - given his wont to de-regulate anything that moves?

      http://www.wsj.com/articles/SB10001424127887324412604578513143034934554


      Henry

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    8. MaxUtil10:54 AM

      "Also, are you denying poor people bought houses they couldn't afford? That was pretty much the crux of the housing price fall."

      No, I'm not claiming that. I'm claiming that while this contributed to the housing crash, it was not the primary cause of why a housing price correction turned into a global banking crisis and recession.

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    9. @MaxUtil
      -Are you arguing for tight money being the cause?

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    10. Oh my god. What, the poor people held a gun to the banker's head? "Loan me money or I kill your children?"

      I think it was much more like "Hey, psst, you with the hole in your shoe. How'd you like to own your own home. I can get you this interest only floating rate loan at a low low interest rate. No, don't worry about what "interest only" means or "floating rate". This is your ticket to the big time. And hey, if the economy sours, you can just walk away."

      And how about "Psst, you with the hedge fund. I can get you these absolutely safe investments. The risk has been pooled and split up and, the best part, "independent" reviewers have assigned a AAA grade to these investements."

      Poor people bought houses that the lenders continuously assured them they could afford.

      Delete
    11. There is more than one side for every contract. And I never said bankers weren't lured by the promise of false profits.

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  8. Anonymous6:36 AM

    I'm not sure about Cochrane belonging to the 3% who don't like public goods. He seems to be in favor of government spending. But not any kind of spending. Like most people in the 97%:

    http://johnhcochrane.blogspot.com.es/2015/01/strange-bedfellows.html

    The 4% number has no solid basis other than being a nice round number and politicians (and most people) like round numbers. But he has a point: If this number is feasible, then it is hard to argue you can achieve it merely by more regulation and taxation. Leaving the issue about the number aside, I think that Cochrane and Noah agree more than they realize about the policies that foster growth and their impact, at least when it comes to judge them by historic evidence. But Cochrane is more optimistic on its current effect based on “non-historical” information.

    A different point is the desirability of a 4% growth. Social costs matter. A war with Russia may give that growth rate but even in that case. I don't think most people would be better off. But this is not what the debate about the 4% is about.

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    1. MaxUtil5:42 AM

      Cochrane's actual views of what policies promote growth may very well line up reasonably with Noah's. Unfortunately, he prefers to argue with strawmen who claim that "boondoggle projects" are what "lefty" economists think will boost growth.

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    2. @MaxUtil
      -You totally made that up. Cochrane doesn't say that anywhere, especially not in these terms.

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    3. MaxUtil10:50 AM

      "He does not claim that ... boondoggle public works and so on -- the alternative path in the current policy debate -- will get us back to 4% growth."
      - Cochrane

      He presents things like 'boondoggle projects' as the alternative to his views so I think it's fair to state that he is claiming what "leftist" economists are proposing.

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    4. Cochrane isn't arguing with them, he simply points out an area of common agreement between him and Noah.

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    5. Also, I apologize for saying "You totally made that up.".

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  9. The whole system of capitalist private property is a 'government intervention'.

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  10. Sorry your response was weak. You had a couple of interesting points, but the post was a barrage of mostly tangential stuff. John knows and relishes he is in the minority. Who cares what a bunch of ASSA members think? Who cares about an IGM poll. It is silly hyperbole to say what about 782%. That is fair to say to Jeb not John. A primer on where the term dismal science came from. Have an economics discussion. These extraneous points don't educate. The big think talked about in the US is not slow population growth causing it, but slow productivity growth.
    It is incredibly unfair not to mention that John talked about an extra 2% growth for 10 years, not forever. That is, a lot of what was in John's numbers was a one-time level effect. The cumulative 2% extra growth over 10 years is basically only restoring the seemingly permanent hit of the Great Recession. That does not seem like a crazy nirvanna, definitely unachievable policy to me. I may not believe it, but it is not pure craziness as you paint it out. 2% extra growth forever maybe crazy.

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    1. It may be possible, but the evidence shows that following the policies favored by Cochrane are unlikely to achieve 4%. If you want to support his preferences just because you like them, that is fine, but you can't claim there is evidence showing they will work now.

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  11. Why do Reagan fans always forget that most of the deregulation they credit him with was accomplished or initiated by Carter. Reagan should get full credit for deregulating the financial industry, but the other areas, especially the crucial beer industry, goes to Carter. Even worse, as Noah notes, Reagan did blow up our debt.

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    1. Tim McDermott11:49 AM

      Reagan should get full credit for deregulating the financial industry... And also credit for the subsequent Savings and Loan fiasco.

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    2. What does the S&L fiasco have to do with anything? In any case, it wasn't economically important.

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    3. No, Reagan did not blow up our debt, that's a big Leftist myth.

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    4. Oh gag, pithcom, you have just completely lost it. Reagan blew up our debt, blew up our debt, blew up our debt.

      Oh, I know, he did not do so as much as FDR, but then we were not fighting WW II in the 1980s. Gag. I suggest you just stop posting now. You have made an utter fool of yourself.

      Barkley Rosser

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    5. No, Barkley, it is you who has made a fool of yourself. Unemployment at the trough of the 1982 recession was higher than during the Great Recession. So did Obama blow up our debt, blow up our debt, blow up our debt?

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    6. We still live in the age of Reagan. Too bad he didn't live to see his crowning glory - the Great Recession.

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    7. Why blame the Great Recession on a dead man?

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    8. Reagan was very influential. His Laissez Faire/Free Market policies live on.

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    9. ROFL. Pithom, I'm confident that all Republicans and Libertarians have the same grasp on reality as you do.

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    10. I suspect they mostly have a lower grasp on reality than I do.

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  12. Pardon my adding a basketball to a chess game, but two things about growth:

    -- we as a species need negative net growth, not positive, until such time as we have access to more planets
    -- we (or at least, I) need a better idea of what varieties of "growth" we are discussing, and which ones we should and should not foster

    Growth based purely on increased population, whether home grown or imported, is not a workable strategy any more. Growth based on whipping up trade, whether in weapons, geegaws, mansions, medicines or antiques, is similarly unsatisfying.

    The direction I would encourage would be what I think of as the idealized Japanese model, probably historically inaccurate and certainly currently inaccurate, but evocative of the values which would help us move forward.

    In that model, for instance, possessions would be of common, inexpensive substance, but of superlative artistry. Skill and learning would be encouraged and respected, not marginalized. Crude power and proud vulgarity would be viewed with distaste. Courtesy would be central, as would patience, thoughtfulness and mutual aid.

    Think Miyazaki. Think "living on a small island." Think in centuries, not news cycles.

    None of this negates the social need for factories, but the need, not the factories, should do the deciding.

    Growth? Maybe, but which growth?

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  13. Great post, as a libertarian free market guy I tend to agree with a lot of the stuff said here. I found Noah's views on vouchers reducing growth as quite interesting, that's an argument I've never heard before. Does he have any posts elaborating on this point?

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  14. Anonymous10:16 AM

    Saying "most economists are middle-ground" is a bit of red-herring, as the middle is moving average. For example in the 1990s most economists clearly favoured free trade in good, capital flows and labour flows with a welfare safety net (yet smaller government). Now many question free capital flows (ie they favour financial re-regulation). It is only a matter of time before economists become aware of the knowledge and views of historians and philosophers who have explained how the benefits of globalisation are ambiguous - eg. it breaks down local communities and social networks. People will say that "too much" free trade and free labour is not good. What is meant by "too much" changes.

    So Noah, I agree with you to some extent, but you have to sharpen up your arguments. You are slightly ahead of the curve though, of many in your profession.

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    1. Anonymous10:31 AM

      Exactly. What is the middle ground to someone is different to someone else. What is a high G/Y ratio to someone is not to someone else. Also some people favour a lot of government regulation, but minimal macro-economic intervention. Some people are pro-globalisation, but like welfare states and anti-cyclical policy.

      Both you and Cochrane need to sharpen things up. Both of you are all over the place.

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    2. "most economists are middle-ground" had me busting out lauging. Pithom and his friends are certain that Obama is a far left communist. In America today, the middle-ground would be well right of center in any sane world.

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    3. "Pithom and his friends are certain that Obama is a far left communist"

      -Eh, no. As saith Gary North, Obama is a Keynesian, not Communist. As Sailer says, he is also a race-baiter. As I say, he is also an Islamic State and general Islamic terror supporter. But not Communist. Obama didn't run on a Communist platform and he didn't govern by Communist principles. I'm not sure whether Obama is a part of the Far or Near Left. Noah is a fusion of both. Krugman is Far. Howard Dean is Near.

      In America today, the middle ground is firmly Left of center in any sane world.

      Delete
  15. I do not find the productivity numbers very persuasive. Companies enhance productivity when the are forced to - they will always take the path of least resistance (fire unproductive workers, hire the most productive, then retrain or re-engineer processes). Over the last 35 years, the labor market has been on average slack, to effect disinflation. I tend to think that in the late 90s were were much closer to full employment, and productivity is cyclical.

    I have no problem with public goods per se. However, I do have a problem with government (lack of) efficiency. We cannot fire bad teachers, bad police, or reform inefficient government processes. What we need is government (and service sector) productivity, so that the same $$ go farther. That will probably require curtailing government employee unions. Unfortunately, I think both sides of the political spectrum are wrong to some degree here: Dems just want to throw money at the problem, while (some, many) republicans just want to cut services. What we need is the same service for less money (productivity!) - with regard to the provision of infrastructure, education, etc.

    I see education vouchers as the lesser of two evils. Baltimore is home to some of the most expensive and poorly performing schools in the country. The teachers union is the biggest lobby in Maryland, and Maryland has the weakest charter school program. The teachers union appears to be more about protecting teachers than educating kids. If we could find a way to eliminate the rent-seeking by govt employee unions, I think more people would be ok with govt spending.



    ReplyDelete
    Replies
    1. I would point to the uniform excellence of the schools in the five states that by law prohibit collective bargaining by public school teachers.

      Based on a 2007 composite of ACT and SAT scores among high school graduates:

      VA is 25th
      GA is 26th
      SC is 39th
      TX is 45th
      NC is 47th

      Using 2013 8th grade NEAP reading results.

      VA is 23rd
      TX is 39th
      NC is 36th
      GA is 37th
      SC is 42th

      Similar results can be found using different measures.

      Delete
    2. Anonymous11:24 AM

      You realize that 1 is best & 50 is worst, right? Except for VA's 8th grade NEAP readings scores, those are all in the bottom half.

      Delete
    3. I'm sorry. That's impossible. It's axiomatic that if you ditch the unions, the schools must improve.

      Delete
    4. Fred Fnord12:44 PM

      Heehee.

      Y'know, I like you.

      Delete
    5. No matter how strong your priors are, my priors are stronger than that.

      Delete
    6. Davis, did you adjust that for race? Education statistics in America are worthless without race-adjustment.

      Delete
    7. Ta-ta!
      http://anepigone.blogspot.com/2015/02/state-iq-estimates-whites-only-2013.html
      Texas is 8th.
      Virginia is 16th.
      North Carolina is 19th.
      Georgia is 28th.
      South Carolina is 36th.

      Delete
    8. Race is irrelevant, dammit. Unions! It's the unions!
      My priors are strong!

      Delete
    9. davis -- i can't help but chuckle with you and enjoy your sardonic humor.
      thanx for posting. :) ... it is axiomatic that lower taxes and smaller gov.
      is good ... it is axiomatic that free markets and free enterprise self regulate
      and so gov. regulation is bad ... so many conservative axioms, so little time
      to repeat them over and over and over again ...

      Delete
    10. Looking at difference between schools with collective bargaining and without (or public vs charter) schools is a requires more nuanced As a matter of fact, the county and school district I live in, the schools are excellent. Education is considered the prime "product" in this county. When there are openings for teachers, there are about 300 applicants for 30 slots, so the system can afford to hire the best of the best.

      Unfortunately, new townhomes go up for 400k and new single family for 750k. So, we have school choice and excellent schools, for people who make enough money.

      Tthere are great schools, they are just expensive, and there are a lot of barriers to improving the not-so-great schools. You might argue we should just move low income people into districts with better schools. Perhaps that works, but I see it as a short term solution that does not address the underlying issue. 85% of Baltimore kids get free or reduced price lunches. You would have to move the entire city!

      Brookings has some good empirical research on school choice and charter schools, by the way. It is not so simple to distill the effects of charter schools on the overall product. It is not as simple as schools with and without collective bargaining.



      Delete
    11. Davis, all those states are in the south, and all states in the south (except Virginia) score below average on these tests, whether or not they prohibit collective bargaining. To actually do a meaningful test, you'd want to compare before and after a change in collective bargaining law for the same state (if such a test exists).

      Delete
    12. pithom: Yeah, blacks and mexicans are stoopid. We shouldn't waste time and money even pretending to educate them. Texas is so smart to only spend resources on white people.

      Delete
    13. Exactly, Cesium. Except for the Texas sentence. As I suggested to Sumner, 40%+ of the time spent on American education is wasted. Many (most?) Blacks and Mexicans are uneducable, and should be doing service-sector jobs right out of Middle School (if not Elementary School).

      Also, from where do you get the idea Texas only spends resources on White people?

      Delete
  16. "They indeed caused a massive runup in the national debt."
    -Untrue. You have to look at things relative to counterfactual. Reagan's policies did not, in fact, lead to a massive runup in the national debt when compared to the policies of any other President in the same circumstances (10%+ unemployment, falling inflation).

    ReplyDelete
    Replies
    1. Is that meant as serious?

      What other president had the same circumstances?

      And where do you find any reference telling you that Reagan's deficits were not historically large, even if cyclically adjusted?

      And how does the weak economy at the start of the Reagan Administration excuse his large deficits for an entire economic cycle over 8 years?

      And did you really just throw back a Keynesian multiplier argument to excuse Reagan deficits?

      Delete
    2. "What other president had the same circumstances?"
      -Obama.
      "And where do you find any reference telling you that Reagan's deficits were not historically large, even if cyclically adjusted?"
      -They were only large, cyclically adjusted, in his second term. And his tight first term fully made up for the looseness of the second.
      "And how does the weak economy at the start of the Reagan Administration excuse his large deficits for an entire economic cycle over 8 years?"
      -They were smaller than the cyclical surpluses during the weak economy.
      "And did you really just throw back a Keynesian multiplier argument to excuse Reagan deficits?"
      -No, an automatic stabilizer one.

      Delete
    3. I think you have imagined that somewhere, somehow there exists a calculation showing that Reagan's deficits really weren't structurally large, but you don't seem inclined to even attempt to reference them, so I guess there is no need to bother refuting them. If you really believe automatic stabilizers tell the whole story of Reagan deficits, I suggest you pull out the back of a napkin and a pencil and try to figure out how that possibly adds up.

      And there have been enough megapixels spilled in recent years, describing the qualitative differences with regards to fiscal effects, between an economy with high interest rates and a Fed induced recession, and one at the zero bound with a balance sheet recession. If you'd like some references on this subject I could probably find you a thousand of them, but the summary point is that they aren't the same, and large deficits are far more appropriate in the latter case.

      Delete
    4. "I think you have imagined that somewhere, somehow there exists a calculation showing that Reagan's deficits really weren't structurally large, "
      -Clearly, you have not read my comment.
      "If you really believe automatic stabilizers tell the whole story of Reagan deficits"
      -Which I don't.
      "If you'd like some references on this subject I could probably find you a thousand of them, but the summary point is that they aren't the same, and large deficits are far more appropriate in the latter case."
      -No, they're not. Cf. Japan.

      BTW, here's my calculation:
      http://research.stlouisfed.org/fred2/graph/?g=14Kr

      Delete
    5. Again, you don't seem to want to provide evidence for most of your claims, beyond some pretty lazy non sequitur, so for most of them I don't see what there is to address.

      Other than to point out the irony that you chose to use this style of argumentation underneath a blog post where Smith pointed out how Cochrane responded to the charge of failing to substantiate his arguments by not substantiating his arguments.


      The one thing you did try to substantiate was that Reagan somehow didn't have big deficits based on an equation you pulled out of your you-know-what that presumes that comparing the ratio of government spending/taxes should be linearly related to the unemployment rate. Awesome.

      Delete
    6. It is. R2=.6582

      Delete
    7. Correct. Reagan cut tax rates and on the revenue side of the deficit calculation revenue rose. On the spending side, the Democratically controlled congress led by Tip O'neill cranked up spending, which Reagan vetoed, and Congress turned over the veto.

      Delete
    8. Also, there was the unnecessary military spending. Reagan vetoed a lot of bills! I didn't realize this. Thanks, Falstaff.

      Delete
    9. ROFL. I take it pithom and Falstaff never saw the "There's a bear in the woods" ad. You two must have never heard of Star Wars, either, or think that it only refers to a movie released in 1977.

      Delete
    10. Sorry for being ambiguous. I meant Reagan was responsible for a lot of unnecessary military spending. Sometimes, the world does not revolve around Washington, but around Moscow.

      Delete
  17. Perhaps a focus on the reasons for 4% would make its use more obvious. Assume 4% and all sorts of tax cuts are possible without the pain of spending cuts and the inevitable deficits are just out of control government. Deficits don't matter, only who is running them.

    ReplyDelete
    Replies
    1. If America had 4% growth, it wouldn't have "inevitable deficits".

      Delete
  18. Cochrane seems to throw out straw man after straw man here. I don't doubt that he really does believe that there are significant growth impacts from "Free Market Nirvana" policies, but the arguments he makes look too obviously mendacious.

    How much is Jeb! paying him to surrender the pretense of intellectual honesty?

    ReplyDelete
    Replies
    1. None. John is a nice and honest guy. And I don't see any strawmen or mendacity in his post. Substantiate your accusations!

      Delete
    2. "More deeply, Noah suggests no alternative policies. He does not claim that more government wage controls, unions, stricter labor laws (Uber drivers must be employees) heavier and more politicized regulation, cartelizing more industries beyond health and finance, raising taxes to confiscatory levels, larger welfare state, boondoggle public works and so on -- the alternative path in the current policy debate -- will get us back to 4% growth."

      That is a straw man. It's one hidden behind a qualifier, but when challenged to provide evidence for his own claims about the growth effects of his policy proposals, instead of responding with such evidence, he invented a fake alternative set of policy prosposals. He tried to hide his own lack of evidence in this way.

      You're welcome.

      Delete
    3. It's not a strawman, as it has a pretty obvious qualifier. And the purpose of the statement is not to provide evidence in support of his policies, but to show that the alternative path in the present policy debate would be a clearly bad idea.

      And the "fake" alternative set of proposals are not fake at all; they're what large parts of the Left want.

      Delete
    4. "It's not a strawman, as it has a pretty obvious qualifier. And the purpose of the statement is not to provide evidence in support of his policies, but to show that the alternative path in the present policy debate would be a clearly bad idea.

      And the "fake" alternative set of proposals are not fake at all; they're what large parts of the Left want."

      I could point out that you throw in a false dichotomy, and doubled down on the straw man by adding some weasel words ... but I can see this is going to get boring really quick.

      Delete
    5. Stating that the Clean Air Act is "politicized regulation" is mendacious. Stating that investment in infrastructure is "boondoggle public works" is mendacious.

      Delete
  19. By my quick math, 4% growth would get us to 148% of current output in 10 years, while a 2.5% CAGR gets us to only 128% of current output.

    Thus if we assume 2.5% as a baseline, higher growth policy change would to achieve a cumulative ~15% increase in output over 10 years to hold us at an average of 4%.

    So ... how could a shift on that scale be achieved, and why should we believe the claims to be plausible? That's the challenge Noah seems to have put forth, noting that Free Market Nirvana advocates have been remiss in providing evidence in the past. In response, Cochrane, instead of laying out a "here is the evidence that my claim is plausible" type argument, has instead thrown out an argument of the form: "well, you don't have evidence for a magical growth plan either!"

    ReplyDelete
  20. Oh, pihcom, you are still here?

    US debt on 9/30/80 907 billion

    US debt on 9/30/89 2,875 billion.

    Ronald Reagan tripled US debt. That is blowing it up very big time.

    You should just shut up, you ignorant lying fool.

    ReplyDelete
    Replies
    1. US debt on January 20, 2009: $10,626,877,048,913.08
      US debt today: $18,151,873,074,142.99

      So did Obama blow up the national debt?
      Or was it the automatic stabilizers?
      It was the automatic stabilizers.
      Think more clearly, Barkley Rosser.

      Delete
    2. Anonymous7:17 PM

      pithom: “Unemployment at the trough of the 1982 recession was higher than during the Great Recession.”

      1982 was a short, sharp shock, and not known as a Great Recession.
      Reagan's policies -- not stabilizers -- blew up the debt.

      Delete
    3. Reagan's was short and sharp because what had been the very anti-inflationary monetary policy of Volcker that started under Carter and dragged him down, was suddenly relaxed after August 1982 when the Mexicans threatened to default on their debts to the leading New York banks. Interest rates plunged more than 6 points in six months, paving the way for the "Morning in America" in 1983 going along with Reagan's debt blowing up fiscal policy.

      Interest rates were already pretty much near zero when Obama took office, and the economy was in the midst of a steep plunge, which turned around not too long after he took office, and put in place his somewhat more limited fiscal stimulus policy, which certainly increased the debt. The economy was actually expanding when Reagan entered office, but he managed to turn it around to go back into that short sharp recession after getting into office, before Volcker finally saved his cookies from the fire after August 1982. And, unlike Reagan, Obama was facing a global recession worse than anything since the Great Depression, with economic performance in the US under him better than most of the rest of the world.

      Really, pithcom. You are not looking any better at all. Reagan blew up the debt worse than anybody except FDR.

      Delete
    4. Anon:
      2008 was a "short, sharp shock" as well. The 1981-2 shock was so short and sharp that unemployment at the end of Reagan's two terms was just as high as it is today. Reagan's policies did not blow up the debt relative to counterfactual policies; in fact, Reagan had the tightest fiscal policy since Herbert Hoover during his first term (though this was begun under Carter):
      http://research.stlouisfed.org/fred2/graph/?g=14Kr
      Of course, he mostly made up for it with a fairly loose fiscal policy during his second term (this was due to needless military spending).

      "Reagan's policies -- not stabilizers -- blew up the debt."
      -You have no evidence for this. So why not just admit you're making stuff up?

      "The economy was actually expanding when Reagan entered office, but he managed to turn it around to go back into that short sharp recession after getting into office, before Volcker finally saved his cookies from the fire after August 1982."
      -Volcker actually managed to turn it around to go back into that almost-as-long as 2007-9 sharp recession by tightening monetary policy in 1981.
      "Obama was facing a global recession worse than anything since the Great Depression, with economic performance in the US under him better than most of the rest of the world."
      -The combined effect of the recessions of 1980 and 1981-2 on the U.S. economy was worse than that of the Great Recession, relative to trend.
      "You are not looking any better at all. Reagan blew up the debt worse than anybody except FDR."
      -The fact stuff happened under Reagan does not mean Reagan did it. Did Reagan write Thomas Sowell's Civil Rights: Rhetoric or Reality? No. That would have likely happened anyway, irrespective of who was in office at the time.

      Delete
    5. Reagan said "lets cut taxes and raise military spending." He got elected by saying that, and he got a second term by saying that, and he got his vice president elected by saying that. And lo, taxes were cut and military spending was raised and the debt increased.

      But yes, I can see how it's entirely coincidental that when the leader of the free world asks for X, it's entirely coincidental that X happens. Health care reform under Obama is also clearly entirely coincidental.

      Delete
    6. The Reagan structural deficits only started to appear after a lot of tax increases. Military spending was unnecessarily raised, but it was not a major contributor in the grand history of the national debt. The fall of the Soviet Union had nothing to do with U.S. military expenditures.

      Delete
  21. Oh, I see you are making a case for "special circumnstances" for RR on his large budget deficits, with you including "reducing inflation" as one of the challenges he faced, although I note that most consider anti-inflationary budget policy to tend to be lower budget deficit-oriented rather than higher so, but...

    Anyway, on the economic recession front, the only post-WW II president to face something as bad as RR, actually worse, has been our current one, Obama. As of 9/38/08, to pick the equivalent starting point, US national debt was $ 10,024 billion. As of 9/30/14 it was $17,485 billion, having increased by just over a trillion the previous year. If that rate continues (actually declining at the moment), it might hit 20 trillion by 9.30/17. That would have him about doubling the national debt, not nearly as dramatic a blowup as the tripling good old Ronald Reagan gave us while he (more accurately the Volcker-led Fed, with Volcker appointed by Carter) was fighting inflation.

    Get lost.

    ReplyDelete
    Replies
    1. 1. Unemployment at the end of Reagan's two terms in office was just as high as it is today. Obama still, unfortunately, has a year and a half to go.

      2. The tripling of the national debt under Reagan was partly due to the fact there simply wasn't as much debt accumulated before Reagan due to unemployment in America being low before the 1970s. Also, inflation and NGDP growth was higher under Reagan than under Obama, forcing the debt to grow faster in nominal terms.

      Get found. :-)

      Delete
    2. pithcom,

      Get real. Reagan was able to take advantage of a stimulative monetary policy thanks to Volcker having run a very strict one starting under Carter with Carter's approval, which had resulted in extremely high interest rates, some as high as 20% by August 1982.

      Obama has not at all had the advantage of the Fed being able to increase the stimulus of monetary policy, although it has remained as stimulated more or less as it was when he took office. But he has seen no decline in interest rates because they were already rock bottom, whereas Reagan was able to see those sky high rates brought about by Carter-Volcker policy decline a whole lot.

      You are not playing it straight here. You initially declared that it was nonsense that Reagan had "blown up the debt." Now you are making up excuses for it. You need to leave.

      Delete
    3. "Obama has not at all had the advantage of the Fed being able to increase the stimulus of monetary policy,"
      -Yes, he did, the Fed just wasn't feeling especially stimulative at the time, and, so, wasn't very stimulative.
      "You are not playing it straight here. You initially declared that it was nonsense that Reagan had "blown up the debt.""
      -It's just as much nonsense as stating Reagan made Robocop.

      Delete
    4. Here is what you said above, pithcom: "No Reagan did not blow up the debt. That is a leftist myth."

      One of the first signs that somebody has a lousy argument and is lying is when they start dragging in political labels. You are not worth bothering with any further.

      Delete
    5. If it was a myth spread by the right, I'd say it was a rightist myth. It's not, so it's a leftist myth. You didn't address any of my points, so I'm assuming the argument is over, and victory belongs to me.

      And I don't have a lousy argument, nor was I lying.

      Delete
    6. Reagan doubled the debt. For no particularly good reason. So yes, Reagan blew up the debt. It was a topic of discussion at the time; you probably weren't there.

      Delete
    7. Debt more than tripled under Reagan, but, as I've pointed out, saying Reagan tripled the debt is just like saying Reagan made Robocop.

      Delete
    8. No it is not, pithcom. It is a true statement that national debt more than tripled under Reagan, and you denied it earlier, claiming it was a "leftist myth." It is not true that "Reagan made Robocop."

      Something tells me that you are hoping to become a commentator on Fox News where lying is par for the course every day and every way. They are even proud of it, so you would fit right in there.

      Delete
    9. I never denied the national debt tripled under Reagan. I did deny that Reagan tripled the national debt. Robocop was made under Reagan. Reagan did not make Robocop. Just the fact that something happened under a guy does not mean he's responsible for it. Obama is responsible for the Islamic State, but he's not responsible for, say, a low trend growth rate of NGDP.

      And I never lied here even once.

      Delete
    10. Sorry, pithcom, you are not getting off so easily.

      Yeah, it has been the standard propaganda story that it was all the fault of Congress, mostly underr Dem control during his presidency. He was submitting these budgets with few deficits, but there was that awful spendthrift Dem Congress making Robobcop.

      Sorry. Wrong. (see either David Stockman or Bruce Bartlett, both of whom worked for Reagan on this)

      The budgets Reagan submitted had the deficits in them. He asked for them. The main thing Congress did was to tilt tht content of spending a bit away from DOD and more to social safety net stuff. But there was very little difference in overal balane. Ronald Reagan got the deficits he asked for. He blew up the national debt.

      You are just wrong, pithcom. How about you just stop lying, please?

      Delete
    11. No, Rosser, that's not my point. My point is that the deficits during Reagan's first term were surprisingly small given the weak economy at the time, and that the deficits in his second term were not large enough to overwhelm the effect of the surprisingly small size of the deficits during his first term. Here, see for yourself:
      http://research.stlouisfed.org/fred2/graph/?g=14Kf
      http://research.stlouisfed.org/fred2/graph/?g=14Kr
      I'm not saying it was the fault of Congress. I'm saying it was more than mostly the fault of the economy. Which was the fault of Volcker.

      Delete
    12. pithcom,

      Your lies just get bigger and bigger. Give it up.

      The highest deficit under Carter was just over 73 billion in 1980. The worst year of recession under Reagan was 1982. However, his deficits did not exceed 200 billion until after it was over, 1983. It exceeded 200 billion again in 1985, 1986, and 1989. You are so full of b.s., it is really unbelievable. Where in hell did you come from? Liar Central?

      Delete
    13. Rosser, did you look at my graphs? Like, at all? You certainly haven't criticized them. Look at quarters, not years. And at spending-to-revenue ratios, not at total dollar amounts (which are misleading due to NGDP growth). And I'm not lying. Reagan was, though not nearly as fiscally conservative as Eisenhower, far more fiscally conservative than most people with an inkling of knowledge about the history of the national debt give him credit for, especially during his first term. Of course, it is well understood that Johnson and Bush were not at all fiscally conservative.

      Delete
    14. Your graphs do not liink, pithcom, but only under some very weird twistings will your statemetns be at all remotevly correct. You have been lying and distorting throughout this whole thred.

      A whopper you pulled above was claiming that Reagan vetoed some military spending. He did, but he proposed much more than he vetoed, with Congress turning him down.

      Again, RR got the budget deficis he proposed, and they were totally unnecessary.

      Delete
    15. So, I just wasted some time to go look at one of these Fred graphs, and it is total crap, not a problem of going from years to quarters. It has the spending to receipts ratio for Carter at its max at 1.1 and the same for Reagan at its max at 1.3, not even a 20% increase. However, we know that Reagan tripled the size of the annual budget deficit compared to Carter (73 billion to well over 200 billion, that holding for several years). There is simply no way changes in taxes or anything else is remotely consistent with that.

      Sorry, pithcom, but you have just gone from one lie to another. First it was Reagan did not blow up the debt. Then it was automatic stabilizers (you adding the utterly stupid "think" when you therw that whopper out). Then it was done by somebody else, Congress, only it was not. He proposed the deficits he got. More recently we have had the excuse that it was the bad economy, except that the bad economy was over by 84 and he was just getting into his biggest deficit years. This last bit is just pathetic proving nothing.

      Oh, and I looked at devicits as a percent of GDP by president. There are only three presidents in all of US history who had higher such ratios than Reagan did: Lincoln, FDR, and Obama, and for Obama that was only for a couple of years with him having brought that way down. Reagan ran his all the way through.

      He very irresponsible blew up the national debt for no good reason. Deal with it, you anonymous troll.

      Delete
    16. What do you mean my graphs "do not liink"? Copy the links and paste them into the address bar of your browser. It's as simple as that. If you don't at least look at them, there's no point talking to you. I haven't been lying or distorting anything here (except for once to another guy, for which I apologized). I also never claimed that Reagan vetoed any military spending; I hold him responsible for some unnecessary military spending in the late 1980s.

      Are you typing on your phone? You'll do better on literally anything else.

      Delete
    17. You have not read. I went to the fist one. I am not going to waste my time with the second one. The first one is very weird, and clearly has done some bizarre manipulation with its spending over receipts numbers. It is crap.

      You claimed above Reagan vetoed some military spending. You lie so much you cannot even keep your lies straight.

      I am not going to spend any further time on this. I think pretty much everybody still following this realizes that you have been wrong wrong wrong on pretty much all your claims on this, as they have evolved. You are nowhere with nothing, except some clearly weridly distorted graphs that are in complete contradiction with all other available data.

      Have fun in your anonymous troll bin.

      Delete
    18. "You claimed above Reagan vetoed some military spending"

      -That's a lie. I claimed he vetoed lots of bills. I also claimed he was responsible for some needless military spending. How you added that up into that claim above, I don't know.

      "He very irresponsible blew up the national debt for no good reason."

      -That's a lie, too.

      "The first one is very weird, and clearly has done some bizarre manipulation with its spending over receipts numbers."

      -That's a lie, too. It's just division.

      "There is simply no way changes in taxes or anything else is remotely consistent with that."

      -Changes in NGDP growth, Rosser. It's that simple.

      "and for Obama that was only for a couple of years with him having brought that way down. Reagan ran his all the way through."

      -The Federal revenue/expenditure ratio is about the same today as it was at the end of Reagan's two terms as President. Unemployment today is about the same as it was at the end of Reagan's two terms as President.

      I am not going to spend any further time on this. I think pretty much everybody still following this realizes that you have been wrong wrong wrong on pretty much all your claims on this, as they have evolved.

      Have fun in your nonymous troll bin.

      Delete
  22. Reply to chart #1: The enclosed FRED chart of ln (Real chained GDP) shows an annual growth rate of ~3.5% from 1947 to 2007. Four percent isn't that big of a jump.

    https://research.stlouisfed.org/fred2/graph/?g=1tuo

    ReplyDelete
    Replies
    1. All deviations look small on a log graph. The difference between 3.5% and 4% during that period is a 33% change in GDP.

      Delete
    2. Thanks for your reply. Indeed the change in GDP from 3.5% to a 4.0% growth rate over a 68 year time span is at least 33%. No small jump.

      My quibble is convolving The change in GDP with a 10 year box function. This is a low pass with significant side lobes that magnify higher frequency noise. I prefer a Hanning function with side lobes less than 32 db from peak amplitude.

      Economic data is not continuous and derivatives don't exist. I think looking at long term trends gives a better perspective on the behavior of the measured property. Of course, turning points forecasting is a problem.

      So, I thought the long term trend showing an annual growth rate of 3.5% over a 68 year time span was a better than displayed in Chart #1.

      BTW, eyeballing Chart #1 shows a 3.5% average growth rate.

      Delete
  23. Anonymous6:34 PM

    Cochrane's and your post are strange in the sense that they are quite non-economical. Both of you don't talk about the difference between growth- and level effects. If you think about standard growth theory, it is pretty easy to get level effects on long-run equilibrium outcomes via tax policies etc., but it is hard to get a long-run effect on growth rates. I think your suggestion to increase subsidies into R&D come closest, but I don't think that the policies suggested by Cochrane will increase growth rates permanently. However, level effects generate large growth rates along the transition path, so we'd need to know how long it takes for the economy to adjust to the new long-run equilibrium.

    I'd also like to hear why you think school vouchers will decrease economic growth. Are you suggesting that they have a negative effect on educational outcomes? The empirical evidence suggests otherwise, though. See Caroline Hoxby for example.

    ReplyDelete
    Replies
    1. A level effect would show up in the 10-year geometric mean growth rate.

      If Cochrane is talking about *trend* growth rates - and he fudges his words a little - then you're right. But he's also talked about 10-year growth rates, so I don't think he's fudging too badly.

      Hoxby's study is not very good. Levitt & Cullen much better. Shows zero effect from school choice. And vouchers offer lots of opportunity for cheating - i.e. fake schools. Bad idea all around.

      Delete
    2. A more recent study finds positive effects for girls, and size depends on quality difference between the schools. http://scholar.harvard.edu/files/ddeming/files/aer.104.3.991-1.pdf

      Delete
    3. Anonymous2:17 AM

      Noah, I think you are selecting the evidence based on your own prior. I agree that the Hoxby study is not the best in the field, but it was one of the first that looked at the topic seriously. There are now quite a few quasi-experimental studies, often from countries other than the US. Several South-American countries have experimented with voucher programs. See for example some of Angrist's paper (and don't tell me they are not well identified). My impression is that studies with a cleaner research design find slightly positive effects on student achievement from voucher programs. Stating that the evidence suggests negative effects is certainly wrong.

      Regarding the growth rates, yes, I suspect that Cochrane talks about the growth rate along the transition path, not in the new steady state. But then we need to study how fast the transition to the new equilibrium takes. Why should it be 10 years? To study that question, we need a model and a quantitative exercise. In any case, I think Cochrane is too imprecise here. And I say that as someone who usually agrees with him.

      Delete
  24. Anonymous6:48 PM

    There must be a presidential election in the offing.


    Henry

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  25. There is not a presidential election "in the offing," but our screwed up system has reached the point where we constantly have a presidential campaign going. It used to be that the presidential campaign started after Labor Day of the presidential year. Here we are more than a year and a quarter out from the presidential election, and the news is saturated with the shenanigans of the 16 candidates (with probably a few more to come) on the Republican side and 5 on the Democratic side ranting and raving at each other.

    This is thoroughly nauseating and probably damaging to US economic growth, except for the sector tied to political advertising.

    ReplyDelete
    Replies
    1. Anonymous7:55 PM

      It seems to me that when the yelling begins, the presidential election has begun.

      Judging by this thread, it has begun.

      Henry

      Delete
    2. What? I would have written all of this whether it was election season or no. I haven't even commented on the elections much, except for saying Hillary will win.

      Delete
    3. It used to be that the presidential campaign started after Labor Day of the presidential year.

      Not so, at least not always. The 1828 campaign began the day John Quincy Adams was sworn in in 1825.

      Delete
  26. Anonymous9:25 PM

    What are the limits to growth? Look at China - 10 +/- % for some time now. It has enjoyed an investment boom for 20 years driven and financed from offshore (Japan, US, Europe) on the back of cheap compliant labour. This can only go so far. Japan was the focus of international investment 40 years ago on the back of cheap compliant labour and continued until Japanese labour costs increased and China opened up. (This is the main reason the Japanese economy has been in a 20 year slump). The US has proved it can develop industries competitively on the back of new technology. The emerging technologies of energy generation and storage, electric vehicles and nanotechnologies are probably the bedrock for the next wave of US growth. Cleaning up its wealth and income disparities will further support growth.

    Henry

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  27. Why hasn't Korea been in the same slump? Much of the Japanese slump is due to population aging.

    ReplyDelete
    Replies
    1. Anonymous9:45 PM

      Re Korea: it's cost structure is out of phase with that of Japan.

      Re Japanese aging: it would have to be a factor, but why necessarily will it cause a slump. It will bring a change in the nature of goods and services provided by the economy. I would say the most important factor was Japan directing its new investment to China.

      Henry


      Delete
  28. What liberalizations do you have in mind when you type "Reagan's liberalizations" ?

    ReplyDelete
  29. Also the alleged Reagan growth bump is not visible in your figure. There was rapid growth during the recovery from the severe second Volcker recession. This was typical of recoveries from post WWII pre 1991 recessions (that is typical of recoveries from inflation fighting recessions). The recovery was unusually strong, but that might just be because the recession was the most severe between 1937 and 2008.

    Overall, Reagan era growth looks good compared to Oil shock era growth (that is growth averaged over the Nixon Ford % Carter administrations) . It was low compared to growth in the new Deal 30s (of course the mother of all recoveries from the great depression) or the great society 60s or even the Truman (post post WWII demobilization) 50s. the average growth rate when top ncome tax rate was 91% was greater than the Reagan years average.

    http://real-estate-and-urban.blogspot.it/2010/05/peter-wallison-opinions-without-data.html

    or for median family income the usual

    http://krugman.blogs.nytimes.com/2010/05/22/down-the-memory-hole/

    ReplyDelete
    Replies
    1. Anonymous10:12 PM

      Reagan fortuitously made the presidency just as the US/world entered a new phase of technological growth. Apart from looking good as it pulled out of the early 1980s slump, the development of computing, information processing and communications technologies launched the world in to a new era of growth. As these technologies reached maturity, the world entered an hiatus. This is where we are now and have been several times before in the last 150 years. The next wave is beginning to build. Whoever has the next presidency will reap the political benefits of it.

      Henry

      Delete
    2. The Reagan growth bump isn't visible due to the Baby Boom and the entry of women into the labor force holding up growth during the 1970s.

      Delete
    3. Anonymous4:10 AM

      Henry doesn't seem familiar with data, particularly productivity data. Maybe he shouldn't speak in public about it?

      Delete
    4. Anonymous6:47 AM

      Data? What the hell is that?

      Henry

      Delete
    5. Anonymous3:45 PM

      "Henry doesn't seem familiar with data, particularly productivity data."

      OK A'mous, which productivity data should I be looking at?


      Henry

      Delete
    6. Reagan growth bump is very visible once you compare to what happened to those who decided to go the opposite way: Europe. Their fast catch-up stopped and then reversed. Just look what happened to this paragon of smart government-led development France.

      Delete
    7. Or socialist, Not-At-All-Serious person-led Greece.

      Delete
    8. Reagan growth bump is very visible once you compare to what happened to those who decided to go the opposite way: Europe. Their fast catch-up stopped and then reversed.

      Japan too, 10 years later. This is the main reason I think Reagan's reforms (some of which were actually Carter's reforms, but SHHHHH!!) were good on balance.

      Delete
    9. Yes, Carter was a great domestic policy president. He (and the congress obviously) deregulated airlines, trucking and telecommunication.

      Speaking of growth, there are even more examples. Canada and Sweden, for example, after they liberalized in the 90's.

      Delete
    10. Anonymous8:10 PM

      A'mous, still waiting for the productivity data.

      Henry

      Delete
  30. "corporate tax cuts for the U.S."

    These have precisely zero benefit for jobs, equality, or growth, and cause a lot of harm to all three. Haven't you looked at the econometrics? It's a completely insane thing to advocate.

    Now, advocating full corporate deductibility of dividends -- there's actually good reason to think that that would help things. Go do your homework...

    ReplyDelete
    Replies
    1. [citation needed]. "Go do your homework" is always a mark of a man who hasn't done his (or, alternatively, refuses to provide evidence for his claims, which is just as bad).

      neroden, why do you think Ireland boomed in the 1980s and 1990s?

      Delete
    2. Anonymous4:08 AM

      neroden's assertion is false, as can be seen by looking at the work of Karel Mertens. Who, incidentally, is a lot more accomplished than Noah, neroden, and anyone on this blog except Chuck Carlstrom and John Cochrane. Learn from your betters.

      Delete
  31. "
    Well, you know, personally I do think Reagan's liberalizations, on balance, were good for the economy. They didn't actually get us to 4 percent growth, even with favorable demographic tailwinds. They didn't end the TFP stagnation (at least not until the mid-1990s, if you want to posit 14-year lags). They luckily coincided with Volcker's taming of inflation. They indeed caused a massive runup in the national debt. But I think that on balance they were necessary and good, and I hope Japan emulates them to some degree in the near future."

    Still wrong. Geez, econ seems to brainwash people.

    Hint: Reagan's so-called 'liberalizations' led directly to the explosion in CEO pay, which led to the current 'billionaires own the government' economy. This is, on balance, a VERY BAD THING.

    Which particular actions of Reagan were the worst? Cutting the top income tax rates (both corporate and individual) and cutting the top estate tax rate, while removing corporate deductibility of dividends... the combo encouraged CEOs to simply walk off with money and hoard it for their dynasty.

    ReplyDelete
    Replies
    1. "massive runup in the national debt" = going from worlds largest creditor to worlds largest debtor. This seems to be conveniently forgotten by those who admire Reagan but theoretically abhor deficits.

      Delete
    2. http://research.stlouisfed.org/fred2/graph/?g=14Kf
      I really don't admire Reagan, though he was better than Clinton or Bush II. He didn't get us into any new wars, but his preparations for war were utterly needless.

      Delete
  32. "Hint: Reagan's so-called 'liberalizations' led directly to the explosion in CEO pay,"
    -Which happened in the 1990s. Under Clinton. And was closely related to the stock market boom of the time, which benefited everyone, including common workers.
    http://www.epi.org/publication/top-ceos-make-300-times-more-than-workers-pay-growth-surpasses-market-gains-and-the-rest-of-the-0-1-percent/

    "Which particular actions of Reagan were the worst? Cutting the top income tax rates (both corporate and individual) and cutting the top estate tax rate, while removing corporate deductibility of dividends... the combo encouraged CEOs to simply walk off with money and hoard it for their dynasty."
    -Why was this bad?

    ReplyDelete
  33. >>I think we - by which I mean Americans - have repeatedly bought into the promises of free-market ideologues, outlier economists, and conservative think tanks, even as their chosen policies have yielded conspicuously diminishing returns since the early 80s.
    <<
    Reagan Reagan Bush1 Clinton Clinton Bush2 Bush2 Obama Obama -- only Reagan was really free market. Remember Bush1 "Read my lips", but then raising taxes?
    Bush2 tax cuts but also steel tarrifs, who are the free market advocates who claim Bush2 was a big free marketeer? Many conservatives were not happy with Bush2 on his economics -- but they (correctly) thought the Bigger Spending Dems were worse.

    Noah, I do like your land value tax ideas (Henry George, ya!), but where have school vouchers done worse than Dem Party controlled city education for blacks?

    Dan Mitchell of (Libertarian) Cato asks "where has Bigger Gov't spending shown greater growth in a developed democratic country than a similar less spending country?"

    Switzerland is growing faster, with limited gov't spending. Estonia is growing faster than Hungary or the Czech Republic.

    ReplyDelete
    Replies
    1. It's fruitless considering only the quantity of government spending and not the quality. Compare the government spending of Eritrea and Ethiopia, for instance.

      Delete
  34. Speaking of burden of proof and looking for evidence in econometric studies, especially on short time scales is just silly. This is just playing with noise or worse asking the wrong questions. One would not expect a response to restrictions such as minimal pay or regulations to be immediate. Unless, the change is big (like the bookstore in SF). However, people will respond over time. Those things cumulate.

    We don't know how the various illiberal policies will work out. Some of them might be possibly useful. One thing they will not be is robust. However, the overall burden of high regulation, high taxes, high transfer state is unmistakable. One look at Europe over the last 30 years in comparison to the english world should give everybody a pause.

    ReplyDelete
  35. There may not be a large number of free market libertarian economists, but those that are do exceedingly well

    ReplyDelete
    Replies
    1. If there's anything I've learned from my fruitless debate here with the (still wrong) Barkley Rosser, it is this: the Money Illusion, as Sumner said, is surprisingly persistent, fucking with people's heads to the point that they can't understand that a tripling of the deficit in nominal terms is not a tripling of the ratio between expenditures and revenues. I propose a 20% per year NGDP target as the most optimal solution to this illusion.

      Delete
    2. Also, you do realize that Robert "Third" Reich and P. Krugpot do extremely well for themselves, right?

      Delete
  36. Oh, I love it. "still wrong Rosser" Really? About what? That the national debt tripled under Reagan, a higher rate of increase than any presidents other than Lincoln and FDR? Oh, that it was just automatic stabilizers. Did not provide the figures, but that was a ridiculous joke, pisscom. Oh, that it was all the Dems in Congress? No, more b.s. and lies. Then this last weirdness that it was the bad economy, only to find out that the budget deficits under Reagan were larger after his recession was over rather than during it.

    Sorry, p-com, you lose. Deal with it and get lost.You have run out of lies.

    ReplyDelete
    Replies
    1. "Then this last weirdness that it was the bad economy, only to find out that the budget deficits under Reagan were larger after his recession was over rather than during it."
      -Money. Illusion.
      "Did not provide the figures"
      -My graphs (which you did not bother to refute) were figures enough.

      Delete
  37. Anonymous11:49 PM

    Hilarity -- two uninformed nitwits (Rosser and pithom) arguing about a subject they understand very little.

    ReplyDelete
    Replies
    1. Which uninformed nitwit is right?

      Delete
  38. Anonymous, And you know what, pray tell? I have not handed out a single inaccurate statistic, unlike pithcom. Do you have anything informative or useful to say about the question of budget deficits and the expansion of the national debt under Reagan?

    ReplyDelete
    Replies
    1. And I have not lied about a single thing Rosser said. Rosser has lied quite a lot by what I said.

      Delete
    2. Not by, about.

      Delete
  39. I just noticed that the relentless p-com has come up with yet another phoney piece of baloney. Now he is pushing real deficits. Sure, there was pretty high inflation at the beginning of Reagan's term, but one of his signal achievements was sharply bringing it down, or at least it came down during his presidency, even if it was more Paul Volcker at the Fed, with the initial support of Jimmy Carter. But, whatever. So, posing that inflation is responsible is pretty much of a joke, particularly as the larger deficits came later in Reagan's term after the rate of inflation came down.

    So, let us look at a more useful number, one that most look at anyway, the percent of GDP that is the budget deficit. So, for 1942-45, the budget deficit was in double digits every year, above 20% for three of them, with the highest in 1943 at 29.6%. From 1947-1980, the budget deficit exceeded 3% of GDP in only three years, 1974-76, barely above 3 in the first and last, and reaching 4.1% in 1975.

    Once Reagan came in it soared, going above 3% starting in 1982 and staying there through 1988, with it above 5% in two years, 1983 and 1984, and above 4%^ in two other years. GHWBush would have it above 3% during 90-93, with it above 4% (but not above 5%) in the recession years of 91 and 92 (yeah, Clinton in by 93, but that was still Bush's budget). Later in Clinton's years it would be in surplus.

    It has since been higher, above 3% in 2003 and then soaring as the Great Recession hit, above 8% during 09-11, but down to 2.4% by 2014.

    Anyway, that is the record. Sorry, pithcom, I do not care how you cut it. Your original claim that Noah was wrong to say that Reagan exploded the national debt is just wrong, no matter how you cut it. Accept the facts and deal with it and shut up.

    ReplyDelete
    Replies
    1. I always like my data presented in graphical form. It's getting late and I'll do the correlations with the unemployment rate in Excel tomorrow. It'll show basically the same thing as I've always maintained here and Barkley has steadfastly denied, for reasons not clear to me. And his failure to consider unemployment just boggles my mind. It's like he believes automatic stabilizers have no influence on the budget (or at least didn't in the 1980s)

      And, like Sumner, I consider NGDP growth to be a more important variable than inflation. They're both nominal variables that can be easily changed by the Fed. Inflation is one side of the coin; NGDP growth is the coin.

      Delete
    2. Anonymous2:40 AM

      You're really not too bright, are you pithom? I mean, when Barkley gets the best of you, you should hang it up right then and there.

      And by the way, who cares what you consider to be important? You have demonstrated an inability to even read data, let alone analyze it, and clearly have no idea about economic modeling. Go back to your von Mises circle-jerk and leave economics to the grownups, little man-child.

      Delete
    3. Anonymous, what the fuck are you talking about? And in what universe did Barkely get the best of me?

      Delete
  40. Look, moron, you cannot read tables because you do not know how to count, or what? Do you use a phoney name because you are not an academic or professional economist? You are going to do some regression on Excel? Here is the basic fact you just are having problems facing. During Reagan's presidency, his highest deficits came after the recession was over and the unemployment rate came down. You can probably find some positive correlation between unemployment and deficits, but that exists in most administations. You would need to show it was strong under Reagan, and if anything, give the fact I just noted, it probably was not.

    Reagan was irresponsible about budget deficits. Noah and even I are willing to grant that some changes he made were desirable, although he has been given credit for a lot of stuff that Carter did (who did a lot more deregulating than Reagan did, although most people do not know this thanks to relentless propaganda by partisan Reagan fans). But, nobody buy you, pithcom is running around trying to defend Reagan's budget policy. It was a hypocritical farce.

    He ran on cutting taxes, raising defense spending, and lowering budget deficits. GHW Bush in running against him said this was "voodoo economics," and that remains true. He did the first two, but he utterly failed at the last. Go see works written by some of his closest budget advisers, such as David Stockman and Bruce Bartlett. They know, and Stockman has even said that they were consciously lying to the public when they were putting forward some of their early budgets, when they claimed that cutting taxes would bring down the deficits. Nope, did not.

    Now grow up, shut up, and stop wasting everybody's time with your hopeless quest. If you really believe the drivel you have been handing out, then you are a total fool, really kind of pathetic.

    ReplyDelete
    Replies
    1. "During Reagan's presidency, his highest deficits came after the recession was over and the unemployment rate came down."
      -Throughout every peacetime presidency, deficits, for obvious reasons, have been correlated with the rate of unemployment, not its direction of change.
      "You can probably find some positive correlation between unemployment and deficits, but that exists in most administations."
      -Yes, obviously.
      "You would need to show it was strong under Reagan, and if anything, give the fact I just noted, it probably was not."
      -That's sort of my point, isn't it? That Reagan's deficits in his first term were surprisingly low given the unemployment rate at the time.
      "Reagan was irresponsible about budget deficits."
      -Nonsense.
      Stockman is right on his personal experience, and wrong about roughly half of everything else. Even Stockman admitted that the early Reagan deficits were due to the Volcker recession and were held down by inflation.

      And why the constant name-calling? Aren't you a professional?

      Delete
    2. Yup, the R2 of the deficit as a percentage of GDP with unemployment is .67547 , slightly better than the R2 of the spending-to revenue ratio with unemployment.
      Here's the graph of unemployment and the deficit as a percentage of GDP. Shows the same thing I've said: the excessive deficits during Reagan's second term were nowhere near large enough to make the impressive fiscal conservatism during his first term any less impressive. The Reagan tax cuts had nothing to do with the deficits under Reagan. If anything, the converse.
      http://research.stlouisfed.org/fred2/graph/?g=1uGn

      Delete
  41. pithcom,

    This will be my last post on this thread. Let me bring to your attention a graph that takes account of what you say you care about, the impact of unemployment-induced spending on automatic stabilizers and reduced revenues due to poor economic performance. This measure is called the cyclically adjusted budget deficit (sometimes the structural budget deficit). This will a graph of this for 1962-2010 estimated by the Congressional Budget Office, and reproduced as Figure 3 in an article published in the Federal Reserve Bank of St. Louis Review, January/February 2012, 94(1), pp. 21-39, accessible at https://research.stlouisfed.org/publications/research/12/01/21-40Kliesen.pdf (if that does not work, just google title), entitled "How good are Government Projections of Deficits and Debt and Should We Care?" (bad and yes is the answer), by Kevin L. Klieson and Daniel L. Thornton (a VP at your fave Fed).

    So, there are debates over how to estimate this deficit measure, but this is usually done by accounting for how far the unemployment rate is from an assumed full employment measure associated with "potential GDP." The full employment rate may be arguable, but across years it is assumed to be the same, which means that the estimates across years are consistent, which is really what is important. In short, this is about as good an estimate as one can get of how one years budget deficit compares to others in roughly comparable time periods, accounting for changes in unemployment.

    This figure shows that you are right about the first couple of years of Reagan's presidency when he had his recession. Even though nominal deficts tripled, the cyclically adjusted one barely changed. Most of the increase in deficits can be attributed to the bad economy.

    However, as I have reiterated several times, this no longer holds for the rest of his term, with this measure going bad, far worse than any year since 1962, and only exceeded at the very end of the sample in 2009 and 2010.

    In 1962 it started out at about 1%, slid to around 2%, a common number in many years, with one lone plunge to 4% in 1968, the only year prior to Reagan's presidency that it was worse than 3%. In Carter's last full year of 1980, it was about the normal 2%. The good news for you is that is about where it stayed through 1983, those recession years of Reagan's presidency.

    Then it goes bad, getting down to nearly 5% for 1985-86 (1985 was actually the year of max deficit/GDP ratio). It remained worse than 3% until 1994, Reagan leaving a wrecked budget that took a lot of effort to overcome.

    Let me point out, pithcom, that despite your repeated efforts to argue about this, you have received zero support from any commenter, zero. Before you try to argue that further, I think you should think about that. Now, I am out of here.

    Barkley Rosser

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    1. Rosser, I looked at your link. The problem is they conflate the cyclically adjusted budget deficit (one thing) with the deficit as a percentage of potential GDP (a different thing entirely). To find the cyclically-adjusted budget deficit, what they would have had to have done was decompose Federal spending into cyclical and non-cyclical expenditures and modify the cyclical ones to act as though the economy was constant. Also, model the behavior of revenues in a constant economy (preferably, with dynamic scoring). I'm sure there are some studies that do this, though I haven't researched any. I'm sure those that exist support my conclusions.

      In any case, there was no way the structural deficit in 1986 was larger than that during the Vietnam War under Johnson. The Vietnam War era under Johnson had a booming economy with lower unemployment than seen at any point in Reagan's two terms in office, and military spending was enormous. My chart captures the necessarily huge size of the structural deficit at the time, as well as that during the Korean War.

      Also, it is abundantly clear the pathway to the Clinton surplus was due mostly to the booming economy, not to anything happening in Washington.

      And I don't argue by ad populum. I hold lots of unpopular positions.

      Delete
    2. I said I would not reply, but I am not going to let you get away with outright lying.

      No, the figure is NOT about the debt/GDP ratio (which I simply mentioned in an aside). It is exactly what you say you want except that it is not dynamically scored. And, sorry, the structural budget deficit was higher in 1985 and 1985 under Reagan than it was in 1968, the worst year for LBJ.

      Deal with it. These are the facts as best they are known. Now, I really am out of here, no matter what garbage pithcom makes up.

      Delete
    3. "No, the figure is NOT about the debt/GDP ratio (which I simply mentioned in an aside)."
      -And I never said it was. :-)

      Delete
  42. plogo6:30 PM

    so when sargent and wallace were writing about reagan's chicken game in the 80s they were a bunch of leftists making a myth of reagan's debt increases? does this make sargent and lljungqvist the long awaited treatise to replace capital? sargent does have his joke about how rational expectations is communism...

    ReplyDelete
    Replies
    1. They must not have understood Depression Economics. :-)

      Delete
  43. Yeah, I am violating my dictum, but I think I can say something useful that might even be helpful for the hopelessly obsessed pithcom. This comes from the fact that while he thinks there is some study out there by somebody that will support the stuff he has been asserting here,there is none. He may even have done the necessary lengthy googling to have finally established that fact. Nobody supports his views, including super pro-Reagan high-powered economists.

    So, what can he do? Well, I suggest adopting the line of former Reagan adviser and person on many short lists to get the Nobel Prize, Martin Feldstein. His line in a fairly recent book was that of course Reagan raised the structural budget deficit, but, "Fully half of that structural budget deficit he inherited from Carter." That is not all that untrue, and makes the whole failure by Reagan to keep his budget under control not sound so bad.

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    1. "He may even have done the necessary lengthy googling to have finally established that fact."
      -Nah. I'm just lazy.

      Delete