My original intent in publishing the Op-Ed was as a way to reach out to inflation hawks who claimed to be followers of Milton Friedman. I was hoping they would see Friedman's views were nuanced and that this would encourage them to take a more nuanced view.
Mr. Obama’s problem wasn’t lack of focus; it was lack of audacity. At the start of his administration he settled for an economic plan that was far too weak. He compounded this original sin both by pretending that everything was on track and by adopting the rhetoric of his enemies.
. . .
I felt a sense of despair during Mr. Obama’s first State of the Union address, in which he declared that “families across the country are tightening their belts and making tough decisions. The federal government should do the same.” Not only was this bad economics — right now the government must spend, because the private sector can’t or won’t — it was almost a verbatim repeat of what John Boehner, the soon-to-be House speaker, said when attacking the original stimulus. If the president won’t speak up for his own economic philosophy, who will?
I have a total of nineteen seats changing hands between Election Day 2008 and the new Senate that will begin work in January, assuming no further changes, and for the time being assuming that Bennet, Murray, and Murkowski all hang on to win.
Those nineteen new Senators are a grand total of...wait for it...276 years younger than the 19 Senators they replaced. That's pretty dramatic! Of course, it's a tough fight against inertia, since the continuing Senators are getting older. Still, this will be the first Senate to turn back the clock in quite a while.
A number of my recent blog posts have involved pointing out adding-up constraints: you can’t have some people spending less than their income unless others spend more than their income, all the world’s currencies can’t devalue against each other, etc..
And judging from the responses, basic arithmetic makes people very, very angry.
My point that if you expect debtors to pay down their debt, someone must be prepared either to increase debt or to reduce assets, leads to hysterical accusations of immorality. My point that a weak dollar is a strong euro and vice versa leads to accusations that I want everyone to become Zimbabwe.
It’s kind of funny; it would be even funnier if denial of arithmetic weren’t contributing, in a very real sense, to our economic problems.
To be fair, many of the hysterical attacks involve claiming that I said things I didn’t.No, asserting that someone needs to spend more doesn’t mean that debt never matters. No, declaring that competitive devaluation does no harm isn’t the same as claiming that you can always print money without limit, and never suffer inflation. But the way my correspondents slide away from the points I’m actually making is itself revealing: it shows that they can’t bring themselves to think clearly about the actual state of affairs in the world economy right now.
I guess if you want to think in terms of simple slogans — saving good! strong currency good! liberals bad! — arguments to the effect that the world right now won’t fit those slogans is disturbing. And the solution is to yell a lot.
In other words, it is hard to discern actual evidence for the extreme supply side proposition that tax rate cuts increase tax revenues, when examining the data (and knowing which data are relevant). Now, we know that many things are going on at the same time, but as a matter of fact one cannot say that income tax revenues rose immediately after the beginning of implementation of EGTRRA.*
. . .
I know there are some who believe argument by mantra is the way to go, but I think constructive debate should be informed by appeal to data.
But in the 30s, we were mainly talking about ending expectations of deflation, or at most creating expectations of a rise in the price level to where it was before the Depression; remember that even in 1938, prices were well below 1929 levels:
That’s very different from trying to create expectations of inflation looking forward with no actual deflation in our past.
The physical sciences continue to advance at a nuanced detail level. The basic tenets are not being challenged (they are not WRONG, they are incomplete and/or inexact*) – at least not very often. The reason for this is scientists are able to devise and run controlled experiments and reach a fundamental understanding of principles, and specifically, cause and effect. The growth of scientific knowledge over time is something like an asymptotic approach to reality. The things that are difficult to know and understand are the new things that are being discovered.
* Relativistic mechanics does not refute Newtonian mechanics; rather, it subsumes it.
The agreement you cite among the economists you listed is at the level of “Which way is up?” Where they disagree is on whether you can get there more effectively by climbing a ladder or digging a hole, because they do not agree on the basic nature of ladders and holes.
Economics is now revisiting the same battleground as it was 80 years ago. It seems not to advance because past lessons are relatively ineffective at informing current thought. It happens this way because economic thought is contaminated by political ideology, and ideology trumps reality far too much of the time.
That really is dismal,
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