Lame-ass response by Rogoff-Reinhart in today's NYT OpEd piece...

[CTyankee]

Last edited Fri Apr 26, 2013, 09:08 AM - Edit history (1)

http://www.nytimes.com/2013/04/26/opinion/reinhart-and-rogoff-responding-to-our-critics.html

I looked at Krugman's latest blog hoping I could find his response, but he hadn't posted it and maybe will post it a bit later. It's still early.

I find the R-R piece the weakest kind of backtracking and "we never said it" , combined with obfuscation in a torrent of blather.

But hey, you be the judge...

UPDATE: PK response just posted. http://krugman.blogs.nytimes.com/

[MannyGoldstein]

1. I'd expect them to be a little more contrite.

Instead, it's mostly about how the other guys are wrong.

Sloppy spreadsheets show sloppy thinking.

[reformist2]

2. Actually, good for them. In any case, we should not become the defenders of astronomical debt.

We ought to the party of true Keynesian stimulus - that means increased spending *and* increased taxes.

[CTyankee]

3. the problem with the "astronomical debt" argument is that it plays into the

RW narrative that it is our debt that threatens us now. Krugman tirelessly points out that historically this isn't so simple and he discusses our debt after WW2 and how the boom afterwards occurred. So these words have to be seen in some sort of historical perspective. IOW, it's complicated.

What we should not do is allow ourselves to be fooled that this political argument is really about such debt. What it is really about is persuading the American populace that SS, Medicare and Medicaid are the causes of all our fiscal problems. Paul Krugman and other critics have more than answered this assertion, over and over again, in far more detail and with greater precision than that of their critics.

With increased spending by the government to create jobs, more tax revenue flows into the tax coffers. And before raising tax burdens on an already threatened middle class, wasteful tax loopholes for the wealthy should be eliminated. Let's start there and see where we get.

[reformist2]

15. We need to tell the truth - huge debt *is* bad, but higher taxes on the wealthy is the solution.

[mathematic]

13. Increasing taxes is the opposite of a keynesian stimulus.

DU logic goes like this:
1) Keynesian economics is good.
2) Raising taxes (on the wealthy) is good.

Therefore:
3) Raising taxes is good Keynesian economic stimulus.

It's fucking absurd. You're actually advocating for the pre-Keynesian economic framework that Reinhart and Rogoff support: debt is bad, balanced budgets are good, etc etc.

Actual Keynesian economics say we should cut taxes during a recession and raise taxes after the recovery.

[reformist2]

14. Well, I thought we were recovering and no longer in a recession. Isn't that what Obama said?

[Jim Lane]

33. It's the two meanings of "recession"

The public uses it to mean "hard times" -- high unemployment or the like. Economists use it to mean "downtrend" -- two consecutive quarters of negative real economic growth. (In this context, "real" means "adjusted for inflation" -- two consecutive three-month periods in which the GDP fell from the previous quarter's GDP, once you value all the goods and services produced in each quarter by the same standard, not by then-current prices.)

We are not currently in a downtrend. The recovery has been weak by historical standards, though, and we still have unacceptably high unemployment. Further stimulus measures are needed.

Tax cuts do have a stimulative effect. In terms of how much stimulus bang you get for each deficit buck, though, tax cuts are less effective than other measures. Even among spending measures, the stimulative effect differs. For example, unemployment insurance payments are at or near the top of the list, because the beneficiaries spend almost all that money fairly quickly.

[Alva Goldbook]

31. It depends on who's taxes you're talking about.

Keynesian economics means stimulating demand. Some tax cuts do this (like the payroll tax cut holiday). Other tax cuts stimulate supply (like capital gains and top marginal income taxes).

[lumberjack_jeff]

19. No, Keynesian stimulus does not suggest increased taxes during a downturn.

The ideal is to quickly jump start the economy so you can then raise taxes to pay the debt and manage inflation once the recovery takes hold.

The problem this time is there is no recovery to exploit for more revenue.

[reformist2]

20. We're not in a downturn. Or are you saying our party lied in 2012?

[lumberjack_jeff]

21. Yes. Our party lied in 2012

The people who bankroll our party are the same people who bankroll their party. They do it with the money that they obtained from suppressing wages, because buying - not just individual politicians but the entire spectrum of political ideology - is a good investment.

[whttevrr]

28. Median Househols Income...

That usually means two or more people, right?

Does that mean that two thirds of the people working full time are making less than 26k?

Or is my 'back of envelope' (meaning: in my head without pen or paper) guesstimation wholly inadequate?

[lumberjack_jeff]

32. "household" and "family" are two different things.

Many households only have only one person. Household income is determined through tax filings.

http://web.archive.org/web/20060922200944/http://www.business.gov/topics/research_resources/market_research/census_bureau_faq.html

[LiberalAndProud]

25. You increase the taxes in the good times.

You know, economies like Bush* inherited when he sent us those tax rebate checks. I think I got $300 myself from his largesse. Good times!

[uponit7771]

26. Yeap you can increase gov spending and decrease taxes on the middle class too

[Benton D Struckcheon]

4. Don't know what Krugman will say,

but the "five year filter" is their justification for leaving out the postwar 1946 - 1950 period, which is just, um, nuts.
Take that out and their results disappear completely.
Herndon also made the point (either with Colbert or on Bloomberg) that since 2000, the relationship is reversed: higher debt is associated with higher growth. I think Keynes explained why, 80 years ago. Maybe these two jackasses should read him and learn something.

[CTyankee]

5. well, they had to get the results they desired SOMEHOW!

[Benton D Struckcheon]

6. Latest GDP results and interpretation

Up 2.5%, consensus was 3.1%.

From Econoday:

The economy had some bounce in the first quarter as GDP growth showed some acceleration. But the details are not as encouraging as the headline. The first quarter grew 2.5 percent after a modest 0.4 gain in the fourth quarter. Analysts forecast a 3.1 percent boost in the first quarter.

Demand growth was very sluggish with weakest component being government purchases while the bright spot was consumer spending.

In other words, the fiscal cliff and now the sequester have had their intended effect: slowing the recovery, just as the Republicans intend. There's your austerity for you.

[CTyankee]

9. PK's response just posted: http://krugman.blogs.nytimes.com/

Nicely done, Professor!

[Sanity Claws]

7. How did something that was not peer reviewed ever get the attention it did?

This is what gets me. It's contrary to policies that won Nobel Prizes for Economics, it was not peer reviewed and yet it was relied on to do what the big banks wanted to do anyway.

[byeya]

8. It's hard for a peer to review a manuscript when the authors don't reveal their data.

[CTyankee]

12. That such a situation drives crucial policy decisions for whole governments

should make it a censurable offense to publish so recklessly. There should be sanctions in academia for such dangerous acts. I hope there is a HUGE outcry in academia for correction of such offenses, safeguards in place and prices to be paid for ignoring those safeguards.

[edhopper]

11. Because

it confirmed the bias of the pro-austerity folks who include all the "very serious people" the MSM and many world leaders and went against what the Dirty Fucking Hippies thought was right.

Same reason FoxNews talks about any bullshit that denies Global Climate Change, no matter the credibility.

[BootinUp]

10. Krugmans comments are now up

http://krugman.blogs.nytimes.com/

Grasping At Straw Men

OK, Reinhart and Rogoff have said their piece. I’d say that they’re still trying to have it both ways, on two fronts. They deny asserting that the debt-growth relationship is causal, but keep making statements that insinuate that it is. And they deny having been strong austerity advocates – but they were happy to bask in the celebrity that came with their adoption as austerian mascots, and never to my knowledge spoke out to condemn all the “eek! 90 percent!” rhetoric that was used to justify sharp austerity right now. Sorry, guys, but with so much at stake you have a responsibility not just to put stuff out but to make crystal clear what you think it implies for policy.

snip

So there’s a clear negative correlation between debt and growth, although no cliff at 90 percent or actually anywhere. The absence of a cliff is crucial: whereas R-R like to say that debt going above 90 percent cuts your growth rate by 1 percentage point, what we actually find is that raising the debt ratio by 45 points cuts growth by 1 point, which is a very different implication.

As Brad DeLong has been pointing out, numbers like that, even if you take them as causal, are a very weak argument for austerity in a liquidity trap. Suppose you cut spending by 2 percent of GDP. This probably reduces GDP by about 3 percent, and reduces the deficit by only about 1 percent of GDP; meanwhile, if we believe in this relationship, it raises GDP a decade later by 0.23 percent. A slam-dunk case for austerity this isn’t.

[markpkessinger]

16. Don't miss the reader comments --

R&R get positively skewered in them, and rightfully so.

[reformist2]

17. R&R have managed some serious jujitsu, making Dems defend high debt and deficits...

Is this really a good position for us to take?

[CTyankee]

18. That's the problem. The public has been mesmerized by repubs harping on

debt and deficits and ignoring the whole picture. PK has actually tried to explain that in his TV appearances and in the NYT.

[markpkessinger]

22. It's not about "defending debt and deficits . . ."

. . . it is about when it is, and is not, appropriate to tackle debt and deficit, and when it is appropriate to run deficits. In a recession like the one we have been experiencing, and have still not entirely pulled out of -- that is, when individuals either can't or are too afraid to spend money, banks are reluctant to extend credit and businesses are hoarding cash rather than reinvesting it in the economy, the only institution remaining with the resources to stimulate demand sufficient to get the economy moving again is the government. If government tries to tackle deficits and debt now by cutting spending, the only result will be further contraction of the economy (and if you want a prime example of that, look at what happened to the U.S. economy in '37-'38, when deficit hawks caught Roosevelt's ear and convinced him to cut government spending before the economy was fully recovered). Krugman has argued that right now, when (a) the economy requires a strong injection of demand, (b) our borrowing costs are at or near zero, (c) unemployment is high and (d) we have an infrastructure that is falling apart -- that is precisely the time we <i>should</i> be running deficits and borrowing to invest in infrastructure projects that will provide jobs. He has further argued that the time to focus on reducing deficits and paying down debt is during flush times, during which government revenue automatically rises as a result of increased economic activity. And again, for a historical example of how this works, you can look at the record high debt to GDP ratio we had in 1945, which certainly didn't seem to hold back the post-war economy much!

[librechik]

23. it's just fucking common sense

which the critters in Congress either don't have or pretend not to have. (and in EU countries, too)

[markpkessinger]

24. Unfortunately, too many people buy into the household budget analogy . . .

. . . which should be obviously bogus to anybody with even a cursory understanding of macroeconomics!

[librechik]

29. exactly--what family has the ability to print money or invent a job

when times are tough. And if they had that power, who would argue they shouldn't use it to save the family?

[markpkessinger]

30. Not to mention . . .

. . . that a family budget is an open-ended system, and a national economy is not. If a family budget were analogous to a national economy, the amount a family spends would have a direct impact on the amount their employer paid them. As Krugman has put it, in a national economy, "your spending is my income, and my spending is your income."

[Sekhmets Daughter]

27. And still they ignore Krugman...

I wish I had been keeping a count of how many times he has explained the ill-effects of austerity on a struggling economy. That R & R are still being assholes shouldn't surprise anyone. It is very difficult to turn an asshole into brain matter or heart muscle.