When dogmas collide

by Russ Roberts on July 8, 2011

in Stimulus

Ezra Klein writes on Twitter:

The job numbers should change the debt ceiling debate. Economy needs more support now, austerity should wait. They won’t.

Funny, I see things in a different light. Seems to me that there is no evidence that having the federal government borrow lots of money and spending it has been very effective. Certainly, the predictions of the effect of that spending by its proponents have been very inaccurate.

I’m with the Hayek character from the rap video:

We brought out the shovels and we’re still in a ditch…
And still digging. don’t you think that it’s time for a switch…
From that hair of the dog. Friend, the party is over.
The long run is here. It’s time to get sober!

Having the government return to the level of spending of say, 2007, isn’t austerity. It doesn’t even imply that there will be a reduction in overall spending. My dogma says that when government spending grows dramatically via borrowing and the money is spent on mostly unproductive stuff, that actually discourages consumer spending. Reducing government spending might encourage confidence in the future and encourage employers to hire more workers. It happened in 1945. That confirms my belief in my dogma. I wonder what the Keynesians are holding onto to confirm their worldview.

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{ 192 comments }

Chucklehead July 8, 2011 at 1:41 pm

The leach has grown as large as the host. To increase the health of the host, the blood flow to the leach must be reduced.
The government invests (spends) for political purposes, not for economic ones.

vikingvista July 8, 2011 at 3:00 pm

Austerity for the parasite is the opposite of austerity for the host.

Sam Grove July 8, 2011 at 3:57 pm

It’s a leech that diverts a large amount of the host’s blood through it’s own body, making the host dependent on the leech in a most unholy way.

These people just don’t grok value creation.

T Rich July 8, 2011 at 6:01 pm

Before last week, the term “grok” wouldn’t have meant anything to me, and I don’t know what I would have thought about your comment.

However, I picked up Heinlein’s Stranger in a Strange Land last Friday. So, your comment is weirdly coincidental with my reading choice. Great book so far. Although, I am not sure of the fullness of my grokking right now.

But, yes, it is clear that Obama does not grok (in the teensiest way) value creation.

Harold Cockerill July 9, 2011 at 7:21 am

For them to grok and then apply the understanding would mean giving up power and they’ll not do that voluntarily.

Paul Andrews July 9, 2011 at 2:12 am

Exactly – very eloquently put

vidyohs July 8, 2011 at 4:19 pm

Basically, I think that the primary reason the gutless politicos will still push for extending the debt limit and try to avoid cutting spending on entitlements is because they don’t want the world to see the USA experiencing Greek style rioting when the responsibility can be laid at their feet, which in my mind will happen if Congress actually has the guts to take the necessary road. I have no doubt in my mind that the unions will take their push to the streets and will be joined by all the usual suspect loonies.

Paul Andrews July 9, 2011 at 2:12 am

Great analogy

Methinks1776 July 8, 2011 at 1:45 pm

Heresy! You don’t think spending on cronies and more government bureaucrats to jam the gears of private enterprise and prevent anyone from doing anything productive is stimulating? Ha. It’s very stimulating.

Just not in the way they’d like us to think.

I wonder what the Keynesians are holding onto to confirm their worldview.

A God complex.

Justin P July 8, 2011 at 2:02 pm

I wouldn’t go so far as a God complex but definitely some sort of superiority complex. How long will it take before the empirical evidence tells them it doesn’t work? A la the calorie content food nudging that doesn’t work.

Methinks1776 July 8, 2011 at 2:10 pm

You take me a touch too literally, but how is it people who can’t construct a pencil (or, in the case of government bureaucrats, have a single original thought in an entire lifetime – if they do, they’re out) suddenly think they can guide an entire economy? They no just which projects to fund. A tweak here and a tweak there and it’s like the song said about the engine going dark and needing a spark.

Yeah, I know it’s only when there isn’t full employment (heaven forbid!), but what is it about higher unemployment that suddenly makes these amoebas so smart?

Apologies to amoebas. Even amoebas are more than just blobs.

Methinks1776 July 8, 2011 at 2:54 pm

They no just which projects to fund.

Huh. A Freudian slip.

Justin P July 8, 2011 at 5:13 pm

I know well enough to to take you too literally. =)

I think unemployment is like market failure to them. They are sitting at the bar smoking a cigar with brandy and thinking they are like Superman, say “Oh my God, there are people unemployed! I know exactly what to do!”

ohioralph July 8, 2011 at 2:47 pm

Justin, probably never. If your worldview is dependent on a perpetual budget, any decrease is an anathema to your existence.
Measuring your success with a profit and loss statement is not a part of their thought process.

vikingvista July 8, 2011 at 3:15 pm

I have difficulty imagining realistically what empirical evidence would be clean enough to persuade me. In spite of their claim to the utility of empirical economics, keynesiacs will always find reasonable excuses for applying a keynesiac interpretation to any economic data.

Justin P July 8, 2011 at 5:18 pm

I agree. What I always find funny, is how most Keynesians are AGW alarmists – obviously it’s another forum for them to show everyone how smart they are and a perfect opportunity to make people do what they Keynesians think is best – will sneer at anyone that who doesn’t look at the “evidence” of AGW. But of course they never even mention the evidence against the Keynesian paradigm, “The 70′s what was that?”

yet another Dave July 8, 2011 at 3:35 pm

How long will it take before the empirical evidence tells them it doesn’t work?

Longer than ten thousand lifetimes. Keynesianism is like a cult. Sure, some escape and realize how incredibly dangerous and destructive the whole thing is, but most never even question the theology.

Chucklehead July 8, 2011 at 2:40 pm

Lets face it, Keynes is only used as a justification to do what politicians already want to do, spend money to increase their power. Yes borrowing and spending today makes today better, but tomorrow worse. Tomorrow is here….
“The long run is here. It’s time to get sober!”

Methinks1776 July 8, 2011 at 2:53 pm

Is it making today better? I hadn’t noticed. How long did the depression last in the face of government spending and torturing?

I agree it’s a very convenient excuse.

vikingvista July 8, 2011 at 2:57 pm

It certainly does not make today better. Unless you are the thief or he is your customer.

Cthorm July 8, 2011 at 3:06 pm

“Yes borrowing and spending today makes today better, but tomorrow worse.”

I hardly think it needs to be clarified, but borrowing and spending today only makes today better in theory with very generous assumptions. Assumptions like perfect information and that government makes spending decisions analogous to the way a business does. These assumptions don’t bear out, so borrowing and spending today has a “multiplier” of less than 1. So in the end, tomorrow is even worse and everyone is waiting for the pot to boil today, only the gas is turned off.

Chucklehead July 8, 2011 at 5:47 pm

Methinks1776. vikingvista, Cthorm
I concede I did not consider the displacement of public-private capital & yes the multiplier is less than 1 (.65-.75). I apologize for the sloppy thinking. Thanks for pointing it out. I am here to learn and be corrected, but I am a chucklehead and will likely do it again soon.

serve July 8, 2011 at 1:49 pm

The fact that Klein labels his preferred policy as “support” and the opposition as “austerity” betrays his own dogma. Whenever the application of these terms is not justified, I think that at least qualifies as unscholarly, if not intellectual dishonesty. If Austrians are correct, then these policies will harm the economy, not help it, so why cede terms like “support” or “welfare” to socialists and interventionists whose policies undermine their own stated goals?

MikeP July 8, 2011 at 1:53 pm

That confirms my belief in my dogma. I wonder what the Keynesians are holding onto to confirm their worldview.

“That which is not seen does not exist.”

Slappy McFee July 8, 2011 at 2:11 pm

Mama McFee’s retort to young spawn when they whined they couldn’t find an item,

“Are you looking with your eyes?”

Perhaps Mr Klein would be better served by opening his peepers.

Justin P July 8, 2011 at 1:58 pm

A good question would be, what is Klein’s Dogmas? He obviously holds the Keynesian view as true for his assertion to hold any weight. Klein’s Dogma as well as many Keynesians is that government spending must increase employment and that the multiplier is greater than 1.
Do they ever question whether or not the multiplier is even greater than 1? Do they ever even look at the empirical studies that show the multiplier could be less than one or even negative. If they did maybe that would change their basic assumption that more spending will increase employment.

Now that you spoketh the name of Keynes, how long till our favorite defender of all things Keynes starts commenting?

yet another Dave July 8, 2011 at 3:44 pm

Do they ever question whether or not the multiplier is even greater than 1?

I don’t know, but it seems to me the theoretical maximum “multiplier” value is 1. The maximum imaginable real world best case “multiplier” value is probably less than 0.8 and negative “multilpier” values seem much more likely than positive values.

The mental gymnastics required to believe government spending can, even theoretically, have a “multiplier” greater than 1 are truly mind-boggling.

Justin P July 8, 2011 at 4:14 pm

Didn’t the Romer Stimulus package have a multiplier of like 2.5 or something ungodly high? Where did they get that number from?

Dan H July 8, 2011 at 4:14 pm

I think that was actually the inflation multiplier ;-)

Methinks1776 July 8, 2011 at 4:40 pm

You really want to know?

Justin P July 8, 2011 at 5:27 pm

I just read 1.57 is their multiplier…still ungodly high. How many models are there predict positive multipliers vs negative multipliers? Which one of those models more closely predicted what happened since the ARRA when into effect?

I’ll have to look through the archives but is there a EconTalk specifically about Multipliers? Maybe with Barro?

Methinks1776 July 8, 2011 at 5:42 pm

As I recall, Barro thinks the multiplier is negative. He also has a website with links to lots of his work. Worth a look there. I really like his intermediate macro book. I just tossed it b/c it’s so outdated.

But, my response was to your second question :)

EG July 8, 2011 at 2:42 pm

There is no state of reality in which a Leftist will ever say “OK, we’ve spend enough. No need to keep increasing it.” Every event, good or bad, is a reason to increase spending.

So, why do we waste our time with people who act like 18 year olds with a new credit card?

vikingvista July 8, 2011 at 2:51 pm

That’s easy. They’re holding on to their lust for power and their contempt for free men.

ArrowSmith July 8, 2011 at 2:55 pm

Nancy Pelosi said that welfare benefits have a 1.73 multiplier. So why not have everyone go on welfare!

tdp July 9, 2011 at 12:38 am

PJ O’Rourke said something like “we give our money to the government and it is repaid to us in a slightly altered form [goods and services], much like a horse gives us back the hay we feed it in a slightly altered form”

Herr Doktor July 8, 2011 at 3:09 pm

If it wasn’t so depressing I would find the reference to Uncle Sams budget as a austerity plan to be comical. Even the so called draconian measures of the Ryan plan don’t cut the budget at all. It simply reduces Governments rate of growth. All this talk about spending 10 years out is silly and meaningless. That’s three congresses from now. They can and will change whatever they want. As a taxpayer the only thing I care about is next year. I would love to see a real decline in Government spending. Say 10% across the board. If you want to keep a program you have to find larger cuts elsewhere. That would be a start. I’m not sure it would create any jobs. I don’t have any evidence but it seems to me the regulatory climate is just absurd now. Every summer for the last 3 years I’ve heard about some poor kids lemonade stand that gets shut down by a bureaucrat.. Its insane… Its reminds me of this passage : “He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance. ” Now where was that from?

Dan J July 9, 2011 at 1:11 am

If only there were enuf representatives who subscribed to reducing govt, even if they were dragged, but went along out of fear of losing their job. 10% total reduction in yr 1. another 10% in yr two. Another 10% in yr 4. 27% reduction in 4yrs. Re-evaluate.

morganovich July 8, 2011 at 3:09 pm

“Seems to me that there is no evidence that having the federal government borrow lots of money and spending it has been very effective. Certainly, the predictions of the effect of that spending by its proponents have been very inaccurate.”

those who fail to learn from history are, um, i forget..

colson July 8, 2011 at 4:59 pm

Write it?

Methinks1776 July 8, 2011 at 6:55 pm

LMAO!

kirby July 8, 2011 at 3:23 pm

If the government spent their money on worthwhile stuff, wouldn’t it drive up the price of said stuff due to artificial demand, discouraging people from buying it? I think it is good that the things the government buys are worthless, even though it is bad that the government buys at all.

Methinks1776 July 8, 2011 at 6:56 pm

Where does the government get “their” money?

vikingvista July 8, 2011 at 7:53 pm

Obama has a stash.

kirby July 8, 2011 at 8:31 pm

from the people. But every dollar of stuff bought by the government is a dollar of stuff that is wasted and not bought by the people.

Methinks1776 July 9, 2011 at 12:57 am

Be careful, Kirby. That kind of thinking could very well land you a job as a professor in Princeton’s economics department.

Kirby July 9, 2011 at 4:48 pm

The horror!

muirgeo July 8, 2011 at 3:29 pm

“I wonder what the Keynesians are holding onto to confirm their worldview.”

I can say confidently we will not get out of this until government spending picks up. All the evidence just keeps piling up against the neoclassicals as they continue to recommend more of the same which got us here.

We are past the main stimulus spending and now we are into the austerity you guys might recommend and things are getting worse not better. There is NO evidence that the deficit leads to uncertainty and decreased hiring. Poor demand… worse demand bought on by the austere parade is leading us into a prolonged stagnation and a possible double dip.

Here is the key line in this months report;
http://www.bls.gov/news.release/pdf/empsit.pdf

“Employment in government continued to trend down over the month (-39,000).”

Austerity is leading to decreases in government jobs which leads to decreases in demand and decreases hiring in the private sector which leads to MORE deficits.

The evidence around the world supports demand side economic and pushes towards austerity will lead us no where but greater unemployment and greater deficits and more pain.

The Neoclassical ideology is dying a slow and torturous death and taking many people with it as its promoters are still far too well represented in policy arena pushing their dead ideas onto the lives of others and the lives of societies. Destroying societies and hindering real progress.

Many more will suffer but eventually the truth will come out. As Tyler Cowen says the low hanging fruit is gone…. any more neoliberalism will lead us further down the road to stagnation and eventually revolt hopefully at the polls but I fear it may go old school when the pigs in power persist unenlightened by history and destined to repeat it.

Daniel Kuehn July 8, 2011 at 3:34 pm

re: “The Neoclassical ideology is dying a slow and torturous death and taking many people with it as its promoters are still far too well represented in policy arena pushing their dead ideas onto the lives of others and the lives of societies.”

In your own words, what exactly do you think neoclassicism is?

The large majority of Keynesians are neoclassicists, muirgeo. Only a small percent of the already relatively marginal “post-Keynesian” movement is at all hostile to neoclassicism.

Methinks1776 July 8, 2011 at 3:43 pm

I think you just officially blew out the circuit breaker on his one brain cell with that post, Danny keuhn. Whatever it is, Muirde is sure it is killing the lives of others and the lives of society. Whatever those are.

muirgeo July 8, 2011 at 4:00 pm

I am finsihing the book by Robert Skidelsky’s book “The Return of the Master” and referring to neoclassicals as he does who were pre-Keynsian who had 4 dominant concepts
1) scarcity (resources are scare relative to peoples needs and denying there could ever be a problem of demand.
2) the neutrality of money
3) equillibrium thinking ( on employment especially)
4) and unrealism of assumptions

But to simplify they are those who believe in supply side economic over demand side in spite of all the contrary evidence.

The moden world shows there is no shortage of supply and indeed that demand is the problem.

Slappy McFee July 8, 2011 at 4:06 pm

Question:

My neighbor constantly loans me his tools/talents to fix my house. I don’t pay him for any of this. Would you say this is causing a lack of demand? Shouldn’t I be buying the tools myself or paying him to fix my house? Next time he offers his assistance, should I punch him or sick my dogs on him until he leaves?

muirgeo July 8, 2011 at 4:23 pm

I’d bet you are BOTH providing each other with demand in the small isolated economy you keep. You are spending money back and forth without a medium of exchange but in so doing you are improving each others economies. ( I am assuming you pay him back in some way.. lending tools, giving advice or doing chores to help him out or making him dinner.)

Slappy McFee July 8, 2011 at 4:59 pm

Congratulations!! Now you understand. You see, in your deluded aggregate world, our non-monotary trade doesn’t count, yet we are both better off. Under your premise, the contractor, the tool maker, the truck driver, materials miner, etc are all worse off because I didn’t demand their services. Because of this, I should not only be obligated to purchase the tool from my neighbor, it should be illegal for him to even offer it.

If you add in your protectionist world view, my neighbor is betraying his profession by assisting me. Driving down demand for contractors all over the US.

tdp July 8, 2011 at 5:56 pm

Yes muirgeo government spending solves everything. That’s why FDR’s New Deal kept unemployment at 20% by 1939 when it would have been at minimum 6 percentage points lower otherwise and why when Eisenhower and Clinton cut spending the economy boomed. Or when Estonia transitioned from a Communist economy to a laissez-faire economy with flat taxes and minimal government spending they had the highest economic growth rate in Europe for almost two decades at 6-7% a year. That’s why Ireland’s economy was booming after slashing taxes and spending in the 2000s and after the US gov and Fed caused the recession the economy fell so hard people started emigrating again. Same deal with Iceland, minus the emigration. How about when Sweden was one of the top-5 wealthiest and fastest growing OECD countries from 1870-1970 when gov spending was very low and fell to the bottom both in wealth and annual growth when gov spending was 60-70% of GDP. When spending fell again the economy came roaring back again in the 1990s.

History shows that when gov spending goes down, the economy booms. Look at the growth rate of welfare-state social democracies with ultra-high government spending compared to other developed countries with lower gov spending (like the US until recently)

muirgeo July 9, 2011 at 10:32 am

tdp,
“Yes muirgeo government spending solves everything. That’s why FDR’s New Deal kept unemployment at 20% by 1939…”

First I didn’t say it solves everything…nor did Keynes. But here are some numbers from reality…

Year spending GDP unemployment
1936 8,228 13% 16% (down from 19%)
1937 7,580 5% 13%
1938 6,840 -4% 18%
1939 9,141 8% 16%
1940 9,468 9% 14%
1941 13,653 17% 9%
1942 35,137 18% 5%

GOT IT? Quite lying to other people and above ALL ELSE quit lying to yourself!!

http://ablankspotonthemap.blogspot.com/2011/07/great-depression-nubers-to-pul-up-when.html

tdp July 9, 2011 at 6:51 pm

The drop in unemployment was the US economy gearing up for WWII. Even before we entered FDR was sending the Allies food, weapons, and equipment. Before then: OMG only one in six Americans out of work! That’s so awesome! And it totally stagnated during that time, going from 16% to 16% from 1936-39 (when we entered the war)! Wow! Awesome! And it’s not like a vast majority of those “jobs” were with groups like the WPA and PWA that paid people to sit on shovels!

tdp July 9, 2011 at 6:52 pm

Also, considering the place the economy was starting from, it’s actually pathetic that it only grew by 9% a year.

Dan H July 8, 2011 at 3:35 pm

You just rehashed one of your old posts.

fatstack July 8, 2011 at 3:42 pm

Terrible post

Sam Grove July 8, 2011 at 3:52 pm

Benito back from the dead.

Slappy McFee July 8, 2011 at 3:57 pm

Honestly, I want to see where the austerity is happening. Minnesota is trying to keep the same budget as the last biennium and we can’t even get that to happen.

If I remember correctly, federal spending is approaching 25% of GDP, of which, 40% is borrowed? How is this austerity?

Bill July 8, 2011 at 4:00 pm

“There is one good thing about Marx: he wasn’t a Keynesian.” -Murray Rothbard

vikingvista July 8, 2011 at 4:34 pm

Funny.

Dan H July 8, 2011 at 4:02 pm

How bout this?

Keyensianism is the art of attempting to plan economic outcomes while maintaining that “it’s still free market capitalism”.

Neoclassicism is embracing the free market.

Austrian economics isn’t even economics. In fact, true Austrians don’t give a damn about what “works” best (even though history has shown that free trade capitalism have indeed worked best). Austrians believe in capitalism first and foremost because it is moral. The fact that it works better is just a nice economic externality. Austrian analysis spends a lot of time simply analyzing the wonders produced by free individuals engaging in voluntary interaction with one another.

Slappy McFee July 8, 2011 at 4:09 pm

Bravo!!!

Kevin Duncan July 8, 2011 at 4:31 pm

What are you talking about? Austrians are definitely economists. Many of the early “Austrian” economists were fairly mainstream among the profession in the early 20th century. Let us not forget that Hayek won a Nobel Prize. As the Foundation for Economic Education points out in some of their lectures, the predominant difference between most “Traditional” economists and the Austrian school is one of methodology and basic assumptions. These include things like the non-neutrality of money. If you want moral framework go read some Ayn Rand.

Truthfully what I find dissatisfying about many of the critiques levied here is that a broad swath of economics is labeled “Keynesian” even if they share any variety of differing assumptions and methodologies as well, even if aspects of their policy prescriptions are the same. Complex systems analysis, behavioral economics, statistical analysis, etc all may come to different levels of agreement despite utilizing entirely different methods. But, apparently they’re all Keynesians, now.

Ken July 8, 2011 at 5:11 pm

Austrians believe in capitalism first and foremost because it is moral. The fact that it works better is just a nice economic externality.

Preach it, brother.

kirby July 8, 2011 at 8:40 pm

Can I get another AMEN!
actually, I tend to fall in that line too. I don’t like people who say that my house belongs to the government.

RC July 8, 2011 at 5:40 pm

“Austrian economics isn’t even economics.”

Sometimes this is tempting to say, but many Austrians have contributed plenty to the science of economics, so this statement is, in the end, extremely unfair.

Btw, I didn’t realize that, for example, discrimination in hiring workers (like the one that lasted for a long time in the South) was a wonder. Guess I didn’t apreciate the beauty of interaction between the racist shop-owner and the hired white worker.

Ken July 8, 2011 at 9:27 pm

RC,

“I didn’t realize that, for example, discrimination in hiring workers (like the one that lasted for a long time in the South) was a wonder.”

What you don’t realize is that employer A not hiring the black man who could do the job better than the white man he did hire hurts himself more than he hurts that black man. After all, in a free market, people pay for productive value, so the black man will find himself a job making as much as he’s worth. In free markets, green is the most important color.

“Guess I didn’t apreciate the beauty of interaction between the racist shop-owner and the hired white worker.”

What you don’t appreciate is that interaction was defined by laws. In case you forgot, Jim Crow were a set of LAWS prohibiting blacks and whites from treating each other as equals. The fact that these laws were even passed makes it clear that many whites and blacks were treating each other as equals, which upset those who didn’t see them as equal.

Regards,
Ken

RC July 8, 2011 at 9:56 pm

Ken,

I agree with you, although one thing ought to be brought up. The racist employer that discriminates will hurt himself by hiring the inferior worker, no doubt. But perhaps the value he personally gets from having an all-white staff exceeds those loses in productivity. After all, value is subjective.
Similarly, some customers are willing to pay more for a friendlier (for them) environment. Friendlier may mean no blacks around, sad as that may be.
Anyway, my point was that not every voluntary transaction is automatically moral, and that’s why I brought up the racist employer example. If Dan still disagrees, he shouldn’t object if someone enters a voluntary sexual interaction with his wife/partner.

Regards,
RC

Ken July 9, 2011 at 12:18 am

RC,

“But perhaps the value he personally gets from having an all-white staff exceeds those loses in productivity. ”

This is certainly possible. But so what?

“Similarly, some customers are willing to pay more for a friendlier (for them) environment. Friendlier may mean no blacks around, sad as that may be.”

Of course this can be flipped. Blacks may be willing to work for lower wages if it means not having to transact with whites. The value he personally gets from working in an all black environment plus his wages exceeds the higher wages he may get having to work in a mixed work place.

And there’s nothing sad about either situation.

“my point was that not every voluntary transaction is automatically moral”

My point is that voluntary transactions between two people are NEVER immoral. If I don’t want to hire a black man, then he goes and sues me, using the government to force me to hire him, that black man HAS committed an immoral act: using physical force to get me to do something I don’t want to do.

“he shouldn’t object if someone enters a voluntary sexual interaction with his wife/partner.’

Of course this is a bullshit argument as libertarians very much believe in enforcements of contracts. The marriage contract is pretty explicit about sexual fidelity. Dan would certainly be within his rights to object based on breach of contract. This is NOT an instance of a voluntary transaction between two adults. It very explicitly involves a third party being defrauded. However, an addendum to this contract, typically called a pre-nup, can be provided, to allow for sexual infidelity.

Regards,
Ken

RC July 9, 2011 at 1:01 am

Ken,

“My point is that voluntary transactions between two people are NEVER immoral.”

Really? If I you ask for a ladder and I offer you mine, then a voluntary transaction has been made. But what if – unknown to you – my ladder is broken and you fall while using it and severely injure yourself. Is this transaction still moral for you? You clearly forgot assymetric information.

“If I don’t want to hire a black man, then he goes and sues me, using the government to force me to hire him, that black man HAS committed an immoral act: using physical force to get me to do something I don’t want to do.”

Morality = allowing people to do what they want (provided they don’t violate the rights of others)? Tell me then, is it immoral to coerce a parent who does not want to provide for his child? Mind you, the parent is not coercing his kid, he simply refuses to provide for him, which of course may result in the kid’s death from starvation. Curious of your opinion.

“Of course this is a bullshit argument as libertarians very much believe in enforcements of contracts.”

What if there is no contract? I mentioned “partner” on purpose. Does that change everything? Now the cheating is moral?

Regards,
RC

Ken July 9, 2011 at 4:40 am

RC,

“But what if – unknown to you – my ladder is broken and you fall while using it and severely injure yourself. Is this transaction still moral for you?”

You’re right. I should have been more careful and included voluntary transactions not involving fraud. Lying is very immoral.

“Tell me then, is it immoral to coerce a parent who does not want to provide for his child?”

Yes. But it is not immoral to take that child away from the parent.

“Mind you, the parent is not coercing his kid, he simply refuses to provide for him, which of course may result in the kid’s death from starvation. Curious of your opinion.”

Yes parents do have an obligation to take care of their children and yes it should be (and is) illegal to neglect you kids. But you’re wrong that force isn’t being supplied by the parent to towards the child. The parent is well aware of the physical dependence of his child on him and commits force by refusing to provide as needed. Young children cannot physically take care of themselves.

“What if there is no contract? I mentioned “partner” on purpose. Does that change everything? Now the cheating is moral?”

No. Because the contract is verbal if there is no legal recognition. Have you ever been in a serious long term relationship with someone and not married them? Do you think that ever happens without the question of fidelity coming up? You even use the term cheating for gods sake, meaning that you implicitly recognize the truth of the formal agreement of fidelity between two people being “partners”.

Regards,
Ken

RC July 9, 2011 at 11:15 am

Ken,

Thanks for replying. Agree with you that in any serious relationship a sort of informal contract (or formal verbal contract) stating fidelity on both sides usually exists, unless it is an “open” relationship.

As for the lying part… well, if lying is also not delivering full information to the other side of the transaction, then such lying occurs extremely often (you won’t hear firms recommending a better product of their competitors, for instance).

Regards,
RC

vikingvista July 8, 2011 at 8:15 pm

“Austrians believe in capitalism first and foremost because it is moral.”

That is simply untrue.

Austrian economics refers very specifically to economics articulated in considerable detail by particular individuals, in particular Ludwig von Mises. It is not founded on ethics or morality, but on praxeology–logical deductions from the axiom of action and apodictic truths, completely independent of any particular morality.

Here is a recent blog repost explaining it. See also the first few chapters of _Human Action_ and _Man, Economy, and State_.

RC July 8, 2011 at 11:26 pm

Thanks VikingVista for bringing this very important text by Rothbard up.

Doc Merlin July 11, 2011 at 12:07 am

“Austrian economics isn’t even economics.”

Lets see… Austrians came up with marginalism AND subjective valuation, the cornerstones of modern economics.

Ken July 8, 2011 at 4:28 pm

“I can say confidently we will not get out of this until government spending picks up.”

You say a lot of dumb shit confidently. Hey, moron, guess what? Government spending in:

2007 – $2,700,000,000,000
2010 – $3,500,000,000,000

Percent change in JUST THREE YEARS: 30%. Are you really claiming that this ISN’T a spending pickup.

As to the rest of your post… well I mean come on. If your opening statement is as stupid as the one you posted, is it even necessary to read the rest?

Regards,
Ken

Methinks1776 July 8, 2011 at 4:30 pm

You used numbers, ken. Neither DG Lesvic nor Muirdiot have a snowball’s chance in hell of understanding what you’re trying to say.

yet another Dave July 8, 2011 at 5:11 pm

:-)

Ken July 8, 2011 at 5:31 pm

I have a hard time communicating muirgeo. He doesn’t believe in logic, facts, or math.

I try though… It’s sisyphean, I know, but still, it must be done.

Regards,
Ken

vidyohs July 8, 2011 at 6:14 pm

Oh oh, m’lady, you just brushed the cholla and kicked the chihuahua! LOL, stand by.

Mesa Econoguy July 8, 2011 at 5:06 pm
muirgeo July 8, 2011 at 6:13 pm

I think you left out state and local spending.

muirgeo July 8, 2011 at 9:21 pm

Ken wrote,

“You say a lot of dumb shit confidently. Hey, moron, guess what? Government spending in:

2007 – $2,700,000,000,000
2010 – $3,500,000,000,000 ”

http://www.gpoaccess.gov/usbudget/fy12/xls/BUDGET-2012-TAB-1-1.xls

Spending for

2008
2,982,544

2009
3,517,677

2010
3,456,213

Spending went down in 2010 and now we are seeing the effects of that.

Ken July 9, 2011 at 12:34 am

HAHAHAHAHAHAHA!!!!

Thanks for the laugh, man. Spending decreased an entire 1.8% in one year somehow overwhelms an overall 26.6% increase over three years?

If what you think is true, why did the economy tank from 2007 to 2009, when government spending increased by 28.9%? The economy didn’t just suddenly start to tank in 2010, it’s been tanking for years. What happened to the “unemployment won’t exceed 8%” after increasing the budget by nearly a trillion dollars? Well we’re in out 28th month of unemployment being above 9%.

muirgeo, you crack me up!

Regards,
Ken

PS: I thought you were giving me the silent treatment. What happened?

Methinks1776 July 9, 2011 at 12:46 am

Now, see people, this here is the utter jeenyus of YASAFI.

According to TFI’s data (let’s assume it’s accurate):

We are today suffering from the effects of a 2% year-over-year (2009-2010) drop in government spending.

So imagine the magnificent riches we should all be rolling in from the 30% increase in government spending from 2007 to 2010!!!

It appears that YASAFI, clever little bugger that he is, has finally discovered the key insight to the magical Keynesian multiplier. Not only has he irrefutably proven its existence, but it turns out that is very large and positive….for declines in goverment spending and a very large and negative for government spending increases.

Call the Nobel committee. We have a winner.

Dan J July 9, 2011 at 1:16 am

Oh, for the love of God….. Thanks for a classic definition of ‘fallacy of composition’, muirgeo.

Ken July 9, 2011 at 4:49 am

Dan J,

It’s not even a fallacy of composition. The fallacy of composition is based on something being true, then erroneously generalizing (if P is true on U and U is contained in X, then P is true on all of X). muirgeo’s statement isn’t even true to begin with. He’s claiming our current economic woes are due to a reduction from 2009-2010, which is clearly false.

For his claim to be true the economy should have been recovering from 2007-2009, as gov spending increased dramatically, then declined in 2010, as gov spending slightly declined. This is clearly not what happened.

muirgeo is completely wrong, thus cannot be committing the fallacy of composition. Although, he has committed this fallacy, along with many other logical fallacies. He’s not real good on that whole logic part.

Regards,
Ken

Ghengis Khak July 9, 2011 at 10:49 am

Just to put a finer point on what Ken wrote, muirgeo can’t be invoking a fallacy of composition because this would require at least a correct assumption.

Methinks1776 July 9, 2011 at 10:54 am

Gentlemen, I think you’re missing the TFI’s incredible insight. He’s missing it too, but that’s beside the point.

vidyohs July 8, 2011 at 6:19 pm

Thanks for muirpidity #62.

“muirgeo July 8, 2011 at 3:29 pm
“I wonder what the Keynesians are holding onto to confirm their worldview.”
I can say confidently we will not get out of this until government spending picks up. All the evidence just keeps piling up against the neoclassicals as they continue to recommend more of the same which got us here.”

One of these days I am going to turn all your idiocy into money by publishing these.

Tom Sawyer turned to Huck Finn and said, “Huck, we will never get out of this cave unless we go deeper.”

Huck replied, “Sheeesh, Tom, you’re one stupid city boy.”

Mesa Econoguy July 9, 2011 at 1:14 am

Like. :)

Daan July 8, 2011 at 4:07 pm

Unbelievable… Increased Confidence from lower government spending. Stupid i did not think about that earlier! That’s our way out of this mess. Forget about those balance sheet restrained jobless consumers trapped in à liquidity trapped economy. To hell with them!

Please.

Dan H July 8, 2011 at 4:12 pm

“to hell with them!” you say?

I don’t say they should go to hell. Liquidity trap? Americans are in a liquidity trap? Wasn’t the bailout supposed to prevent a liquidity trap? Wasn’t that the whole point? But wait, you’re saying there still is a liquidity trap? So you’re saying a government program didn’t accomplish what was intended. Shocker! Remember that the road to hell is paved with good intentions.

Daan July 8, 2011 at 4:21 pm

Better use bad intentions than?

Dan H July 8, 2011 at 4:26 pm

Are you saying that the intentions of a libertarian economic policy are bad?

If my intentions are to foster the maximum amount of economic freedom for everyone by letting them keep more of their own money and by getting government out of their way, is that a “bad intention”?

Daan July 8, 2011 at 4:47 pm

I was trying to get to this circular reference you just posted.

Ken July 8, 2011 at 5:20 pm

I seem to remember something about good intentions and some road…

Daan July 8, 2011 at 6:24 pm

Slogan Econ 101 vs. Econ 101. The first will prevail because the latter is not understood by the mass. So far the wisdom of crowds and creative destruction.

muirgeo July 8, 2011 at 4:17 pm

I suggest we make some sort of wager.

I pretty much think I can say as long as we are laying off government workers things will not get better. Barring some other major structural policy changes the economy will stall or even dip back into recession.

When we start hiring government workers then maybe the economy will pick up. You guys and your beliefs will be laid bare once again. Things will never improve with your prescriptions.

Right now we have been firing government workers and you see the results…. I don’t have any worries about losing this debate. Like climate change and evolution I think demand side economics in the modern era is all but irrefutable.

A key point is to realize the demand siders can point to some very specific things that have to happen , like increased demand, before the economy will pick up while the neoclassicals always talk about nebulous non-quantifiable things like uncertainty because they really haven’t got anything else to hang their hats on that makes sense with the current trends and data.

So again when demand picks up, when trade becomes more balanced, when wages increase, when income inequality increases, when taxes on the wealthy and when government hiring increases…. THEN you will see an economy in recovery and stronger than average growth.

I would like one of you to tell us what conditions will need to be met before we see good growth….I’m not sure you can even come up with anything less nebulous then “uncertainty”.

I don’t like what is happening to our country but from a debate perspective I am loving this because you all have your backs pinned against the walls with no real coherent explanation or predictability to what you believe…. uncertainty is a good way to describe what you all believe but its irrelevant to discussion of the economy. It amounts to hand waving and whistling in the dark because you can’t come up with anything else.

We are up against the wall and more tax cuts, less regulation, less spending… ANYTHING you guys recommend that goes to policy will fail and reveal what a fraud your beliefs are.

Dan H July 8, 2011 at 4:23 pm

Yeah… cutting spending as a percentage of GDP is a terrible idea. I forgot how bad the 90s were under Clinton when spending as a percentage of GDP decreased. Those times were awful. Did I mention Clinton signed a bill that also lowered the top capital gains tax rate from 28 to 20 percent?

But man did that not work because the 90s were so awful.

Daniel Kuehn July 8, 2011 at 4:24 pm

Then take the man’s bet.

Dan H July 8, 2011 at 4:35 pm

You see, I’m not that dumb. With 300 million people pursuing their separate interests in this country, there is just too much that could happen to change economic conditions that would have absolutely nothing to do with the work of government.

For instance, we could find a shit-ton of oil somewhere where we never had it before, thus tanking energy prices, freeing up capital which then business use to expand and hire.

Or, someone could invent an entirely new source of energy (a la the “Galt Motor”) which reduces the marginal cost of energy to near zero, once again freeing up resources causing businesses to expand and hire.

These would be examples of events that could turn around an economy even if government policy as it is now doesn’t change.

That’s not too say that the economy wouldn’t turn shitty again once competition runs it’s course. But there would be a serious jolt to the economy if one of these two scenarios were to happen, despite current government policy.

Now if you wanted to say something like “Average unemployment over the next 15 years will be lower than the previous 15 years”, I’d be willing to take that bet. I will bet that if government spending as a percentage of GDP does not decrease, then the next 15 years will see higher average unemployment than the previous 15 years.

HaywoodU July 8, 2011 at 5:02 pm

What bet?

Ken July 8, 2011 at 5:24 pm

Disingenuous Kuehn,

Yes. What bet? In good times, the left says we should grow gov, we can afford it. In bad times, the left says we should grow gov, it’s necessary. In good times, the gov claims credit because it grew. In bad times, it claims that the economy is hurting because the gov isn’t growing fast enough.

We can look at other countries and see very clearly that muirgeo is wrong. Sweden was spiraling out of control a couple decades ago, until it implemented austerity, relatively anyway, measures. Ireland. Germany.

Regards,
Ken

muirgeo July 8, 2011 at 5:49 pm

You won’t even see them attempt to make a similiar list of conditions needed for improvement to occur. I don’t think you could even get them to describe what improvement would look like. It’s all the difference between beliefs and testable hypothesis…. and thus the name calling.

Ken July 8, 2011 at 7:10 pm

“thus the name calling.”

Pot? Kettle?

tdp July 8, 2011 at 5:59 pm

“Did I mention Clinton signed a bill that also lowered the top capital gains tax rate from 28 to 20 percent?”

Exactly, which cancelled out the change in the top tax brackets because people shifted money around.

tdp July 8, 2011 at 5:59 pm

So Clinton got the economy going by cutting spending, not raising taxes.

muirgeo July 9, 2011 at 10:38 am

OK now that you got your right wing propaganda talking point out…tell the class what year that capital gains tax cut went into effect. I bet rush limbaugh never mentioned the year did he?

tdp July 9, 2011 at 12:48 pm

Exactly, dumbass. Clinton CUT capital gains taxes, meaning that the overall tax burden of the population didn’t increase but decreased, and CUT spending. I don’t care who did it, cutting taxes and spending WORKS.

By the way, who controlled the CONGRESS when that happened? You know, the group that actually SETS tax rates and controls spending? Come on, what party was it?

muirgeo July 9, 2011 at 7:41 pm

hehehheh…lol…hehhhheeeheheh…funny guy!

you should have just pretended not to have seen my post.

heheheh… funny

Methinks1776 July 8, 2011 at 4:26 pm

Oh good. Friday night comedy hour has begun. Six whiskeys from now, this will all start making sense to me.

yet another Dave July 8, 2011 at 5:06 pm

From tonite’s muirgeonic comedy hour:

First, an amusing typo:

I am finsihing [sic] the book by Robert Skidelsky’s book

Wow – Skidelsky is so amazing that his book is smart enough to write a book!

Next we have this little gem:

You are spending money back and forth without a medium of exchange

Just wow.

I think it’ll take more than six…

Methinks1776 July 8, 2011 at 7:38 pm

JEEENYUS!!

First of all, why do you assume this is a typo? It does prompt a thought experiment that almost makes sense after about the fourth double whiskey: If you had to bet, which of the two do you think is more capable of writing a book – Sidelsky’s book or Muirdiot? My money’s on the inanimate object.

Why does K=(R)(A)(P) keeping flashing in my mind :)

Okay, y’all have fun. I gotta go pet the money lying around on Wall Street now. If I get there early enough, I might even have time to set some kittens on fire.

Mesa Econoguy July 8, 2011 at 5:07 pm

You’re already 3 behind….

Dan J July 9, 2011 at 1:18 am

LoL!!!

James Hanley July 8, 2011 at 4:35 pm

When we start hiring government workers then maybe the economy will pick up.

What money will the government use to pay those workers, and what do you think that money is doing right now?

muirgeo July 8, 2011 at 6:16 pm

Some of the trillions sitting idle in Wall Street accounts.

That stuff could be building us a new electric grid….and much more.

Methinks1776 July 8, 2011 at 7:11 pm

U R uh JEENYUS!!

HaywoodU July 8, 2011 at 7:17 pm

There it is folks.

All our problems will be solved through theft.

2 martinis was all it took for me.

muirgeo July 8, 2011 at 7:34 pm

Yeah cause what Wall Street did was not theft… what ceo boards do is not theft… what multinational corporate lobbyist do is not theft.

You are an apologist for thieves not an advocate against thievery.

vidyohs July 8, 2011 at 8:30 pm

Yep, to idiots and moral reprobates like the muirhuahua, as long as one person has money, we all have money. It is just a matter of stealing what money the man has, after all he has not right to it, he just earned it…….earning it gives him no special privilege in regards to how it is used.

vidyohs July 8, 2011 at 8:32 pm

He has money so we all have money is the new looney left mantra, talking point, and the muirhuahua reveals his idiocy by blathering it like it has meaning to anyone but the sewer dwellers of socialism.

HaywoodU July 8, 2011 at 9:28 pm

Your generalizing statements carry no weight here. You don’t know me. But I know you through your years of commenting drivel on these pages. Your stolen talking points are shallow and vacuous. Your world view could be blinded by tooth floss yet your brain, check that, your ego tells you different.

Keep up the cyclical poo if it makes you feel good. Go nuts.

Anyone who thinks that lobbyists wield power on their own is delusional to the nTH degree.

Dan J July 9, 2011 at 1:18 am

What govt does is theft!!!

Dan H July 8, 2011 at 7:23 pm

Why don’t you just come right out and say what you are? You are a fascist. You believe in National Socialism. You lament free trade and immigrant workers, and you believe in a command and control domestic economy. That is National Socialism, better known as fascism.

Dan H July 8, 2011 at 7:26 pm

^that was intended for Muirgeo

Methinks1776 July 8, 2011 at 7:41 pm

He doesn’t know what that is. That has probably occurred to you :)

kirby July 8, 2011 at 8:39 pm

actually, some people in WS ARE theives in the sense that they caused the government to steal millions to bail them out. But muirego would never argue that his precious government could actually cause harm to society!

muirgeo July 9, 2011 at 7:44 pm

Yeah and Dan H works in the belly of the beast… either a desperado unable to make it on his own or just a amoral sellout willing to get in the slop with the other pigs….living like a suited beast.

muirgeo July 9, 2011 at 7:48 pm

Dan h sthu… don’t pretend to be a supporter of markets when you work at a socialist fascist organization that doesn’t give a rates ass about free market philosophy except for the cover it useful idiot supporters provide. You have no life of your own… you are a completely emotional ROM being. You are nothing of higher nature of which our species is striving for… you’re a beast red in tooth and claw…

John Galt July 8, 2011 at 7:35 pm

What is the potential productive value of all federal and state owned land? Why doesn’t it pay all our taxes and then some?
No need to steal more loot when you already have 40% of everything now is there?

Mesa Econoguy July 8, 2011 at 7:36 pm

My idle millions are buying government-mandated CFLs. Sorry.

muirgeo July 8, 2011 at 5:45 pm

shlould be when income inequality DECREASES…

Mesa Econoguy July 9, 2011 at 1:16 am

Oh, much better.

Thanks.

Now try correcting everything you ever posted on this website.

muirgeo July 8, 2011 at 4:33 pm

Again… as in the 1930′s the free-marketeers are left to complain about the slowness with which the Keynesians are getting us out of the huge ditch the marketeers have dug us into.

It’s pretty telling… especially when it happens over and over again. And they complain with no remorse and unabashedly.

Ken July 8, 2011 at 5:34 pm

HAHAHAHAHAHAHA!! Methinks was right. Comedy hour started early. It thought it started at 7pm.

Free market ditch dug by whom? You mean the extreme interventionist Hoover, who increased spending faster than Obama?

Regards,
Ken

tdp July 8, 2011 at 6:00 pm

Well, according to Keynes (and Milton Friedman) we should just keep digging ditches to make work, and do so with spoons, not shovels.

Ken July 9, 2011 at 2:02 am

“and Milton Friedman”

Please provide a source for this claim.

Regards,
Ken

tarran July 9, 2011 at 10:47 am

Milton Friedman once encountered a government official who was pointing out that by eschewing heavy machinery on some project requiring the removal of massive amounts of dirt in favor of having laborers carry the stuff they were able to employ lots of people.

Friedman asked sarcastically why not take the shovels away and have the digging done with spoons so that they could employ even more people.

Dan H July 8, 2011 at 7:31 pm

I’m hitting the refresh button every 15 seconds in anticipation of another great muirgeo one-liner! Comedy hour indeed!

Classic Murigeo!

Ombibulous July 8, 2011 at 7:27 pm

I’m sure the Zimbabwe letter of thanks is on the way. It’s great how Sergio Brin & Steve Jobs handiwork gets a 10000000% mark up at the hands of our commanders n thiefs.

Dan J July 9, 2011 at 1:53 am

Did you even take a look at what happened in the thirties from FDR policies. I am sure you have. Collateral damage? The consequences were worth it? The ‘stimulus’ of FDR in form of work programs was used to strong arm politicians. Chicago style politics. Individuals were bullied into donations for politicians or lose their jobs. The AAA was used to manipulate farmers andled to farmers pushing African Americans off of the farms into the cities. Global market cotton share by the US was reduced drastically and pushing prices up dramatically, making for scarce clothing. Food shortages, etc.,…
Industrial Recovery Act was not for recovery but for bullying. Businesses were destroyed, men thrown in jail for not submitting. The top industry leaders were to set pricing on products and services and to set wages. This resulted in loss of businesses and jobs. Minimum wages were instituted to fend off the exodus of businesses to the south and African-American hiring. Minimum wages were primarily used for two purposes- for the silly notion that higher wages would spur demand and for racial bigotry. Now, America has to relive the nitemare of FDR.

James Hanley July 8, 2011 at 4:42 pm

Russ Roberts writes: Seems to me that there is no evidence that having the federal government borrow lots of money and spending it has been very effective. Certainly, the predictions of the effect of that spending by its proponents have been very inaccurate.

I agree, but… Folks like Krugman and Brad DeLong argue that given the amount of the downturn, the amount of government spending wasn’t in fact enough to offset it. So their argument is what I might call a “white over black paint” argument–of course you can cover black paint with white paint, but it just requires more paint.

I’m not making any defense of their argument, which I find very dubious, but because I’m only half-educated in economics (being an economically minded political scientist), I’d be very interested in Roberts’ response to that specific argument of theres. Because frankly they would see their argument as a clear rebuttal to his–he says, “I don’t see the evidence spending works,” and they say, “Of course not, because we haven’t spent enough.”

Jim July 8, 2011 at 9:03 pm

My response to that argument is always the same. Even if it wasn’t enough, we should at least have some evidence that we got a bang for the buck spent. What is it?

muirgeo July 8, 2011 at 9:36 pm

Look at the GNP and employment numbers. The GDP increased to 5.0% in the 4th quarter of 2009. Jobs went from -700,000 to 150/200,000 . Now the stimulus and spending petered out alomg with GDP and jobs… just like the Keynesians predicted.

The evidence IS there. Again only about 500 million of the stimulus was spending the rest as tax breaks which don’t help near as much (thanks to the republicans).

We needed a sustained stimulus and we got a short weak one withthe same results.

Again… if the you republicans get your way and spending is truly cut tjhe economy will go further south and that much more data will exist to show you how wrong you are….

Eventually it will either get so bad people will take to the streets or some how we will get the spending and policy changes that are needed and things will improve.

But I ave ootlined the conditions that will signal and start the improvement…. they will not happen for a while. Doing nothing or pushing more austerity as you guys want will show worsening numbers. You guys will lose as you have in the past with only denial of the facts and re-writing of history and passing the blame to others in some other way.

tdp July 8, 2011 at 9:51 pm

Then why did the economy boom in the 40s and 50s and again in the 90s after spending cuts…we had balanced budgets then and the GDP increased and unemployment decreased. Look at my earlier post. There is a NEGATIVE correlation between government spending and economic performance. If you think government is so good why don’t you volunteer all your money to Uncle Sam and push for a socialist command economy where the government does ALL the spending and distributes the results to everybody. 100% taxes and 100% government spending! Maximum employment! everybody prospers!

muirgeo July 8, 2011 at 10:15 pm

Because … as the theory goes stimulus is only needed to come OUT of the ruts. Once the markets kick in Keynes recommends backing off on spending.

I’d suggest getting The Return of the Master by Robert Skidelsky… he ( Keynes) has much in agreement with Hayek, Friedman and Burke even. Keynes was a capitalist… he just realized it wasn’t self regulatory. The key thing is to keep employment full and pick up demand as needed with spending when in a slump.

tdp July 9, 2011 at 12:45 am

The economy revived and still revives after spending by the gov is decreased and money is free to flow into the private sector. There was no spending binge that got us out of a very short downturn in 1946, it was a spending cut, the fact that American manufacturing had zero global competition until Europe and Japan were rebuilt, and the fact that people had nothing to spend money on during the war but they did once consumer goods were made again. When the economy got rolling in the early 90s under Clinton, it was after he CUT spending, not after he increased it.

kirby July 8, 2011 at 9:55 pm

http://www.usdebtclock.org/

Y’know, just because we take money from china doesn’t mean we won’t have to pay it back.

kirby July 8, 2011 at 9:58 pm

http://www.usdebtclock.org/
http://www.usdebtclock.org/2008.html
$5 trillion doesn’t count as a tax increase, strangely enough.

Dan J July 9, 2011 at 1:56 am

Well ,then…. Let’s add $18 trillion in spending every year, forever,to keep it going…… Asinine!!!

Mesa Econoguy July 8, 2011 at 5:07 pm

Superficial observation:

Russ is an economist. Ezra Klein is not.

muirgeo July 8, 2011 at 10:11 pm

“Superficial observation:

Russ is an economist. Ezra Klein is not.”

And this is the sad part.. Ezra is right and Russ is wrong.The evidence is already clear to anyone with an open mind and it will become more clear as policy swings in the direction of Russ’s auterity and the eocnomy gets worse.

Subhi Andrews July 8, 2011 at 10:30 pm

George, what is so clear about evidence? You are not an economist either! I’m not either. My conversations with you here, I’m pretty sure I have read more about economics than you have. Only thing clear to me so far is that evidence is unclear, and economics – on the macro side – is still about as dark as the deep sea. Economics humbles me everyday, and it seems to do the opposite to you. Yet, I don’t see any better understanding of the topic on your part. You are always talking about the black & white way you see economics, about clarity and such. Makes me wonder!

How many scholarly works of economics have you read? Have you asked questions about economics to understand areas that were difficult? Who have been your guide in this process?

What happened to debate on your blog?

Mesa Econoguy July 9, 2011 at 12:04 am

And this is the sad part.. Ezra is right and Russ is wrong.”

Que?

On what basis do you make that statement?

Having studied under Mr. Roberts, I can assure you, both he, and subsequently I, know a shitload more that this Ezra Klein charlatan.

No, the evidence does not agree with you, nor Ezra, nor Brad DeLong.

It also disagrees with Kruggybaby, Alan Blinders-on, and Jared Bernstein.

Here’s proof:

9.2%.

Ken July 9, 2011 at 12:37 am

Mesa,

It’s not just 9.2% now. We’re in our 28th straight month of unemployment exceeding 9%.

Anyone care to guess the last time that happened? That’s right, way back in the day when two of our worst presidents, back to back, massively intervened into the markets.

The evidence is already clear to anyone with an open mind that Keynesianism is terrible for an economy.

Regards,
Ken

Mesa Econoguy July 9, 2011 at 1:20 am

Mi amigo Ken, you are so correct, it really ain’t funny at all:

http://blogs.wsj.com/economics/2011/07/08/without-dropouts-jobless-rate-would-be-over-11/

Without Dropouts, Jobless Rate Would Be Over 11%

The unemployment rate increased to 9.2% in June, the Labor Department reported, but if the recession hadn’t pushed so many people out of the labor market it would have been much worse.

The duration of unemployment continues to increase and sat at an average of 39.9 weeks in June. More than four million people who want jobs, or nearly a third of the unemployed, have been out of work for more than a year. Those are the people are hanging in and looking for work, but a large number have given up altogether.

The share of the population in the jobs market, called the labor-force participation rate, fell to 64.1% last month — the lowest level since 1984 when women were still just beginning to enter in full force. The participation rate peaked in 2000 and has been steadily declining since as the effect of women taking full-time jobs plateaued and Baby Boomers began to retire, but the decline accelerated sharply during the recession. The participation rate was 66% at the start of the recession and 65.7% when the recovery started in June 2009. If the participation rate were still at that level, the unemployment rate would be more than 11% right now.

With nearly a third of the unemployed out of work for over a year, it makes their reintegration back into the labor market more and more difficult. People out of a job that long tend to lose skills and experience long-term effects on their lifetime earning power. It’s even harder to reintegrate workers who have dropped out altogether.

There’s also a problem of underemployment. A comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs. That number shot up in June to 16.2% from 15.8% a month earlier.

The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find. People who drop out of the labor force completely aren’t included in this tally.

Sometimes the jobless rate can rise because people re-enter the work force. That can be a positive sign for the economy, indicating a strengthening labor market and improved confidence. Unfortunately, that wasn’t the case in June. The number of people in the labor force dropped last month, while the number of people employed tumbled and the number of unemployed increased.

I’m sure Ezra Klein knows these things already.

IDtheseEconomists July 8, 2011 at 5:13 pm
River July 8, 2011 at 6:03 pm

How much do you want to wager. Small business drives growth and they are very skittish about health care cost, regulations from the EPA, OSHA, NRLB, taxes, local and state agencies, energy cost and others. There is demand-exports, energy, health care, productivity enhancing projects, transportation are examples. When a small business has a chance to meet these needs AND can get financed, then hiring will begin. Government will not start hiring again ( since a large portion of government is local) until private hiring goes up as economic activity is the source of revenues.

So if the wager is which moves fastest, private increases in hiring or government hiring I have $50 that says private hiring leads the charge.

tdp July 9, 2011 at 12:46 am

Exactly. Make it easier and profitable for small businesses to hire and give people more money to spend themselves and the economy will revive.

Subhi Andrews July 8, 2011 at 6:40 pm

This happened yesterday in Macroecon class.

http://www.viewfromthepeak.net/2011/07/08/hypocrisy/

jjoxman July 8, 2011 at 8:21 pm

Very interesting. I am developing a macro for MBAs class right now, and I may well be the only libertarian in there.

Ombibulous July 8, 2011 at 7:19 pm

When I picture Ezra writing, I see him wearing a stars and stripes bandana and making pledge of allegiance gang signs. Crips, govs, catholics, greens, at root they’re all gangbangers of some sort more or less.

If he makes a living enlisting suckers to join Uncle Sam’s fantasy government league good for him.
He can have all my first round picks and choose Obama or Biden, I wouldn’t even bother picking Paul, I’m not grokking what they’re selling.

Jim July 8, 2011 at 9:13 pm

Is government overhead or a contribution to the economy? That is the question any Keynesian must ask because it answers the question as to whether stimulus helps.

Social safety nets are arguably a forced redistributionist contribution, although since they are inherently unsustainable Ponzi schemes rather than adding value or investment, the economic drag becomes inevitable.

As for the rest of government, what would you call regulation so invasive that it has obstructed whole industries, like oil, and forces at least a trillion a year in private compliance alone? I’d say overhead.

And if it is overhead, then yes, cutting it would provide almost immediate benefit even if government cost did not decline.

tdp July 9, 2011 at 12:46 am

Overhead.

Mesa Econoguy July 9, 2011 at 2:12 am

Overhead, plus management fee.

Retirement investments yield approx 2%, standard annual indexed market return is 8% (and shrinking, due to size of government), and “risk free rate” is now 0, unless you own gold.

CalPERS (and many other retirement plans) growth assumption is 8+% per year. And growing.

Get ready to pay for their stupidity as well.

Greg Webb July 9, 2011 at 12:35 am

The statist mob does not care about logical, coherent arguments properly supported by objective, verifiable evidence, facts, and history. All the statist mob cares about is public adulation, control of others, and their seething hatred of an orderly society that emphasizes freedom of the individual. They assume that they will be part of the political elite because they said and did as they were told. And, if they are successful, they will be surprised, just as many communists were surprised, when that political elite betrays them. As Vladimir Lenin said, they are “useful idiots.”

Mesa Econoguy July 9, 2011 at 1:41 am

Well said, Greg.

Hence, Elizabeth Warren, idiot #2.

muirgeo July 9, 2011 at 7:51 pm

Elizabeth Warren is gonna slay you…. she’ll be like Buffy the Vampire Slayer. you’re afraid of a little girl… I love it that she threatens your mob.

Greg Webb July 13, 2011 at 12:51 am

George, that does not make any sense. Please try again.

DG Lesvic July 9, 2011 at 4:00 am

In all of the above, not a single graph or equation.

It’s good to see that you’ve learned your lesson.

And no need to thank me. All that real economics was thanks enough.

Bill Koehler July 9, 2011 at 8:15 am

As the Great Depression persisted, even Treasury Secretary Henry Morgenthau admitted that the New Deal had been a failure. On May 6, 1939, he confessed, “We are spending more than we have ever spent before and it does not work. . . . We have never made good on our promises. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!”

“P*ssin’ in the wind, makin’ the same mistakes…”

muirgeo July 9, 2011 at 10:34 am

Great Depression Numbers to Pull Up When They Start Rewriting History

http://ablankspotonthemap.blogspot.com/2011/07/great-depression-nubers-to-pul-up-when.html

or Keynes on Steroids….

ear spending GDP unemployment
1936 8,228 13% 16% (down from 19%)
1937 7,580 5% 13%
1938 6,840 -4% 18%
1939 9,141 8% 16%
1940 9,468 9% 14%
1941 13,653 17% 9%
1942 35,137 18% 5%

Ghengis Khak July 9, 2011 at 11:27 am

5% unemployment! See how well it all works?

Nevermind that millions were employed engaging in war and destruction, industry making guns and bombs instead of wealth, plus the food rationing. Ahhh the good old days of WW2.

tdp July 9, 2011 at 12:45 pm

What did the world economy do during that time again?

tdp July 9, 2011 at 6:55 pm

If it weren’t for World War 2 we’d have stayed in the depression for another decade at the rate things were going. Just when FDR and his pals were starting to panic there was a labor shortage because people were needed to make war materials. Otherwise with a few more years of no progress toward real recovery FDR and the New Deal would have become a lot less popular.

vikingvista July 10, 2011 at 4:06 am

Peoples’ lives did not improve during the war. Government spending increased, and American hardship worsened. That’s keynesianism for you. The economy did not improve until all the spending and meddling was stopped–AFTER the war was over.

The lesson of WW2 was that the depression could have been rapidly ended at any time, if the government had curtailed its interventions to the same extent as they ultimately did in 1945.

vikingvista July 10, 2011 at 9:37 pm

errata: …AFTER 1945.

muirgeo July 9, 2011 at 10:57 am

” Reducing government spending might encourage confidence in the future and encourage employers to hire more workers.”

I will take that bet…. If we actually have a reduction of annual federal spending uncompensated by state spending you will see a decrease in employment the first month of the new fiscal year compared to the year in which the spending was cut. Loser pays $500 to the charity of choice of the winner.

muirgeo July 9, 2011 at 11:04 am

“Reducing government spending might encourage confidence in the future and encourage employers to hire more workers. It happened in 1945. That confirms my belief in my dogma.”

What happened in 1945?

Year Spending GDP Unemployment
1944 91,304 8.1% 1.2%
1945 92,712 1.1% 2.7%
1946 55,232 -10.9% 3.9%

1950 unemployment 5.3%

tdp July 9, 2011 at 12:44 pm

year total(fed/state/local) per capita in 2010 $ % of GDP GDP unemp.
1948: 35,600 $1,976.98 20.47 -0.51% 3.8%
1949: 40,200 $2,163.37 23.47 8.74% 6.1%
1950: 44,800 $2,418.62 23.95 7.73% 5.2%
1951: 48,900 $2,377.78 22.38 3.83% 3.3%
1952: 71,600 $3,261.55 27.88 4.60% 3.0%
1953: 80,000 $3,568.94 29.02 -0.63% 2.9%
1954: 77,700 $3,362.64 29.27 7.20% 5.6%
1955: 73,400 $3,147.60 26.70 1.98% 4.4%
1956: 76,000 $3,188.12 26.47 2.02% 4.1%
1957: 81,800 $3,258.51 27.21 -0.90% 4.3%
1958: 134,700 $5,065.44 28.84 7.17% 6.8%
1959: 145,700 $5,302.66 28.77 2.48% 5.5%
1960: 151,300 $5,355.80 28.74 2.33% 5.5%
1961: 164,800 $5,626.43 30.25 6.06% 6.7%
In 14 years:
Government Spending increased 10 times in absolute terms and 9 times as a % of GDP. The GDP increased its growth rate 6 times, decreased its growth rate 5 times, and grew negatively 3 times. Government spending decreased in absolute terms 4 times and as a % of GDP 5 times. Unemployment increased 5 times, stayed the same 1 time, and decreased 8 times. There is little correlation between spending increases and GDP or unemployment. Both went up after some spending increases, both went down after some spending increases, and both went up after spending decreases and both went down after spending decreases.

Overall economic prosperity during the years from 1945-1973 can best be attributed to the lack of competition for US manufacturing, the booming population and expanding workforce, and the fact that government spending at all levels was a smaller % of GDP then than it is now.

Russ Roberts July 10, 2011 at 4:41 am

The gdp numbers are flawed because wage and price controls ended. But the more important point is that the keynesians of the day predicted a horrendous Depression if govt spending dropped suddenly at the end of the war.

They were wrong.

They looked as silly as the modern keynesians who said that if we didn’t pass the stimulus unemployment might reach 9%.

Jim July 10, 2011 at 9:19 am

Exactly. I have never read a Keynesian response to the massive decrease in regulation and government spending after the war, coupled with one of the strongest growth rates ever in GDP.

Is there one?

muirgeo July 10, 2011 at 6:42 pm

Well sure the data isn’t perfect but that is always the default position when it does not correlate with ones position. To make a claim, “Reducing government spending might encourage confidence in the future and encourage employers to hire more workers.” it should hopefully be based at least somewhat on data… which will be imperfect…. but hopefully correlating. My point is that the imperfect data seems to better support the Keynesian claim that cutting government spending and jobs in THIS economic milieu will more likely lead to prolonged stagnation then encouragement to hire. I don’t think employers care a bit about the public debt or public spending if they have good sales. And it just seems to make more logical sense. Employers are not hiring, based on surveys, because they are not selling. Will sales go up or down after we cut demand more by laying off public workers?

Robert Sidelsky has a good chapter comparing the post FDR Bretton Woods periods performance with the post Washington Consensus periods performance. Yeah… not so great of data but fairly consistently correlating again in favor of Keynesian policies. And the reverse… the big crashes occurring after laissez faire periods predictably leading to wage stagnation and inequality…. yeah bad data but I’d rather have the bad data on my side than not.

Dan J July 11, 2011 at 7:56 pm

Only bad data would be used to support your misguided positions.

gold bracelets July 11, 2011 at 12:32 am

It’s another forum for them to show everyone how smart they are and a perfect opportunity to make people do what they Keynesians think is best.

jcpederson July 11, 2011 at 7:16 pm

Cannot afford austerity! That is marvelous!
Buy that interview suit on credit, buy the impressive car with a 60-month payment plan, because overextension is the only way to get above water. Tell us more about how this works on the national level, Ezra!

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