So I finally made a chunk of time to read and think about Michael Kinsley's response to Paul Krugman's rebuttal of Kinsley's claim that Krugman was engaged in a "misguided moral crusade against" rather than a technocratic critique of "austerity".
First and most essential, I need to set some rules here: If I'm going to be called a canine of any form, standards must be maintained.
I insist that it be not "attack dog" but either:
- the Maoist "running dog", or
- Jon Snow's direwolf: Ghost.
Those are the approved options. Pick one. Use it. Stick to it. It's really not hard at all to do.
I hope that that is now clear...
Second, I read through Kinsley's new piece.
The first seven paragraphs appeared to me to be throat-clearing--and rather strange throat clearing:
I read claims like "Krugman started this round" that link to a piece that Krugman explicitly positions as a response to Kinsley's "somewhat bizarre attack". How can you start a round with a response?
I noted that Kinsley's first seven paragraphs contain links to Evan Wolfson, Andrew Sullivan, Dan Drezner, Charles Pierce, Paul Krugman, and me--but only Paul and I are named. You don't need to name everyone you link to, you don't need to link to everyone you name, you don't need to quote everyone you name, and you don't need to quote everyone you link to. But in his first seven paragraphs Kinsley quotes from only one and names only two of the six people he links to. That's odd.
And in context it is even odder. Kinsley's earlier article contains eighteen occurrences of "Krugman"--yet not a single link to anything Krugman has written, and not a single quote from anything Krugman has written.
The previous article did have one single link. It did quote from the article it linked to. That article was by Stuckler and Basu. The name "Stuckler" did not appear in Kinsley's article at all. The name "Basu" did not appear in Kinsley's article at all. Stuckler and Basu are called "two academics", "social scientists from Stanford and Oxford", "they", and thrice "the authors", but they are never called "Stuckler and Basu".
This seemed to me to be Kinsley exhibiting a strange passive-aggressive twitch--telegraphing to Stuckler and Basu: I'm going to attack your article, and I'm going to link to it, but I'm never going to mention your names, ha, ha!!
And what is the connection of Stuckler and Basu's article to the never-quoted and never-linked to but mentioned-eighteen-times Paul Krugman?
It is, Kinsley writes:
[Krugman] did not write the paper about how austerity kills, but it fits comfortably with everything else he’s been writing on the subject.
In short: Krugman didn't write it, and I am too lazy to quote from anything Krugman did write, so I will say it "fits comfortably" with what he writes, and proceed as if Krugman did write it.
Or, Franklin Foer is paid a pretty penny by Chris Hughes to be an editor! Where is Franklin Foer in this?!?!
After those seven paragraphs, I was pleased to find that, come paragraph eight, Kinsley makes an argument:
Michael Kinsley vs. the Anti-Austerians: I was particularly intrigued by this idea of purposely holding back a recovery until you can take credit for it. Why wait for that? Paul Krugman takes credit for good economic news whenever it happens. On Krugman’s blog site (“The Conscience of a Liberal”) last week were two bits of prose side-by-side. One was an ad for his latest book, End This Depression Now! “How bad have things gotten?” the ad asks rhetorically.” How did we get stuck in what now can only be called a depression?”
Right next door is Krugman’s gloat about the recent pretty-good economic news. “So where are the celebrations,” he asks, “now that the debt issue looks, if not solved, at least greatly mitigated?” Greatly mitigated? By what? Certainly not by anyone taking Paul Krugman’s advice. He has been, in his own self-estimate, a lone, ignored voice for reason crying out in an unreasoning universe.
Unfortunately, Kinsley's argument is not a tight argument. It is a fuzzy argument. It appears to me to move in six stages:
- Paul Krugman fears Republicans are trying to delay recovery until they are in power, at which point they will be able to take credit for it.
- But that makes no sense, for you can take credit for recovery whenever it happens--even if you are not in power.
- For example, Paul Krugman thinks we are in a depression, but he also takes credit for recent pretty-good economic news about the falling deficit
- In fact, he gloats about how good the recent economic news about the deficit has been.
- Even though he had nothing to do with generating the good news about the deficit.
- Paul Krugman is a hypocrite.
However, if you were to say that Kinsley's paragraph is too fuzzy to understand what he is trying to say, I would have a hard time rebutting you. Perhaps I have misread it? Perhaps there isn't much to misread?
In support of his argument, Kinsley quotes:
one sentence from ad copy for End This Depression Now
one sentence from Krugman's post: "So where are the celebrations now that the debt issue looks, if not solved, at least greatly mitigated?"
Here is Krugman's entire post:
Where Are The Deficit Celebrations?: For three years and more Beltway politics has been all about the deficit. Urgent action was needed to avert crisis. A Grand Bargain absolutely had to be reached. Fix the Debt, now now now!
So where are the celebrations now that the [decline in the deficit and the stabilizing of the projected debt-to-annual-GDP ratio mean that the] debt issue looks, if not solved, at least greatly mitigated? And it’s not just recovering revenues: health costs, the biggest driver of long-run spending, have slowed dramatically.
What we’re getting from the deficit scolds, however, are at best grudging admissions that things may look a bit less dire — if not expressions of regret that the public seems insufficiently alarmed.
Jamelle Bouie gets at a large part of it by noting what was obvious all along: for many deficit scolds, it was never really about the debt, it was about using deficits as a way to attack the social safety net. Deficits may have come down, but not the way they were supposed to — hey, we were supposed to be kicking 65 and 66 year-olds off Medicare, not doing something so goody-goody as managing costs better.
There is, however, a secondary factor: think about the personal career incentives of the professional deficit scolds. You’re Bowles/Simpson, with a lucrative and ego-satisfying business of going around the country delivering ominous talks about The Deficit; you’re an employee of one of the many Pete Peterson front groups; and now, all of a sudden, the deficit is receding, and you had nothing to do with it. It’s a disaster!
And so the deficit progress must be minimized and bad-mouthed.
I looked in this for Paul Krugman taking credit for the falling deficit. I didn't find it. If you find it, email me.
I looked in this for Paul Krugman "gloat[ing] about the pretty-good economic news" of the deficit.
And I didn't find it.
Why not? Because the falling deficit is pretty-good economic news for austerians, but not for Paul Krugman. Nowhere does he say it is really good news--what he argues is that it should be reason for austerians, who have been fearing an exploding debt and claiming that because of it we must do all kinds of unpleasant things that they claim they really would rather not do, to sigh in relief and say "never mind". For Krugman, however, the falling deficit is bad news--it is weakening the economy.)
I looked in this for a claim that Paul Krugman has been "in his own self-estimate, a lone, ignored voice for reason crying out in an unreasoning universe." And I didn't find it.
What I do find, elsewhere, is Paul believing that he is having an impact, that argument matters and matters greatly, and that the fact that the U.S. is doing much better than Britain or continental Europe is powerful evidence to that effect--that behind our efforts there must be found our further efforts.
So I moved on to paragraph nine, in the hope that Kinsley would step up his game.
Alas, paragraphs nine through thirteen struck me as more throat-clearing.
- "if Paul Krugman wants to get into a contest about who has spent more time in a comfortable, air-conditioned office dreaming up new ways for the government to spend someone else’s money on programs to help a third party, I’m pretty sure I would win...
- "I supported Obama’s tax increase on upper brackets..."
- "I don’t appreciate being called a neo-con any more than Paul Krugman would..."
- "I assume from the way [Paul Krugman] writes that he is out there most Sunday mornings painting poor people’s houses, serving up soup and making sandwiches. And I congratulate him for it..."
- "what does [Paul Krugman] himself get for a speech?... I think there’s nothing wrong with [giving paid speeches..."
- "what about the motives of the anti-austerians like Krugman? Are they purposely keeping the economy sputtering until they can take power and take credit?"
- "an Atlantic blogger"--note, again, the absence of a reference by name--"who thinks he’s going to live forever, had the bad manners to point out that I’m over 60." This last is worth pausing on: this is a reference to Matt O'Brien. Matt's point was not that he is young while Kinsley is old and going to die soon. Matt's point was, instead, that people in their 60s are often found making inappropriate analogies between today and the 1970s simply because the 1970s were their formative years. And "an Atlantic blogger"--that is so 2003...)
However, paragraph eight is there, and it is an argument. But it is an argument that relies on misconstruing what it is criticizing. So there is really not very much meat here. Certainly there is not enough for which a poor overworked direwolf might feed.
But I try my best...
Third, Michael Kinsley claims:
There are two possible explanations [for people's displeasure with his "Paul Krugman's Misguided Moral Crusade Against Austerity"]. First, it might be that I am… just so spectacularly and obviously wrong that there is no point in further discussion. Or second, to bring up the national debt at all in such discussions has become politically incorrect…
And why should Kinsley be surprised that he is wrong? Kinsley writes:
I can’t help feeling that the gold bugs are right…. My fear is not the result of economic analysis. It’s more from the realm of psychology. I mean mine. […] The puritan in me says that there has to be some pain. That’s not to say that there hasn’t been plenty of economic pain. But that pain has come from the recession itself, not the cure…
I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be. And future sufferers are not necessarily different people than the past and present sinners. That’s too easy.... The problem is the great, deluded middle class—subsidized by government and coddled by politicians.... If you make less than $250,000 a year, Obama has assured us, you are officially entitled to feel put-upon and resentful. And to be immune from further imposition...
Kinsley has no good substantive, analytical, technocratic arguments.
He has a pre-analytical "belief" that "we have to pay a price" and a "feeling... from the realm of psychology" that is "not the result of economic analysis". It is not the result of economic analysis because there is no economic analysis that connects the "great, deluded middle class--subsidized by governments and coddled by politicians" with our current major problem of low demand, idle capacity, and unemployed workers.
So why should Kinsley be surprised to find that the only people backing him up are Chuck Lane and Joe Scarborough?
He says up front that he does not have an argument.
He follows through by not making an argument.
Why does he then claim to be surprised when it turns out that he is treated with less respect--subjected to "one of those flattering but scary web hailstorms"--than people who do have arguments?
Fourth, there remains the second prong of Michael Kinsley: Kinsley wants to believe that the internet hailstorm was not because he was wrong, but because bringing up the national debt has become "politically incorrect".
Bringing up the national debt has not become politically incorrect--and if it were, that would be no reason not to bring it up. Moreover, just because Kinsley is wrong does not mean that further discussion is useless. Further discussion is not useless. Further discussion is very useful.
But what is needed is informed discussion.
We need honest arguments and honest disagreements about things we can see. We do not mere knee-jerk gut feelings. We do not need mere psychological reactions and complexes.
The debate over whether prudent economies should pursue additional temporary fiscal stimulus and boost government purchases, until the bond market tells us otherwise via sharp increases in long-term interest rates, or turn toward austerity and cut government purchases starting right now is a technocratic debate. It has two sides: a benefits-of-stimulus side and a costs-of-stimulus side.
On the fiscal-stimulus-has-low-benefits side, the arguments for austerity were three. They were that:
Even for reserve-currency sovereigns that control their own money supplies, further expansion of government purchases will trigger rapid and substantial increases in interest rates that will make fiscal multipliers small or even negative--hence no or small benefits.
Even for reserve-currency sovereigns that control their own money supplies, further expansion of government purchases will trigger rapid and substantial increases in uncertainty that will lead businesses to place a low value on expanding or even maintaining their operations and in the process depress the stock market, and so make fiscal multipliers small or even negative--hence no or small benefits.
There are other superior monetary-policy tools for fighting unemployment and slack capacity, like quantitative easing, adopting a crawling price-level target, and nominal GDP targeting.
Over the past five years, reality has spoken very harshly against (1) and (2). The world's central banks (with the possible exception of Japan) do not believe in (3). There are powerful theoretical arguments against (3). Certainly if it is correct it requires operations on a much larger scale than I at least would have thought needed five years ago. But it is possible that (3) is indeed a better policy road than additional temporary fiscal stimulus.
On the fiscal-stimulus-has-high-costs side, the arguments for austerity are:
Additional government purchases will raise the debt-to-GDP ratio in the long run substantially, rather than having little effect or lowering it, as debt accumulation will raise the numerator by a greater proportion than a more rapid and complete recovery will raise the denominator in the long run.
A higher long-run debt-to-GDP ratio runs a high risk of triggering an episode of fiscal dominance. In an economy with a long-run real growth rate g, a normal-time required rate of return on government bonds r, a debt D, a price level P, a level of GDP Y, and a maximum politically-sustainable long-run primary government budget surplus of σ, when the economy normalizes the price level will be given by: P=(r-g)D/(σY). Too-high a level of debt given r, g, Y, and σ thus will trigger a very large burst of inflation that will prove very costly.
A higher long-run debt-to-GDP ratio runs a high risk of requiring financial repression--a draconian regulatory regime over finance in order to keep the costs of amortizing the debt low that will be very bad for the efficiency of the financial system and will substantially retread growth.
It is not the case that the world economy's demand for safe assets will be so high--that savers will be both patient and risk-averse enough--that it is beneficial for growth that the government step in and provide the AAA assets savers have such a high demand for that the combination of investment bank security origination and rating agencies can no longer provide.
Here reality has not spoken nearly as strongly over the past five years.
What we do know is that the bond market strongly disbelieves in (1): unless you think that investors in long-term bonds have systematically gotten bond values very wrong, the arithmetic is that additional government purchases right now lower rather than raise debt-to-GDP ratios.
What we do know is that the history of Japan over the past decades as well as the Great Depression indicates that the fear of (2) or inflation driven by fiscal dominance is a very distant and unlikely threat, if it is a threat at all.
We do know, with respect to (3), that Reinhart and Rogoff misread their historical results: the costs of required financial repression are not low up to a debt-to-annual-GDP ratio of 90% and do not become high above that level. The historical record suggests that if there are costs to financial repression they are small. They increase slowly and continuously as debt rises.
And (4) is, as they say, "at the research frontier".
Over the past four years we have learned an awful lot about the benefits and costs of austerity vs. stimulus, and what we have learned has greatly strengthened the intellectual case for the stimulus side.
Given that this is the state of the technocratic debate, what is Michael Kinsley's proper role? It is:
To listen carefully, and try to understand what the serious and valid technocratic arguments are.
To try to find better and clearer ways to accurately convey the valid technocratic conclusions to the chattering classes and thus, eventually, we hope, to the electorate.
If that is not the role he seeks, than what is the point of it all, at all?