Wall Street Journal Crashed-and-Burned-and-Smoking Watch
I remember my first noticing current Wall Street Journal editorial page editor Paul Gigot back when I joined the Clinton Treasury. "But... he's lying!" I said. "Yes," said the Assistant Secretary for Public Affairs. "Deal with it."
Sixteen years later, and Paul Gigot is still lying:
Problems with CBO Stimulus Report: [Jared] Bernstein claims vindication on the basis of a new Congressional Budget Office report that finds that 600,000 to 1.6 million more people are employed and GDP is 1.2% to 3.2% higher than if Congress had done nothing. After rehearsing some of our greatest hits—"It's hard to imagine a more complete repudiation of Keynesian stimulus than the evidence of the last year's job market"—Mr. Bernstein says that we're "more interested in scoring political points" than acknowledging the stimulus reality. We stand by our economic judgment....
A word about that CBO report: It sets up a nonfalsifiable standard for judging the Administration's policies by using large macroeconomic forecasting models, including a Keynesian "multiplier" that says each dollar government injects into the economy yields more than a dollar in output.... No one ever doubted that the stimulus spree would create or "save" some jobs.... But that $1 has to come from someone or some business in the private economy that might have put it to more productive, job-creating uses.... These new jobs that aren't created don't get picked up in Bernstein-CBO econometric models, but their loss leaves the economy less prosperous overall. What can be measured with greater, if not perfect, accuracy is how many new jobs are being created across the economy, and how many people want to work but can't find a job...
To the extent that there is an argument here--and I am not sure that there is--it is Eugene Fama's fallacy:
Fama's Fallacy, Take I: Eugene Fama Rederives the "Treasury View": The problem is simple: bailouts and stimulus plans are funded by issuing more government debt.... The added debt absorbs savings that would otherwise go to private investment.... [S]timulus plans do not add to current resources in use. They just move resources from one use to another.... I come back to these fundamental points several times below...
Greg Mankiw tried to defend Fama:
Fama's arguments make sense in the context of the classical model... presented in Chapter 3 of my intermediate macro textbook.... [W]ether one leaves the classical model behind to embrace the Keynesian model is a judgment call...
But, as Greg writes in chapter 3 of his intermediate macro textbook, the classical model
assume[s] that the labor force is fully employed...
Does anybody think that this is a good assumption to make right now?
Why oh why can't we have a better press corps?
And would there be any social loss if the WSJ were shut down tomorrow morning, and all its subscribers shifted over to the FT?
