Why oh why can't we have a better press corps?
If Richard Posner ever retracted or apologized for his confused, mendacious, and false sliming of Christina Romer, I missed it.
But in my email inbox this morning is a message from New Republic asking me to come by and read what he has to say about th dobomy:
Considering the extraordinary nature of our economic situation, we’ve decided to go in search of extraordinary economic solutions. Over the course of this week, TNR will feature a number of prominent economists and otherwise eminent thinkers offering novel ideas for pulling our economy back from the brink.
None of these ideas are guaranteed to work, and some of them can’t realistically be implemented given Washington’s political dysfunction. But at a time of rising fatalism, as Americans are hungering for glimmers of optimism, all of them should serve as much-needed food-for-thought….
Later this week: Contributions by Richard Posner…
So I asked: "Why Richard Posner?"
Thanks for your e-mail.
We wanted the symposium to represent a range of voices and backgrounds and did not want to only include economists. Also, in 2009, Posner wrote “A Failure of Capitalism: The Crisis of ’08 and the Descent into the Depression.”
Seems to me that the New Republic would do much, much better if it focused on having a high-quality symposium that would inform its readers rather than one that seeks to "represent a range of voices and backgrounds and did not want to only include economists". Aggregators will survive only if they are good aggregators.
Econbrowser: I Am Even More Confused Now...: by Richard Posner's math...On August 25th he wrote, regarding Dr. Romer's August 6 speech:
The figure of $60 billion of $61 billion is too high. According to recovery.gov, the $61 billion figure is as of last week--seven weeks after the end of the second quarter. Since the rate of stimulus expenditures is said to be accelerating, the number for the second quarter is undoubtedly significantly lower. This makes the $40 billion in tax relief all the more important to Romer's argumente And if that figure consisted of actual rebate checks, or reductions in current withholding, then of course it should be included in the total outlays of the stimulus program. But in fact very little of it consists of rebates, which is why it is not recorded on the government's website as stimulus money spent and is why Romer should not have said that by the end of the second quarter the government had "spent" "more than $100 billion" in stimulus money. Almost all the tax relief provided for in the stimulus bill consists of reductions in taxes by individuals and businesses. The question is how many of those reductions have resulted in increased cash flow to taxpayers. If, for example, the reduction is reflected in reduced withholding, or a reduced payment of estimated tax by people who filed estimated returns on April 15, it should be counted as stimulus spending; it puts money in people's pockets. If it merely reduces their future tax liability, it does not. All that is certain is that not all that $40 billion in tax relief is stimulus money; not all, and, at a guess, not most, put money in people's pockets before the second quarter ended. [emphasis added]
For those readers new to this debate (which I had thought had been clearly resolved by explicit math), see the previous posts here:   .
There's a moving window on the Recovery.com, so I can't see the cumulative $60 billion figure for end-June, but I do recall it. Better yet, Donald Marron recalls it. No one else has disputed the $60 billion figure.
In any case, apparently in this latest attempt to salvage his argument, Mr. Posner has given up on accusing Dr. Romer of deliberately lying about the $40 billion figure, and has moved on to redefining those funds. (By the way, I'm not sure I've seen him explicitly admit that dividing a quarterly figure by annualized GDP, as he does in his original post, is a mistake.) Specifically, he is saying that the $40 billion is partly decreased withholding, or shifting around of tax liabilities, and not entirely rebates. Mr. Posner does not provide any source for this assertion, and the language in Dr. Romer's speech (and footnote 4) seems to indicate otherwise.
Let's assume absolutely none of the $40 billion took the form of rebates. As I showed in my math in this post, assuming zero spending out of the tax component, one can easily obtain 4 ppts growth in 2009Q2 GDP, given that the "transfers" to the states are largely helping support continued spending on goods and services like teachers, civil servants, health services, etc.
I am of course working in the "old-fashioned" Keynesian mode that Mr. Posner says he prefers. If one hews to a real business cycle approach, or other approaches were the economy does not systematically deviate from full-employment, then none of the foregoing is relevant.
Update 8/28 12:20pm Pacific: See also Justin Wolfer's take on Posner.
Freakonomics » Posner, Redux: The confusing spectacle of Judge Posner blogging about macro continues. His latest missive appears particularly misguided.
To recap, Posner attacked CEA Chair Christina Romer for being too optimistic about the effects that fiscal stimulus had on second-quarter growth. According to Romer, the better performance of the economy in Q2 relative to Q1 was largely attributable to the economic stimulus. But Posner argues that $100 billion in stimulus spending in that quarter is simply too small relative to the size of the economy to make much of a difference. Throw in accusations of unethical or irresponsible behavior, and you have yourself an academic brouhaha.
But the error was Posner’s. As it turned out, he was comparing apples and oranges. Actually, he was comparing a quarter of an apple with a whole apple: by contrasting the amount of stimulus spending in one quarter with an annual measure of gross domestic product, he understated the relative size of the stimulus by a factor of four. He then multiplied his error by comparing it with the change in an annualized growth rate, which overstates the change in quarterly GDP growth by a factor of four. Yes, he was right that his numbers suggested the stimulus was too small to make this much of a difference. But that’s because his numbers understated the relative size of the stimulus by a factor of four and overstated the claimed consequences by a factor of four. And so Posner was wrong by a factor of sixteen. (See if you can spot his correction or apology in his follow-up.)
But now Posner is back, talking about “Christina Romer’s More Than $300 Billion Mistake.” That $300 billion? Beyond stating that number in a headline, he never returns to it, so we don’t know if it’s a typo or a calculation. But reading the full piece, it becomes clear that his real target is that we’ve all been wrong in taking Romer at her word that in Q2 around $100 billion of the stimulus money went out the door. Posner now thinks that it was “too high.” To cut through some confusion, note that this reflects that $60 billion is direct government spending and $40 billion comes in tax reductions. But Posner says:
The figure of $60 billion of [sic] $61 billion is too high. According to recovery.gov, the $61 billion figure is as of last week — seven weeks after the end of the second quarter … the number for the second quarter is undoubtedly significantly lower.
You can see the data from recovery.gov, here.
The chart plainly shows that seven weeks after the end of Q2, $84.6 billion had been paid out, not $61 billion. But Romer’s claims are about the quarter that ended on June 30, and while I don’t have data for precisely that day (although I’m sure Romer does), you can extrapolate the green line backwards. By July 17, $67.4 billion had been spent, and it looks like about $3 to $4 billion per week is being spent. Extrapolating backwards two to three weeks to June 30, the total was probably right around, ummm … $60 billion.
And the other $40 billion? As Menzie Chinn rightly notes, Posner doesn’t think that taxpayers have received it, but he doesn’t say why.
I’m glad that there are folks who are going to monitor the claims of government economists closely, but unfortunately Posner has generated more heat than light. John Maynard Keynes reportedly said, “When the facts change, I change my mind.” My advice to Posner: when your understanding of the facts change, don’t keep attacking the facts, change your mind.