Happy New Year from Menzie Chinn!
Time to emulate the media’s "year in review" pieces, with my own take on the most outrageous, nonsensical assertions presented in the guise of analysis…. The inspirations range from (once again) the Heritage Foundation's analyses (where have you gone, Bill Beach!) to the ongoing search for hyperinflation/crowding out.
(1) March: Representative Ryan’s plan assumes a path for tax revenues, without any detail on how those tax revenues targets would be attained. Sounds like “command and control” to me!…. (2) May: Governor Romney says 500,000 net job creation per month is typical during a recovery… "the equivalent in percentage terms never happened during the eight years of the G.W. Bush administrations." In fact, over the last 21 or so years, one has to go back to the Clinton administrations to find such numbers.
(3) May: David Brooks tries to play economist…. (4) May: Governor Walker doubles down on 250,000 new jobs by 2015, in Dispatches (XXI)…. (5) July: Waiting for high inflation (and still waiting)…. (6) July: Waiting out for crowding out (as feared by Representative Ryan, and still waiting)…. (7) October: At Long Last, One Member of the 47% Where He Belongs!. (8) October: if you don’t like the jobs numbers, it must a conspiracy! From Watergate! Iran-Contra! BLS 2012.10.5?: "it is so depressing to see the descent of a large portion of the commentariat into delusion and/or mendacity that I thought I would show exactly how pathetic the assertions of data manipulation are…. Welch himself describes the controversy: '… In my first tweet, sent the night before the unemployment figure was released, I wrote: "Tomorrow unemployment numbers for Sept. with all the assumptions Labor Department can make..wonder about participation assumption??" The response was a big yawn. My next tweet, on Oct. 5, the one that got the attention of the Obama campaign and its supporters, read: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers." As I said that same evening in an interview on CNN, if I could write that tweet again, I would have added a few question marks at the end, as with my earlier tweet, to make it clear I was raising a question.'" I'll let readers decide whether Mr. Welch is trying to have it both ways; inspecting the video of Mr. Welch on Anderson Cooper would be particularly instructive….
(9)November: Who needs experts when you know the answer? From The Republican Joint Economic Committee Does Public Finance: Or, "Just because you can’t prove that the top marginal tax rate has a large impact on economic growth doesn’t mean that it doesn't: just have faith!"… (10) December: Macro analysis using an identity. From Why Worry about the Fiscal Cliff: Almost three years ago, some analysts (I use the term loosely) argued that the stimulus embodied in the ARRA (which was about one third tax reductions) would have no impact on GDP, i.e., would not be stimulative. Consider the following statement by Mr. Brian Riedl of the Heritage Foundation: "… Spending-stimulus advocates claim that Congress can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question: From where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another…." What this implies is that if the stimulus was ineffective because each dollar spent by the government was a dollar taken away from the private sector, then we should rejoice when each dollar no longer spent on defense (paying fighter pilots guarding US airspace, maintaining nukes, etc.) is released to the private sector for purchases of yachts and mansions. (By the way, a new classical formulation leads to a similar conclusion.)…
Bonus Item - February: Because no such compendium is complete without an example from Professor Mulligan. From Famous Conditional Forecasts from the Real Business Cycle Side.
As I was reviewing material to use in teaching how new classical models relate to the popular aggregate demand/aggregate supply models [0] used in policy analysis, I ran into this forecast in the real business cycle vein from October 26, 2008. "Barring a nuclear war or other violent national disaster, employment will not drop below 134,000,000 and real GDP will not drop below $11 trillion." All this is to illustrate that in the fog of business cycles, one's got to be careful about making forecasts (the rest of the article is a must-read, as is this rousing defense by Professor Mulligan in October 2009)...
