Live from La Farine: We haven't heard of "Obama's Katrina" in quite a while, have we? But we can nevertheless watch myths being made in real time--thus setting time bombs to do major, major damage in the future...
Five recent things worth reading, or what Paul Krugman said:
Obama the Job-Killer: "Given the GOP field’s collective decision to go for Bushonomics squared...:
...it seemed like a good time to update this chart.
Doubling Down on W: "One downside of The Donald’s turn in the spotlight is that the policy positions of the tonsorially conventional candidates...:
...are going largely unscrutinized, which is bad. For the fact is that the whole field has taken a hard right turn into fantasyland.... Big tax cuts tilted toward the 1 percent... George W. Bush’s signature domestic achievement... failed to deliver.... You might think that the current crop of candidates would be proposing something different.... [But] a doubling down... proposing to blow a bigger hole in the budget than W ever did, and use the extra debt to do even more to increase inequality. It’s pretty amazing. The next thing you know, they’ll be bringing back the architects of the Iraq disaster to do it all over again. Oh, wait.
Destructive Long-Termism: "At this point there is overwhelming evidence that fiscal policy has strong effects...:
...I’ve seen nothing suggesting that fiscal policy has lost traction, and have no idea why [Tim] Taylor thinks that. Monetary policy has indeed had difficulty gaining traction. But that’s exactly... the liquidity trap.... Analysis suggests is that the right solution to this problem, if you can get it, is higher inflation expectations. Where does anyone get the notion that it’s a problem requiring structural reform, or even necessarily a problem structural reform can solve?... If you have a persistent problem of inadequate demand--which is the secular stagnation argument--then find things that will boost demand. Don’t throw up your hands and whine that you can’t, and/or use demand-side problems to argue for other stuff that has no obvious relevance to the problem. You may think you’re being wise and judicious, but you’re actually engaged in an act of evasion.
Policy Effectiveness since 2008: "I came down pretty hard on Tim Taylor yesterday, but with reason...:
...[No] reputable economist should, at this late date, be saying things like ‘We tried huge stimulus, but it didn’t work, so maybe fiscal policy is ineffective.’...
Actual stimulus was only modest-sized and short-lived, as I documented in my previous post.
Since 2010, the distinguishing feature of fiscal policy has been how contractionary it has been....
There has been quite a lot of empirical work on fiscal policy since 2009, and the preponderant conclusion of that work is that fiscal multipliers are larger, not smaller, than under pre-crisis conditions. If you want to disagree with that work, OK, but explain why--a tossed-off remark won’t cut it....
This matters--a lot. If fiscal policy is as effective as ever, if not more so, then austerity policies did immense damage, and we really need to be ready to do stimulus in the next downturn. But that has no chance of taking place if even economists who should be well-informed just make up a policy history that never happened.
Mandate Memories: "Sarah Kliff notes that the individual mandate in Obamacare is turning out to be essential...:
...and it’s working, with the risk pool improving as the penalties kick in. What I wrote back in 2007, when Obama was campaigning against the mandate. Fortunately, once in office he was a stronger advocate for health reform than I feared--including for necessary pieces he opposed in the primary; what we actually ended up with was, strictly speaking, Hillarycare.