The Argument Against the "First Derivative Mistake" Excuse
Unless you’re really stupid, or bending over backwards to find excuses for the Obama Administration’s Geithnerian malfeasance, you should be less than impressed with Matt Yglesias’s attempt to argue that the Administration saw reason to be happy with overall employment (link to Brad DeLong).
If you’re Matt Yglesias, you should be even less impressed with your (own) argument.
Because Matt Yglesias was paying attention in 2010. He was paying much more attention to Barack Obama’s speeches than I was, so he would have heard the 27 January 2010 State of the Union, when Barack Obama said:
[O]ur efforts to prevent a second depression have added another $1 trillion to our national debt. That, too, is a fact.
I’m absolutely convinced that was the right thing to do. But families across the country are tightening their belts and making tough decisions. The federal government should do the same. (Applause.) So tonight, I’m proposing specific steps to pay for the trillion dollars that it took to rescue the economy last year.
Starting in 2011, we are prepared to freeze government spending for three years. (Applause.) Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will. (Applause.) [emphases mine; laugh track in original]
And Matt Yglesias, who was paying attention then and has a memory now, would have known that “freezing government spending in 2011” means starting 1 October 2010 (when FY 2011 starts), which means that departments have to start planning and cutting…well, basically when the words leave Obama’s mouth.
And Matt Yglesias would have known that transfer payments such as Unemployment Insurance, Temporary Assistance for Needy Families, the Home Energy Assistance Program, and other programs that (at the least) enable “discretionary” spending on things such as food, clothing, and medicine are not on the list of programs that will be exempted from funding cuts. So—even ignoring any moral considerations about letting people freeze to death or starve—there’s a cut in consumption (and therefore GDP) coming. Which will impact employment.
And Matt Yglesias would have known that freezing Federal spending—which is what Obama really means, since he doesn’t control the States’s spending directly—means that the States that are at best just starting to recover, and that have to balance their budget somehow, and only did it for the then-current fiscal year with the help of a lot of stimulus that won’t be coming from a frozen government budget. So there will be cuts in civil servants, and more cuts in consumption.
And Matt Yglesias would have known that freezing the Federal budget in the midst of a slow recovery (because even Matt’s first graphic doesn’t come close to the stable-unemployment rate of 110-150,000 new jobs a month at the time of the SotU, and only approaches it later because it includes temporary census hiring) means that there will have to be layoffs at the Federal level as well, even if there is no one (contrary to economic theory) who leaves for the private sector.
And Matt Yglesias—who isn’t as dumb as his post makes him seem—would know that an Administration that says something that stupid in 2010 isn’t looking at his second (more clearly understandable) graphic, or even his first (census-enhanced) graphic, but rather so mythological construct where all those government workers and increasingly-impoverished unemployed people magically Create Jobs.
And Matt Yglesias—not to mention Brad DeLong—would not be at all surprised when the result of those early 2010 policies came home to roost:
Indeed, the reaction might well be that the recovery went even better than should have been expected, and to wonder why.
And Matt Yglesias would, instead of making excuses for them, wonder aloud why any capable economist (or even one of the Administration’s policy guru) would have been stupid enough to take the first chart he presented seriously as a roadmap, since the Administration changed the territory—for the worst, from an employment perspective—from the previous model. He would be asking if Austan Goolsbee—who is smarter than both Matt and myself, and possibly the two of us combined—was just sleeping through the entire Administration.
But Matt Yglesias didn’t do any of those things. Why, oh why, can’t we have a better press corps?(tm, Brad DeLong)
But Scot Sumner said that we only need NGDP targeting anyway (and like all good monetarist ignoring how it would actually work) so Matt was too busy forming his book on how progressives ignore monetaty policy to pay attnetion to fiscal matters.
Ken,
I actually like the graph you poasted after the 2010 census spike. Gov jobs going down and private jobs coming back nicely. The private job growth since from the 2010 and on looks roughly the same as job growth prior to the recession. Looks like we just have to wait it out and the private sector will come back (if the trend continues.)
Though I would add a freeze to the Defense establishment also…
But Obama is you guy!
Islam will change
Looks like we just have to wait it out
Thing is, private growth returned thanks to the government becoming the borrower of last resort:
http://research.stlouisfed.org/fred2/graph/?g=3dY
My thesis is that the economy is fundamentally broken and that there’s nothing to “wait out”.
We only got out of the last recession thanks to the home debt bubble machine with its wonderful wealth redistributional effects.
If you’re waiting for another $6T bubble to come along, it might be a long wait.
Troy,
I’m not waiting for another bubble, but the red line seems to be on a steady upward trend since 2010. Not as fast as we would like but moving up.
The economy may be broken but barrowing 40% of the USG working capital each year isn’t going to help either.
Islam will change
Matt is so clever that the tight spot he often finds himself squeezing into is his own ass. (See Iraq War)