Mike Konczal Vs Market Monetarists
Just click the link
I don’t have anything interesting to add. My problem is that I can’t help thinking of whether Konczal’s criticisms amount to a credible accusation of impropriety. I have tried not to blog this, but really can’t resist.
At the end of 2012, David Beckworth told the Keynesians they were wrong. In a provocative post, he argued “that nominal GDP (NGDP) growth has been remarkably stable since about mid-2010 despite a contraction in federal government expenditures” and that “the Fed has been doing a remarkable job keeping NGDP growth stable.”
[skip]
So how did this line in the sand turn out? Here’s the data updated through 2013, with year-over-year (Beckworth’s line) and two quarters showing …
It was stable, until it wasn’t. … NGDP growth was lower in the first two quarters of 2013 than it was in 2012.The third quarter did spike, [skip]
“I’d note Beckworth didn’t mention this data or his old approach at all in his victory lap. Scott Sumner used this graph and data for his “Most Important Graphic of 2013,” but didn’t include any of the 2013 data. “
I think that suppressing all data from 2013 in a contribution to a collection of “Graphic[s] of 2013” is, at least, getting very close to the line.
I am genuinely interested in what commenters think of this.
I think, QE3 or “QE-Infinity, which began in late 2012, offset much of the contractionary fiscal policy in 2013.
It should be noted, the recession that began in 2008, or when the economy peaked in Dec ’07, was caused, initally, by restrictive monetary policy (the Fed raised the Fed Funds rate to 5 1/4% and left it there too long, until Sep ’07) and contractionary fiscal policy (the 2007 federal budget deficit shrank to $161 billion).
However, we were on the path to a mild recession, e.g. because of the Bush tax cut in early ’08, until Lehman failed in Sep ’08, which caused the economy to fall off a cliff.
Also, it should be noted, the much smaller U.S. trade deficits over the past few years have made the U.S. “recovery” look stronger, since shrinking trade deficits add to U.S. GDP. Real GDP growth has been much higher just because the U.S. is consuming less than producing in the global economy, which reflects stagnant living standards at best.
U.S. Real GDP Growth
2010: 2.5%
2011: 1.8%
2012: 2.8%
2013: 1.7% (projected for full year)
2014: 2.5% (projected)
It has been, and continues to be, a very weak recovery from the severe recession. Consequently, the U.S. economy is underproducing by about $1 trillion a year.
The U.S. had a massive tax increase in 2013 – almost $500 billion. The federal budget deficit shrunk from $1.089 trillion in fiscal year 2012 to $680 billion in fiscal year 2013 (ending Sep 30th), or around $400 billion.
• The expiration of the so-called “Bush tax cuts” enacted in 2001 and 2003 and extended to December 31, 2012 will draw $165 billion out of the economy.
• The renewal of the regular payroll tax, back to 6.2% from the temporary 4.2% extended to December, will draw another $125 billion out of the economy.
• The expiration of the Alternative Minimum Tax (AMT) “patch” designed to protect middle-class taxpayers from this “wealthy-only” tax will now apply to them as well and will extract another $119 billion.
• The expiration of numerous other tax cuts, tax cut extenders, the reimposition of the “death tax” and the elimination of 100% “expensing” for business investment will withdraw an additional $51 billion, and
• The imposition of five of the thirteen new taxes imposed by Obamacare effective January 1, 2013 will be responsible for the balance.
Grand total: $494 billion, or almost four percent of the country’s gross domestic product to be extracted and transferred to the federal government.
Sure Beckworth and Summer have a reputation to uphold in that they are vested in their ideology. Maybe they just have not updated their data sets yet? I mean how easy was it for them to simply send along what they have. Busy men and all. Or, maybe the collection was created not by asking for submission but by cutting and pasting.
I’m betting on laziness and a knowing that in the end the profession of economics has no policing power regarding professional integrity. What economics has is a faction supported by those making the money.
I don’t think one can say either way until they put out some more graphs that include the 2013 data. If they do not do so, if they go on to a different set of data or different means of graphing the data, then one could accurately accuse them of ill intentions.
I think the problem is that we have not caught up to the output gap yet. So I don’t see how this is an MM victory. Brad Delong makes the point that with a truly neutral fiscal-monetary policy you should see about a 40% drop in the output gap in a year. We hvaent’ seen this once in the 2010-2013 period.
Even if there was some growth it would have been faster without the austerity. That’s what actually matters. Unless you can argue that the rate of growth in the economy has been optimum the last 4 years there’s no way to argue that we’ve had anywhere near full monetary offset.
http://diaryofarepublicanhater.blogspot.com/2014/01/sumners-trouble-is-he-doesnt-know-what.html
http://diaryofarepublicanhater.blogspot.com/2014/01/now-were-talking-delong-takes-on-white.html
If you go by historical standards this has been a very slow recovery. Sure it’s been better than the EU but this is a very low standard. The question isn’t that we’ve recovered but that the recovery has been so slow. If 4 years and still with an ouput gap is something the MMs want to brag about they might want to think again.
The Fed did its job. It reduced interest rates and raised asset prices for households and firms. The Fed deserves a lot of credit for “QE-Infinity.”
Here’s what Bob Brinker said about the Fed (Dec 2012):
“It’s only because the Federal Reserve has been active that we have any growth at all in the economy….The Federal Reserve is the only operation in Washington doing its job.
The only person that would criticize Ben Bernanke would be a person who is so clueless about monetary policy and (the) role of the Federal Reserve as to have nothing better than the lowest possible education on the subject of economics….Anybody going after Ben Bernanke is a certified, documented fool….”
I agree. fiscal policy and the economic policies out of Washington have been ineffective, because it has been similar to placing one foot on the accelerator and the other foot on the brake. The pro-growth and anti-growth polices, out of Washington, created very expensive growth, at best.
A large tax cut and substantial deregulation were needed, to jolt the economy into a self-sustaining cycle of consumption-employment (where consumption generates employment and employment generates consumption, etc.).
Instead, we got tax cuts that were too small and too slow, along with more regulation (on top of $2 trillion a year of federal regulations), and counterproductive regulations, which the economy has been unable to absorb.
@daniel Becker
Konczal noted that Beckworth has gone on to different methods of analysing the data. Nominal GDP is no longer the key.
I am very very lazy, but I just can’t believe laziness would cause a failure to update a graph of nominal GDP growth (or cause someone to omit 2013 data from a contribution to a discussion of 2013 graphics).
I mean the updated graph just took my 2 minutes to generate (by the clock)
https://research.stlouisfed.org/fred2/graph/?graph_id=155832&category_id=0
and a lot of that was signing in so I could save it. I saw it after one.
The article includes commentary by Sumner. In the comments contributors explain why they consider their contribution to be the key graphic for 2013. I think there is no doubt that the choices were made by Sumner (anyway one can check).
TWO WARS on credit can be very expensive to pay for, what with interest and all. OTOH 85 billion a month and WE can all live like kings. Unfortunately T-bills ARE just another instrument of debt and debt begs interest.
The world order is our trade deficits pay for the wars, along with most of our standing military.
We exchange worth less paper for goods. So, we can consume up to $800 billion a year more than produce in the global economy and in the long-run.
wrong GDP figures:
2010:4.0%
2011:2.5%
2012:3.0%
2013:4.0%
Weak recovery my backside. You may not like how the recovery has become, but your numbers are way off.
I have 4-5% in 2014. Before slowing back to 2.5% in 2015.
“My problem is that I can’t help thinking of whether Konczal’s criticisms amount to a credible accusation of impropriety…I think that suppressing all data from 2013 in a contribution to a collection of “Graphic[s] of 2013″ is, at least, getting very close to the line.”
Beckworth evidently made that particular graph in April before the BEA’s advance release of 2013Q1 GDP on the 26th of that month, so of course it doesn’t contain any data from 2013.
And in the introduction to Atlantic’s “The Most Important Economic Stories of 2013—in 44 Graphs”, Matthew O’Brien says the following:
“…So, to remind ourselves what did change in the last 12 months, we asked our favorite economists, journalists, and think-tankers for their favorite charts of the year…”
So it simply sounds like Sumner submitted that graph (which was posted during 2013 by Beckworth) as his favorite graph of 2013. If Sumner had changed Beckworth’s April 2013 graph, by bringing it up to date, then that would not at all have been in keeping with the intent of what Atlantic was trying to do, which was obviously a year’s end retrospective of peoples’ favorite graphs of 2013. (Did anyone else alter their favorite graphs before they submitted them? Uh, no, don’t be ridiculous.)
Moreover, what did Sumner actually say in his commentary on the graph?
Scott Sumner:
“The US and the Eurozone did roughly equal amounts of austerity. But the US had some unconventional monetary stimulus whereas the eurozone raised rates several times in 2011 to slow inflation. You can see the results of this natural experiment.”
Does updating the graph dramatically change this conclusion?
http://research.stlouisfed.org/fred2/graph/?graph_id=155911&category_id=0
Em, not really.
Since then the US has significantly surpassed the Euro Area in terms of fiscal austerity. According to the October 2013 IMF Fiscal Monitor, between calendar years 2010 and 2013 the US increased its general government cyclically adjusted primary balance by 4.4% of potential GDP compared to 3.7% of potential GDP in the Euro Area. Furthermore the Euro Area has lowered the MRO rate from 1.5% as recently as early November 2011 to only 0.25% in December 2013.
The gap between the two yoy NGDP lines has narrowed from 3.5% in 2012Q4 to 2.4% in 2013Q3, but the US has only moved down from 3.8% to 3.4% whereas the Euro Area has moved up from 0.3% to 1.0%, meaning nearly two thirds of the narrowing is probably attributable to more expansionary monetary policy in the Euro Area.
Actually, I’m pretty sure Sumner will appreciate you bringing this up.
We have had a generation’s worth of an output gap. It equals the public investment gap that began when government became “the problem.” We covered it up with a stock bubble and a real estate bubble, both of which generated enough apparent wealth to support consumer spending even as real savings plummeted. Catch up on the neglected projects — not make-work, real stuff — and then continue sufficient public expenditure to maintain the improvements properly, and our troubles will disappear.
@Mark Sadowski
Are you saying that Sumner cut and pasted a graph made by someone else without citing the person who actually made the graph ? That seems to me to be rather serious misconduct.
The title of O’Brien’s piece was “The Most Important Economic Stories of 2013—in 44 Graphs” So stories of 2013 not Graphs published in 2013.
If you had actually looked at the other graphs instead of making an assertion based on a guess you would have noticed that many include data from 2013. I have looked at all the graphs which appear before “Sumner’s” (quotation marks because Sumner presented it as his illustration of 2013 thus claiming it was his even if he copied the graph from someone else without citing the true author). All seem to have the latest available data.
Many clearly were made soon before O’Brien assembled them.
your statement “(Did anyone else alter their favorite graphs before they submitted them? Uh, no, don’t be ridiculous.)” demonstrates utter disinterest in the facts. You should check a published article (two clicks away) rather than assert what is in it, based on a guess.
note: This comment has been edited to tone it down and make it more nearly diplomatic. I am very willing to tell you in an e-mail what I really think of you. However, I think a frank and honest statement here would damage the comity necessary for useful comment sections.
John, those numbers look more like nominal GDP growth than real GDP growth. Per capita real GDP growth is even worse.
Chart:
http://www.advisorperspectives.com/dshort/charts/indicators/GDP-per-capita-overview.html?Real-GDP-per-capita-since-1960-log.gif
Robert Waldmann:
“Are you saying that Sumner cut and pasted a graph made by someone else without citing the person who actually made the graph ? That seems to me to be rather serious misconduct…If you had actually looked at the other graphs instead of making an assertion based on a guess you would have noticed that many include data from 2013. I have looked at all the graphs which appear before “Sumner’s” (quotation marks because Sumner presented it as his illustration of 2013 thus claiming it was his even if he copied the graph from someone else without citing the true author). All seem to have the latest available data. Many clearly were made soon before O’Brien assembled them. your statement “(Did anyone else alter their favorite graphs before they submitted them? Uh, no, don’t be ridiculous.)” demonstrates utter disinterest in the facts. You should check a published article (two clicks away) rather than assert what is in it, based on a guess…”
Gee Robert, let’s take a closer look at some of these graphs and see if what you are claiming makes any sense.
1) Binyamin Appelbaum submitted a graph created by Laurence Mishel without any citation. The graph ends in 2011 although Mishel has created one that extends to 2013 which Appelbaum used in an article last year.
2) Jordan Weissmann submitted a graph created by Annalyn Kurtz of CNN without any citation.
3) Heidi Moore submitted a graph which contains no quarterly observations from after 2012.
4) Cardiff Garcia submitted a graph created by Frank Levy and Richard Murnane without any citation. The graph ends in 2009.
5) Adam Ozimek submitted a graph created by the Initiative on Global Markets (IGM) without any citation.
6) The lower half of Brad DeLong’s image contains graphs made by Kathy Ruffing without any citation. They end in 2011.
7) John Carney’s graph ends in 2011.
8) Felix Salmon submitted a graph created by Nikolaus Panigirtzoglou without any citation.
9) Barry Ritholtz submitted a graph created by Carl Swenlin without any citation.
10) John Sides submitted a graph created by Larry Bartels without any citation.
11) Adrianna McIntyre submitted a graph from a paper by Chandra, Gruber and Mcknight that was published in 2011 without any citation.
12) Noah Smith submitted a graph created by James O’Toole of CNN without any citation.
13) David Beckworth submitted a graph created by Michael Darda without any citation.
So by my count there are 11 graphs created by other people which were submitted without any citation. Another nine graphs created by other people were submitted with citation, meaning nearly half the graphs were created by other people, and probably weren’t updated even if more recent data was available. In addition two graphs which evidently were self created did not contain the most recent data.
In short, and in the words of David Glasner (notice my citation?), maybe you really should calm down.
Is Robert Waldmann accusing Brad DeLong of “misconduct”? I’ve always thought of him as a very honest character.
Angry bear KO
I am genuinely interested in what Robert Waldmann thinks of Mark Sadowski’s last comment.
This commenter thinks that Mark Sadowski seems to have the facts on his side, and that the normally expert and brilliant Robert Waldmann has misunderstood what the article in question was about, i.e., people’s favorite graphs, not their own graphs. Which doesn’t sound like much of a theme for an article. Favorite books or movies would have been more interesting to me than graphs. (And I’m a nerd.)
in reply to SG even though this comment is dead
In the comment thread I noted that in academic economic publicationsit is improper to present someone else’s work without a citation. Sadowski demonstrated that many people did this. My comment in the thread was silly.
I stand by the observation that the title of the post “2013 … in … graphs” implies graphs about 2013 not made in 2013. Konczal’s paraphrase gives a different impression very consistent with the interpretation of “your favorite graph of those you saw in 2013”. But the actual title, not the paraphrase, is the relevant context for the graph. Sometimes you even have to click two links.
I am willing to assume that Sumner interpreted the request as about graphs made in 2013 and assumed that sending one did not imply the claim that it was his work. He (and the other 10 or 11) should have cited, but it’s no big deal.
Sadowski’s assertion including the word “ridiculous” is itself ridiculous. He didn’t look at the many graphs including 2013 data before making it. He carelessly assumed that the post was about your favorite graphs made in 2013. That was not the title of the post nor the way the request was interpreted by many contributors. the phrase “don’t be ridiculous” should be used with caution, especially if one goes on to [I have edited this comment for diplomacy (again)].
I conclude regarding Sumner that my doubts about propriety have been resolved. There were different interpretations of the request for graphs — graphs made in 2013 or graphs showing what happened in 2013. Sadowski assumed that it was clear that the request was of the second type, so my claim that 2013 data should have been included was “ridiculous”. I am sure he didn’t check and see that there were many data from 2013 in the whole set of graphs. He guessed and said I was ridiculous for not agreeing with his guess. I wrote about what I saw (noting I had looked only at graphs presented before Sumner’s).