Coyne on Krugman and Keynes
Krugman hardly needs me to leap to his defence against Canadian economic flat earthers like Andrew Coyne, but here goes.
Coyne’s latest column argues that there is a recovery underway in the US which owes nothing to Keynesian stimulus. Accordingly, “we can add America post-2008 to the long list of failed experiments in Keynesian demand management.”
“Perhaps Krugman, at least, would claim that this was in response to previous doses of stimulus: that, far from disproving Keynesian theory, this was actually confirmation of it.”
This is strange on at least two counts.
First, Krugman’s thinking is hardly difficult to access, so there is no need to muse about what he has said or would claim.
Second, as any reader of Krugman’s blog knows, he has acknowledged that a very modest US recovery is underway, while pointing out that the US economy is still operating well below its potential growth path.
He argues – incessantly – that the US economy needs additional stimulus if that gap is to be closed, and he has never argued that the first stimulus package had no effect, only that it was far too small to promote a meaningful recovery.
So there is absolutely no contradiction between what Krugman has argued and the fact of a very tepid US recovery.
Coyne goes on to side with the Fraser Institute argument that fiscal stimulus in Canada had no impact – an argument that has been thoroughly debunked by neutral economists such as Serge Coulombe, as reported on this blog.
How do you get a “neutral economists.” If the economist is too acidic do you bathe them ash water? If they are too alkaline do you bathe them in vinegar?
Not sure neutrality is the question here. Coyne is a hack no matter his PH reading. He does have the look of a VSP though.
Good point Travis. I guess I meant that Serge is pretty mainstream rather than a known and predictable progressive economist. In fact just about all competent economists would say that fiscal stimulus had a significant influence on the Canadian recovery, including the Bank economists.
Coyne is a counterfeit.
Over at Behind the Numbers, David Macdonald commented on the Canadian Association of Professional Employees’ analysis that Coyne rejects. I was a proud member of that union during my time in the federal public service.
According to the GOA audit of the emergency loan programs and other assistance of the Federal Reserve the total US bailout has been 16.1 trillion, and 3.1 trillion of it to Europeans Banks. This pales in comparison to the 787 billion from congress’s economic stimulus package.
There is debate about accounting methods: from various sources depending on the interpretation of the stats the US bailout has been anywhere from 1 trillion to 24 trillion, with 16 trillion being the more popular number since the Government Accountability’s Office’s audit was carried out under a provision of the Dodd-Frank Act.
If it is true, and 16 trillion was used to bailout the financial sector and if 3 trillion was used to bailout European banks– making the Fed essentially the lender of last resort for the world– to me this does not represent keynesian demand management.
This money would have been better spent on social programs, maglev rail, roads, bridges, education etc–all real job creators instead of bailing out financial fraud and having the public underwrite private risk.
Coyne pulls out the calculator and talks a lot of nebulous blather that informs no one. Confuses with conflab. Newspapers should be written in a comprehensible manner so that the reading level is about grade 8. Filling space with wordy back ass constructions, metaphoric embellishments and random street talk merely emphasizes for whom he writes. Is he saying by analogy that the Canadian economy would not do well to have stimulus spending? When it clearly needs a boost.
Andrew,
Yep in the short run we are all pretty much on agreement that:
Y = C+I+G + (X-M).
Coyne skipped class that day.
The US economy is currently experience government stimulus.
The government is running a deficit – therefore it is putting more spending into the economy than it is taking out through taxation.
Same is true in Canada.
Good point Jeff,
G = taxes – transfers = deficit / surplus.
The question is when the primary deficit goes to 0.
But don’t expect Coyne to provide such an analysis.
The real point, however, is that Coyne is just trying to deflect from the fact that neoliberalism has been a massive macroeconomic failure. He, and others like him, simply have too much intellectual fixed capital to get out from under. So they will soldier on, scribbling for the intellectual cause of a white elephant.
The radical left in Greece is now polling over 40% and all Coyne can think to write about is his will to mendacious idiocy.
Radical Left?
Communists, Trots and deep greens. Wha? you want more radical left than that?
Sorry Erin, but proud member of CAPE is an oxy moron. That is the first time that association, and please spare me with calling CAPE a union, has ever come out in an activist nature for the greater public good, which in this case just happens to include their members. They have had so many opportunities to come forth in an activist role but instead spends too much time suing its own members in litigation protecting its executive that literally it sickened me. They have been in bed with management at Treasury board for years, and the one time that we threatened with a leadership bid at the national office 3 years ago, the national conjured up a bunch of charges and banned the entire executive of local 503 from ever being members of for life. So tell me, you were a proud member? You may want to write that off as local politics, but there was something much much more at stake here. We actually we trying to turn CAPE into an activist organization, so that economists and sociologists within the public sector had a union that they could feel confident in defending their interests and not suppressing them. The membership is at 14,000 so they are large enough to do some proper work in terms of activism, in fact one of the reasons they actually are as big as they are was due to raiding about 6000 technical workers from the PSAC.
So Erin, I cannot respect that last comment you made.
And of course they are not CLC affiliated so there was not much recourse my brothers and sisters had at local 503 to bring to light these injustices in which every last one in front of a kangaroo court of an appointed jury by the national, replaced by an appointed executive of 503. RAGE! And by the way, local 503 was the largest local of CAPE by far with 5000 members.
Okay back to the business at hand. Watch I will probably get sued by Claude P. I have already been threatened before legally by my union not to go public. Hence why I have to use my handle SALTY CRACKERS. But I think you all know who I am.
Hey Erin,
Your are joking about your CAPE comment right? Otherwise you obviously never went to a meeting or knew the execs. Odd how how a “union” becomes activist when its own execs necks are finally on the line!
Whats up Andrew you don’t like Salty?
Jeff – a deficit in and of itself is not stimulative. Moving from a large to a smaller suplus could be stimulative, as could a modest decrease in the deficit in the context of an expanding economy.
Stimulus/Restraint = discretionary change in government spending, adjusted for the cycle.
The media get this wrong all the time,
“as could a modest decrease in the deficit in the context of an expanding economy.”
???
Well, in a strong recovery from a recession a government could choose to spend more and bring down unemployment faster rather than give the priority to rapid deficit reduction, slowing the reduction in the deficit that would otherwise have resulted from the growth of GDP. That fiscal action would be stimulative, n’est ce pas?
OK. I get the second but not the first. The first reads as a crowding out argument. Which is fine if it can be substantiated by facts. The second explanation you give is intuitive.
Here’s a short letter to the Editor I sent off to the Gazette yesterday. We’ll see if they run it….
———-
Andrew Coyne argues that the US economy is recovering nicely, despite the absence of large-scale stimulus spending. Unfortunately for his argument (and millions of unemployed Americans) it isn’t. Although recent job figures show some improvement, the economy is still down approximately 6 million jobs from the 2007 pre-recession level (and about 11 million jobs short of where it would be, if the recession had not occurred). Indeed, at the present rate of ¨recovery¨ it will take the U.S economy about a decade to get back to where it should be, in terms of employment.
Contrary to Coyne’s assertion, Keynesians do not say that the economy will never improve without stimulus spending, but rather that, even if it eventually does, the economic and social costs of waiting will have been senselessly higher than necessary.
Also, contrary to what Coyne asserts, Keynesian economists do not blindly think that all deficit spending is good. In the face of recession and severe underemployment, Keynesians argue that slashing government spending will only result in further job losses and larger deficits, due to higher payouts of social benefits and lower tax revenues, whereas increased government spending on useful services will put people back to work, raise tax revenues and ultimately reduce the deficit.
Travis, I think the problem is in the communication. I think what he meant was, a merely modest, as in deliberately slowed, decrease in the deficit in the context of an expanding economy. That is, a modest decrease when normally a strong decrease would have been expected.
Yep.
The Federal government is about to implement the most massive cuts in living memory…
the cuts are projected to kill close to 100,000 jobs
It is about classical ideology….ie all government intervention is bad…ignoring the facts…
Unfortunately that ideology drives the current Feds…