Unemployment Rate

New Yorker's John Cassidy Can't Count, Digs In Heels On Precious Continental Spellings

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Diaeresis? I say it's an umlaut and I say the hell with it.

The magazine where they put umlauts on exotic borrowed words like "coördinate" now blames America's lack of faith in Keynesian economic intervention for the world's "lacklustre" economy. 

"The aversion to government spending, and government activity generally, which animates many Americans," writes El Neoyorquino's John Cassidy, "isn't actually based on economics, or logic: it is an emotionally driven belief system, founded upon a cockeyed view of American history and buttressed by a variety of right-wing shibboleths." 

Cassidy has a problem with his own argument, however. As he notes, all holders of power, and all their media toadies, are Keynesians: 

In the real world that rarely intrudes upon conservative economists and voters, both parties (and all Presidents) are Keynesians. Whenever the economy falters and private-sector spending declines, they use the tax-and-spending system to inject more demand into the economy. In 1981, Ronald Reagan did precisely this, slashing taxes and increasing defense spending. Between 2001 and 2003, George W. Bush followed the same script, introducing three sets of tax cuts and starting two wars. In February, 2009, Barack Obama introduced his stimulus. The real policy debate isn't about Keynesianism versus the free market, it is about magnitudes and techniques: How much stimulus is necessary? And how should it be divided between government spending and tax cuts?

Cassidy is correct: Keynesianism is the ascendant belief system of the state-managed economy. Because it is an orthodoxy rather than a thesis derived from evidence, Keynesian stimulus is not falsifiable, but it has recently been put to a trillion-dollar public experiment: 

After the $700 billion Troubled Asset Relief Program and many lesser stimuli of the Bush years, such as the $400 billion Federal Housing Finance Regulatory Reform Act of June 2008, the incoming Obama Administration in 2009 proposed the $750 billion American Recovery and Reinvestment Act (ARRA). While the ARRA was being debated, administration economists warned that if the stimulus were not adopted, U-3 unemployment would peak above 8 percent and would today be above 6 percent.

Congress passed the ARRA and President Obama signed it in Feburary 2009. Cassidy again:

So far, some $750 billion in stimulus money has been paid out: about $300 billion went to tax breaks for individuals and firms; roughly $235 billion was dispersed in the form of government contracts, grants, and loans; and another $225 billion was spent on entitlements—unemployment benefits, Medicaid, food stamps, and so on.

Note that the above figures for tax breaks, contracts and entitlements actually add up to $760 billion, not $750 billion. But hey, that's close enough for government work: Keynesian belief requires a certain jesuitical approach to hard numbers. 

Also, we're only counting Treasury expenditures, not the Federal Reserve's compulsive monetary expansion, which dwarfs those efforts. In any event, the stimulus experiment was conducted in broad daylight and we can now assess the result: Unemployment peaked (so far) above 10 percent. It is now above 8 percent and rising. The outcome with the stimulus is worse than the counterfactual without the stimulus. 

Cassidy draws three conclusions, even the titles of which are riddled with weasel words and my-way-or-the-highway assertions: 

1. It gave a much-needed boost to spending and growth.
2. The rise in federal spending under Obama was pretty modest.
3. Paul Krugman is right.

Note that there's nothing in here about actual economic performance on the only planet most of us (Paul Krugman is a possible exception) will ever experience. To explain that incovenient truth, Cassidy concludes that our faith our stimulus wasn't big enough.

It sure looks to me like Cassidy is the one repeating the shibboleths of a cockeyed, emotionally driven belief system. Do the Keynesians have any evidence, other than appeals to authority, to justify trillion-dollar expenditures of other people's money? Is the New Yorker's vaunted copydesk as indifferent to practical outcomes as it is to basic addition and subtraction? 

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  1. isn’t actually based on economics, or logic: it is an emotionally driven belief system, founded upon a cockeyed view of American history and buttressed by a variety of right-wing shibboleths

    He can use a thesaurus without troubling so much as a single brain cell. Now that’s a talent.

  2. When did TARP get reclassified as “Stimulus”?

    1. From a Keynesian perspective, anytime the government vomits money on someone, that’s “stimulus”, complete with the positive-externality multiplier.

      1. I didn’t think that counted for temporary injections. Only givaways.

        TARP was all structured as loans, in a variety of forms. There were no giveaways, except for anyone who defaults.

        1. Cash is cash, my friend. From a Keynesian perspective, its all stimulus once it is emitted by the government.

          On the back end, of course, requiring repayment of loans, and applying that repayment to actually retire outstanding Treasuries, would count as a good Keynesian thing to do to cool off all that economic heat your stimulus created.

          But we didn’t do that. When the money came back in, it was immediately respenct by the government.

          1. Maybe. But there weren’t any Keyensian motivations behind TARP. TARP was an industry security blanket. It was not meant to create growth, but rather to prevent retraction.

            I personally wouldn’t classify it as “stimulus”. The point of TARP was to prevent industry failure. It’s not really possible to determined for sure if it was TARP that kept that from happening. But it certainly played a role.

            In my view, true Keynesian “stimulus” is raw spending. Outflows with no expectation of inflows. ARRA was “stimulus”. TARP, no.

            1. Considering that the Keynesian model supports the notion of deficit spending during the bust (and the oft forgotten repayment of debts during the following booms), the very foundation of Keynesianism is wrapped up in outflows with the expectation of inflows. Any deficit spending is by its very nature and outflow with the expectation of a future inflow to recompense for the outflow divvied out during the bust.

          2. Cash is cash, my friend

            I am not so sure. Krugman seems to think spending money on war machines and defending against fake alien invasions works better then other spending.

            1. You misunderstand Krugabe’s argument.

              He doesn’t want spending on impending alien doom to supersede other spending, but to occur right alongside of it.

  3. It sure looks to me like Cassidy is the one repeating the shibboleths of a cockeyed, emotionally driven belief system

    Projection is one of the more singular hallmarks of TEAM BLUE.

    1. You got that right. And anyone with a brain should be able to look at these upwarding-sloping curves and have a hard time arguing that lack of federal spending is our problem.

      1. Ha, “upwarding”… and here I was taking editors to task for typos….

      2. You got that right. And anyone with a brain should be able to look at these upwarding-sloping curves and have a hard time arguing that lack of federal spending is our problem.

        THE SCIENCE IS SETTLED AND YOU’RE WRONG!

        Wait…wrong thread.

  4. isn’t actually based on economics, or logic: it is an emotionally driven belief system, founded upon a cockeyed view of American history and buttressed by a variety of right-wing shibboleths.

    HAHAHAHAHAHAHAHAHA!

    2. The rise in federal spending under Obama was pretty modest.

    The largest increase in government spending, and as a result deficits, in American history is pretty modest?

    These people, including Krugman, would be funny if they weren’t so dangerous because people take them seriously.

    1. It’s an accounting trick the Democrats are using. I even saw a press release on Market Watch about it. George II Bush passed the TARP, increasing spending by 800 billion bucks in one shot, as a bipartisan effort to save the US and world economies from imminent collapse (so the story went at the time.)

      Obama’s first budget was the next year, and increased spending only “modestly” beyond the supposedly one-time-TARP-boosted-800-billion-shot-in-the-arm. So spending by Obama was approximately one trillion dollars higher than the pre-bailout baseline, which became the new normal.

      Hence, Obama is really fiscally moderate!

      Ratchet, meet quantum leap!

  5. Hmm, government leaders believing in an economic theory that puts government at the center. Why would I be surprised that they are all Keynesians? The merits of policies never seem to convince them anyway. Spending lots of other people’s money is the easiest thing for them to do.

  6. Who is this Cassidy fella and what’s a shibboleth?
    Follow the umlaut link in the article, talk about prople that like the smell of their own farts!
    I’m going back to post on HuffPo, now, there’s some self-rightous fart smellers. I mean smart fellas.

    1. Shibboleth was one of the Old Ones, the gods in H.P. Lovecraft’s Cthulhu series.

      1. You’re thinking of the boss monster in Quake. The one that you had to gib through the teleporter. Shug-a-something something.

        1. Actually, I was just joking. I never played Quake.

          1. I was joking too. Shug, or Shub, I forget, is from Cthulhu too.

            1. Yog-Sothoth?

              Note: this post is not spam.

    2. Shibboleth comes from an OT story (Judges?).

      One of the tribes pronounced it “sibboleth” as they didnt have the “sh” sound in their dialect. The word was used to test people who were entering a city or territory of something. If they said it wrong, they were killed.

      1. 5 The Gileadites captured the fords of the Jordan leading to Ephraim, and whenever a survivor of Ephraim said, “Let me cross over,” the men of Gilead asked him, “Are you an Ephraimite?” If he replied, “No,” 6 they said, “All right, say ‘Shibboleth.'” If he said, “Sibboleth,” because he could not pronounce the word correctly, they seized him and killed him at the fords of the Jordan. Forty-two thousand Ephraimites were killed at that time. — Judges 12:5-6, NIV

        1. Would they let him pass if he said yes?

          1. No, they were fighting a war with Ephraim.

  7. Joe’z law! It’s a diaresis (pl. diareses), not an umlaut.

    1. joe’z law law, Actually it’s a diaeresis

      1. Check out the alt for a little more embarassment.

        1. And more Joe’z law fun! Kids, don’t try this at home.

    2. Thank you. I was about to say the same thing.

  8. Shrike will be around any moment to tell us that we are all republican wingnuts and that we have not the slightest understanding of economics. Not like his great capitalist self.

  9. Here is a nice graph: http://uneconomical.files.word……png?w=600
    It shows public net investment in the UK. According to Keynesian orthodoxy, the Brits should all be living in Nirvana right now (which they are not) because of the massive spending spree.

    1. Stimulus not yet large enough.

  10. The answer to Tim’s last question should be a self-evident “no”.

    1. Er, “yes”.

      1. [scareduck screams as is he launched into the Gorge of Eternal Peril]

  11. Cassidy’s got a column in the 6/11 issue of Fortune: ‘The Euros should give up austerity and embrace inflation’.
    Yeah, right. *He* doesn’t have any savings in Euros.

    1. Apparently there are entire countries in the EU that don’t have any savings in Euros.

  12. Jack Cassidy was more entertaining when he was playing bass for Jefferson Airplane.

    Well, slightly.

    1. And when he was hanging out with Ken Kesey, now he isn’t much fun at all.

  13. Two problems with the analysis, among many:

    1) At the time, state governments were firing droves of public workers, offsetting the federal stimulus. The lousy employment numbers consist of fired government workers offsetting private-sector job gains.

    2) The deficits got bigger because tax receipts dipped way, way down. It wasn’t like the federal government was spending more while getting the same revenue stream.

    1. “2) The deficits got bigger because tax receipts dipped way, way down. It wasn’t like the federal government was spending more while getting the same revenue stream.”

      You mean they spent more and more as they were getting less and less? Is that your point?

      1. Precisely, which is what they should do. Google “countercyclical policy.”

        1. Just because it has a name doesn’t mean it’s a good idea.

          Hell, even the administration’s own numbers say we would of been better off without the stimulus.

        2. That only works (according to the theory) if on the upswing they actually cut spending (like actual cuts, not reduction in the rate of growth). And that doesn’t seem to be something politicians can do. Every stimulus project will become the new normal and deficits will just get worse and worse with every economic downturn.

          1. Agreed. Governments have failed to tighten on the upswing pretty much without exception. They increase spending, and they decrease taxes, both of which are pro-cyclical wrong moves.

            1. Shouldn’t that tell us something about trying to implement Keynesian monetary policy?

              1. I think you mean fiscal policy.

                It tells us that it is very difficult to do politically. Maybe almost impossible.

                1. I did mean fiscal not monetary.

                  If it is pretty much impossible, then all we are ever going to get is more and more spending. Which is fiscal insanity.

          2. Every stimulus project will become the new normal and deficits will just get worse and worse with every economic downturn.

            ^^THIS^^

            All government spending works this way.

            Take education as an example. This year State “X” spends “Y” on education. Next year they receive a 1-time federal grant which brings spending up for the year to “Y+Z” which becomes the new normal because in the year after they receive the grant they will cry that teachers are going to be out of a job if they don’t raise their funding to what was supposed to be a 1-year shot in the arm. It’s sick.

        3. When have we followed a “countercyclical policy”?

          1. Only on downturns, and never on upturns. “Full-employment deficits” have been the norm for most of our lifetimes, to ruinous effect.

          2. Keynesians ignore the calculation problems of their underlying theory. There is even an elementary calculus mistake in the common set up — stimulus is a positive multiplier when economic production is no longer at its peak. You are no longer doing a proper measure of activity if you are still figuring in the previous peak. No longer relevant in telling you the current condition to base a decision on in regards to what will and will not be productive.

        4. Government deficit spending when debt is at 90% GDP or more can cut GDP by 2%.

          Coutercycle policy not only does nothing to help the economy it actively hurts it.

          Why the fuck do you think we have been in stagnation mode for so long? 4 years is it? Most recoveries happen within a year of a recession.

          Keynesian economics has made it worse and has held off any recovery.

          1. Wrong. Non-Keynesian, pro-cyclical full-employment deficits during the good times is what gave us huge debt. When bad times came, we were already too deep in debt to have an ideal Keynesian stimulus response.

            There is no question that stimulus is the “correct” response to the downturn, just as there is no question that you have to surface when you are in danger of drowning underwater. The only question is whether we are in too deep — whether we will get “the bends” trying to resurface — with debts incurred and accruing.

            1. Re: Registration at Last,

              There is no question that stimulus is the “correct” response to the downturn,

              Au contraire, it is entirely questionable. After the end of WWII, and after Keynesians were warning about the disaster that loomed if government curtailed spending, the government curtailed spending and the economy rebounded.

              The difference between reality and the Keynesians is that the Keynesians still invent their own.

              just as there is no question that you have to surface when you are in danger of drowning underwater.

              Actually, stimulus is like lowering the floor of the pool thinking that such will help the drowning person.

            2. Your ideas completely go against what seems to me as common sense. But thanks for not getting all Tony or shrike like about it

    2. You mean you can’t keep spending atrocious amounts of money when you have to take a pay cut? I’m shocked. SHOCKED!!!

      1. No, you can’t, and neither can I, but the government can, and should.

        And if you still need an explanation for why government policy should not mirror spending retractions by individuals, but should instead be “countercyclical,” you are uneducable.

        1. So why do Greece and Spain have any problems? Those governments seem to spend as much as they possibly can.

          1. Because they still do not spend enough. Lower the retirement age to collect full benefits to forty five, double the minimum wage, add a few more three day weekends, and enforce tax collection Greece will undoubtedly be out of this crises in no time.

          2. Spain had a surplus when the crash hit. Thrift simpliciter is no guarantee of successful governance, and austerity is not the right policy approach to an economic downturn.

            1. Yes, it is.

              1. ipse killaz?

                1. Did you supply anything more than an assertion above? Why no, you did not.

        2. Right. How does government get that money again?

          1. Tax it, borrow it, print it…

            1. What makes you think any of those three things are good ideas?

              Also, is it that all the spending we do now compared to 12 years ago just isn’t getting spent on the right stuff? Our budget* is 3.something Trillion this year. That’s not enough money to stimulate the economy?

              *it’s not really a budget since we haven’t had one of those in three years.

              1. The federal government is SS, Medicare/Medicaid, and the military. What’s left as “discretionary domestic” spending — where stimulus has to come from — is a small fraction of the budget.

    3. 1. That would have been a net gain if accompanied by mass suicides by public employees, but unfortunately their drag on the economy was subsidized even after the job losses.

      2. The gains in tax reciepts through 2006-08 were an anomaly. 2005 receipts at the federal level were 2.15, they jumped to over 2.4 in the next following year.

      1. Worthless. Thanks for nothing.

        1. Worthless to point out the worthless? Employed, those government sector employees were a drag on the economy given there are no government functions whose product is greater than their cost; yet, when they are unemployed, their value somehow rises to the point of undermining economic growth? That’s a laughable theory you presume.

        2. About as worthless as you, Gabriel. You’re such an impotent little troll. It’s almost cute in its way.

          1. It is ineffectual, isn’t it?

            It makes me weep for my country when I think that this is what has come to our government toadies. Man, a Russian toady will burn your damn house down. Here in America the lowly toady merely tells us to, “like google it, man. you’re really wrong so just google it…dude.”

            That’s why America will never have a socialist revolution. As if a bunch of gutless, impotent toadies could even get past the first gun owning American.

            Fucking toadies.

          2. So nice to be on a first-name basis with my bitch’s son.

            1. You’re impotent, Gabe. You can’t sire shit. You’re also an obsessive little troll…and all butthurt about registration.

              HAHAHAHAHAHAHAHAHAHAHAHAHAHA

              1. I like registration. It’s not doing enough, though. Griefers like you and Sevo should be closed out already, but the moderators apparently don’t give a sh!t about your pollution.

    4. At the time, state governments were firing droves of public workers, offsetting the federal stimulus. The lousy employment numbers consist of fired government workers offsetting private-sector job gains.

      I’m gonna need a link for that, especially since most of the stimulus money went to the states to patch their budgets.

      The deficits got bigger because tax receipts dipped way, way down. It wasn’t like the federal government was spending more while getting the same revenue stream.

      That’s funny. That’s not what the facts say. According to them, we were spending more AND collecting less.

      http://www.taxpolicycenter.org…..?Docid=200

      1. You need a link? Try Google.

        The “while” was conjunctive, not disjunctive. My statement remains correct.

        1. It wasn’t like the federal government was spending more while getting the same revenue stream.

          Whatever. In conjunction with your first sentence though, your assertion is false:

          The deficits got bigger because tax receipts dipped way, way down.

          Actually, no. From 2008 – 2009, tax receipts were down @ $420BB, while spending was up @$535BB. Because math is hard for you, let me point out that spending went up by more than taxes went down.

          Even if 2009 taxes had stayed level with 2008, rather than going down, the 2009 deficit would still have been bigger than the 2009 deficit. So you can in no way conclude that the deficit got bigger because tax receipts went down.

          1. Nothing in my comment excluded increased spending as one source of the increased deficit. I merely said reductions in revenues increased the deficit (true) and the government was not increasing spending from a level revenue stream (also true).

            I’m fine at math. You’re logic needs some work though.

    5. “The deficits got bigger because tax receipts dipped way, way down. It wasn’t like the federal government was spending more while getting the same revenue stream.”

      Well the tax revenue decreases count as stimulus in the Keynesian framework too. So I’m not sure why this a problem with his analysis.

      1. Decreases in tax receipts is not the same thing as an actual tax cut, nor is it to the same effect.

    6. Re: Registration at last,

      1) At the time, state governments were firing droves of public workers, offsetting the federal stimulus.

      Nitwit here thinks that spending = economy.

      The lousy employment numbers consist of fired government workers offsetting private-sector job gains.

      Consistency, thy name ain’t Registration at Last – the idiot confuses State workers (mentioned above) with “federal” employees.

      2) The deficits got bigger because tax receipts dipped way, way down.

      World, meet the nitwit who thinks spending is immobile.

      It wasn’t like the federal government was spending more while getting the same revenue stream.

      Yes, it was you imbecile – that’s how the national debt came into being.

  14. Keynesian belief requires a certain jesuitical approach to hard numbers.

    So, what’s your point? That Catholics can’t add?

    1. “Give me the policy and I will give you the numbers.”

  15. it is an emotionally driven belief system

    As are all belief systems.

    Unemployment peaked (so far) above 10 percent.

    The Labor Force Participation Rate continues to drop. It peaked in 1999.

    Has any orthodox Keynesian ever written about why Japan’s massive stimulus between 1989-2011 didn’t work? IIRC, they went from government debt as ~25% of GDP to about ~225% of GDP.

    1. massive stimulus between 1989-2011 didn’t work

      Well of course. Krugabe says it wasn’t big enough.

      So never mind those long lists of reasons for Japan’s slump. The answer to the country’s immediate problems is simple: PRINT LOTS OF MONEY.

      Funny thing is, I never read this article before. I didn’t even know it existed when I searched for it. But I knew it had to exist. Because it is the law of Krugabe.

      1. That article dates to 1995-1996. Still, that’s pretty wild. There’s a certain perverse logic to it, but something about it just doesn’t quite work. I think it’s unfalsifiability of it.

    2. On that topic, how Keyensian policies go horribly wrong:

      Japan’s Debt Sustains a Deflationary Depression

      http://www.bloomberg.com/news/…..ssion.html

      Increasing debt and deflation, unpossible!

      1. Perhaps they should stop forcing the Japanese people to save via the postal system which buys up all that government debt. It’s just indirect taxation.

  16. Whenever the economy falters and private-sector spending declines, they use the tax-and-spending system to inject more demand into the economy.

    Ronald Reagan did precisely this, slashing taxes and increasing defense spending

    George W. Bush followed the same script, introducing three sets of tax cuts

    How much stimulus is necessary? And how should it be divided between government spending and tax cuts?

    This guy doesn’t even know what “tax and spend” is. “Tax” refers to increasing taxes, not lowering them.

  17. Note that the above figures for tax breaks, contracts and entitlements actually add up to $760 billion, not $750 billion. But hey, that’s close enough for government work: Keynesian belief requires a certain jesuitical approach to hard numbers.

    Cheap attack, all the more cheap since there’s so many worthy attacks available. A rounded sum is rarely equal to the sum of the rounded numbers. I suppose you expect the writer to specify all costs down to the cent so as to avoid errors like that?

  18. Perhaps the New Yorker should campaign to bring back other obsolete English characters, such as the letters thorn, eth, and the a/e ligature known as ash. Not to mention the long s so beloved of colonial-era printers.

    That way, they’d be even smarterer.

    1. If we’re bringing cool letters back, I want the long S. That thing trips me out after reading “House of Leaves”.

      1. I want the B with a tail too.

      2. For some reason, I always read the long S with a lisp: “Houthe”.

        1. I’m totally going to do that from now on. AMAZING.

    2. I could get behind that.

    3. Actually, I think the reintroduction of thorn or eth would be a great idea. How we torture the sounds for t and h to give us the sound of “th” bothers the fuck out of me.

  19. I’d like to say John Cassidy is a bit naiive since I’m forced to use Unicode.

  20. Ive had him incifed long enough that I cant tell, is “Registration at Last” MNG?

    1. Nah, not wordy enough. MNG would spew paragraphs explaining his point rather than just dismiss everyone around him with conclusions gleaned from 200 level macro. He was also less apt to write “try Google” as an explanation for where he was getting his figures.

  21. I’m not sure what using a diaeresis has to do with being “continental.” The use of the spellings pre?minent, co?perative, etc. seems to have been one of those crusades to make English more readable by making it more consistent. So, co?perative is not pronounced, “cuperative,” and the diaeresis indicates the distinct syllables. GB Adams of Yale University uses the diaeresis obsessively in his “Constitutional History of England.” If anything, I see its use as being very anglophile.

    1. one of those crusades to make English more readable by making it more consistent

      Very continental.

      1. I don’t know. There have been a number of Americans who have tried similar things.

        1. Some Americans are continental at times.

          1. So, perhaps Britain repelled invaders with its unpronounceable signs? If so, then we really should have been speaking Welsh, just to make darn sure the French weren’t able to learn our language and dump a bunch of their Latin-roots into our speech. Linguistic litterbugs is all they are.

    2. “Co-ordinate” makes even better sense, yet The New Yorker refuses to use it to-day.

      1. How about Coors-dine-8? It is a “banquet beer”, after all.

    3. If anything, I see its use as being very anglophile.

      Thus, the New Yorker’s use of it.

  22. I’m calling em umlauts. We don’t need two different words to describe dots over a letter. That’s fucking stupid.

    1. An umlaut is two dots used to convey a blend of the vowel with an “e” sound. I was taught that the umlaut was originally a small e placed over the o, u or a. Here, it indicates that the letter is pronounced normally rather than being blended with the previous letter.

  23. I find that the best monocle suppliers come from the Continent, for instance Switzerland, an important optics centre.

  24. if the stimulus were not adopted, U-3 unemployment would peak above 8 percent and would today be above 6 percent.

    I am certain this prediction is correct…next time we should not pass any stimulus and get a 2% reduction in unemployment.

    Spend less more jobs…Win Win.

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