…You just can’t tell how much damage they will do.
The reality-based community took it on the chin again this week in a whole bunch of ways, many documented by others at this site. One that caught my eye came in this exchange, reported in TPM:
“[I]f you want a role that has benefit programs for older Americans, like the ones we’ve had in the past, and that operate for the rest of the government like the ones we’ve had in the past, then more tax revenue is needed than under current tax rates,” [Congressional Budget Office chief Doug]Elmendorf said. “On the other hand, if one wants those tax rates, then one has to make very significant changes in spending programs for older Americans” or all the rest of the government’s functions.
Given where Congress finds itself — a separate story that began over a year ago — that’s the debate Democrats want to be having. Should we roll back safety net programs in order not to increase taxes on the wealthy?…And it’s precisely the debate Republicans do not want to have. So they spent Tuesday trying to reorient the conversation: instead of arguing in favor of their preferred and informed decisions about the future of the country, they posited a scenario where crisis is upon us already and the only plausible way to avert fiscal catastrophe and help the country end its economic slump is to cut, cut, cut right now.
“There’s a recent report by Alberto Alesina of Harvard University,” noted Sen. Rob Portman (R-OH), “showing that the most successful and pro-growth deficit reduction took place in countries that relied chiefly on austerity programs, spending cuts. And nations that relied more on tax increases were less successful in reducing the deficits and had slower economic growth.”
Ah, one more zombie lie — or rather an error, or failed analysis turned into a public lie by those who repeat it.
Alberto Alesina and Silvia Ardagna published this paper in 2009. Portman accurately described what it claimed to demonstrate. To say, as Brian Beutler does in the TPM piece, that this work is controversial is surely true — just as remarking that a blue whale is large is a valid statement. Here’s Krugman discussing it shortly after publication, capturing the flavor of informed (as in, statistics-competent) criticism. There are, of course, a wealth of other takes a google’s length away.
But the real problem is that Krugman’s and others’ initial questions of the work, were, of course correct.
To put it in the way natural scientists do when confronted by similar challenges to well-established knowledge, extraordinary claims require extraordinary proof. Here, if you want to say something contrarian about experiences as empirically well documented as the effects of fiscal austerity on economies, you need to nail every facet of the argument. You don’t just get to say the speed of light in a vacuum in the early universe was different from that speed now (a real claim). You gotta prove it. So far, eighty years of trying to do so for both the tired light hypothesis and the anti-Keynsian fairy-dusters have been unsuccessful.
This latest attempt to assert (spherical) cows are (spheroidal) chickens is no different. The most recent analysis of Alesina and Ardagna’s claims comes in this report from the IMF research shop. Essentially, the new work shows, the Harvard team constructed their data universe in way that led them into a fundamental mistake, as Krugman’s describes:
…results purporting to show economic expansion following spending cuts and/or tax increases were based on a statistical illusion: an expanding economy can often lead to rising revenue and/or falling spending (e.g. because safety-net spending falls or because the government cuts back in an attempt to cool off inflationary pressures). And as a result, what the Alesina-Ardagna results capture is muddle by reverse causation.
The IMF authors say something similar with proper professional decorum r — which makes their conclusion yet more rhetorically devastating:
Estimation results based on measuring discretionary changes in fiscal policy using cyclically-adjusted fiscal data––a practice often used in the literature––suggest that fiscal consolidation stimulates private domestic demand in the short term, providing support for the hypothesis. This result is consistent with a literature that finds that fiscal contractions can be expansionary. However, our analysis suggests that using cyclically-adjusted data to estimate the effects of fiscal consolidation biases the analysis toward overstating expansionary effects.
In contrast, estimation results based on fiscal actions identified directly from contemporaneous policy documents provide little support for the expansionary austerity hypothesis. In particular, we compile an international dataset of fiscal policy adjustments motivated by a desire to reduce the budget deficit and not in response to current and prospective economic conditions using the Romer and Romer (2010) historical approach. Based on the fiscal actions thus identified, our baseline specification implies that a 1 percent of GDP fiscal consolidation reduces real private consumption by 0.75 percent within two years, while real GDP declines by 0.62 percent. The baseline results survive a battery of robustness tests. Our main finding that fiscal consolidation is contractionary holds up in cases where one would most expect fiscal consolidation to raise private domestic demand. In particular, even large spending-based fiscal retrenchments are contractionary, as are fiscal consolidations occurring in economies with a high perceived sovereign default risk.
Put that more simply: you need to look at what really happened during the actual events you want to understand if you are going to make any sense of the situation. When you look at a derived model of those events, you miss what people actually said and did, and you are vulnerable to a whole host of methodological traps to which any act of model-making is subject — and hence you screw up. Which is what the Harvard pair appears to have done.
I don’t know what Alesina and Ardagna will say to all this, or about the use of their conclusions by Senator Portman. But, of course, once it’s out there, they could issue mea culpas from the balcony in St. Peter’s Square, and it wouldn’t matter.
That’s the nub: the real issue is that credentialed economists produced work that does not conform to reality — but does conform to what our friends in the Comfort the Comfortable lobby would wish to be true…and hence, it will never die. Just to repeat: it is not true that cutting demand in an economy with a demand gap in the gazillions will magically conjure up folks willing to spend.
Oh — and one more thing: Portman knew, or should have, that the work he cited was, to say it most nicely, unproven. The IMF research, only the latest in a series of demonstrations of flaws in the Alesina-Ardagna conclusions, was released early in the summer, more than two months before the hearing this week.
If Portman did not pick up on work of direct relevance to their argument about the proper course for our country to steer, then he and his staff are incompetent, and should have no role in setting policy for a rowboat, much less for a society and economy on which the lives and happiness billions at home and abroad depend. If he did know about it, then he’s a lying scum who has no business in any position of power.
You make the call.
So, just to get back to the underlying reality (and to belabor the obvious one more time): as the British Chancellor of the Exchequer George Osborne was reminded this week, starving an already famished economy of someone, anyone, the government willing to spend is the way to screw your economy, and especially those most vulnerable in it.
Which, of course, is exactly what the Republican deficit hallelujah chorus is trying (and mostly succeeding) in doing to us.
Images: David Vinckboons, Distribution of Loaves to the Poor, before 1650.
Viktor Oliva, The Absinthe Drinker, 1901
Cacti
John Boehner made it known in his laughable “jobs” speech that his priorities were tax and entitlement reform.
In other words…
Fuck you grandma, my golf buddies need your money, and I’m coming for it!
rikryah
I love the post AND the tags
Linda Featheringill
LOVE the painting of the absinthe drinker! I’ve been accompanied by a few ghosts from time to time along the road of life and am delighted that somebody actually painted a picture of it. And I don’t care if the artist thinks this is proof of some form of craziness. :-)
grandpajohn
I vote for both incompetent and lying scum
some guy
Geithner to Obama: “Fuck you, you work for me!”
In the book, Obama does not deny Suskind’s account, but does not reveal what he told Geithner when he found out. “Agitated may be too strong a word,” Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but “the speed with which the bureaucracy could exercise my decision was slower than I wanted.”
Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president’s plans.
“I don’t slow walk the president on anything,” Geithner told Suskind.
“The Citbank incident, and others like it, reflected a more pernicious and personal dilemma emerging from inside the administration: that the young president’s authority was being systematically undermined or hedged by his seasoned advisers,” Suskind writes.
Linda Featheringill
There is an idea that apparently only lefties understand that capitalism desperately needs paying customers. If you have potential customers without money, they are no more useful to business than prosperous customers who don’t like your product.
cleek
politics is orthogonal to science.
Senyordave
@grandpajohn:
Great post, and thanks grandpajohn for getting right to the point (although I take issue with the term scum; the obvious next term after lying is “sack of shit”)
Xenos
There are many cases of spectacular screw-ups by Harvard Grads.
My personal favorite it the HLS grad at Arthur Andersen who allowed the Enron documents to be shredded, and then waived attorney-client privilege on a report about withholding other reports from the SEC. A fortnight of bad decisions put tens of thousands of people out of work.
singfoom
Wait wait wait. You need to stop this whole “facts” thing you’ve got going on. The current ideology of the Republicans, including Sen. Rob Portman, I’m sure, doesn’t need these facts.
Sure, he’ll make statements that alude to facts, but you don’t need facts in this political game. You just need statements.
When your opponents point out that your statements are based on bad facts, we’ll they’re just being pointy-headed intellectuals and we hate them anyway because of their book learning.
IGMFY. This applies to “facts” as well. With our populace insulated against facts they don’t like (This is not specifically a Republican or conservative phenomenon), we’re ready to go down the rabbit hole of doing what we need to do based on faulty assumptions.
I for one, will not welcome our new austerity overlords.
Jose Padilla
Alesina has publicly backed off his support of contractionary expansion of expansionary contraction or whatever you call it. Yglesias had a post on this a couple of days ago.
Epicurus
A la “History of the World, Part I”:
Q. So, Senator Portman, what do you do for a living?
A. I’m a “stand-up philosopher”; I coalesce the vapors of human experience into a viable and meaningful comprehension.
A: Oh, a *bullshit* artist!
Please, what is wrong with this country? Can the great unwashed not see that they are being buffaloed by the greatest collection of grifters and scam artists to ever inhabit the halls of Congress? And that’s saying a mouthful…damn but I hate the GOP. Heartless bastards, every single one.
Bill Arnold
@singfoom:
Wait wait wait. You need to stop this whole “facts” thing you’ve got going on.
Upper West
@grandpajohn: Every analysis of the right comes down to the “stupid or evil” conundrum. You can usually tell by the particular person — Rove is evil, Bachmann and Palin are stupid and evil, Romney is somewhat stupid and evil (though maybe less so than the others).
Maybe there’s a separate category — “Blinded by ideology to ignore facts.” Maybe Portman fits that — but that’s an explanation not an excuse.
Zifnab
@Linda Featheringill:
All the more reason to cut taxes. If you can’t get money from consumers directly, just make it all up on the back end. Because, by god, the only thing that matters is that we keep those profits rolling in. Gotta maintain the illusion of economic growth.
joes527
@Cacti:
Not even close.
All the republican plans are very careful to explicitly exempt the demographic that tends to vote republican from any pain.
It is: Fuck you late-boomers and everyone that follows. My golf buddies need money, and you can’t expect me to take it from the folks who vote for me.
Tom levenson
@Jose Padilla: Thanks. I’ll add note of this when I get back to an input device more capable than my phone.
PurpleGirl
Funny, Ireland went with austerity to please the banks (two plans, the second more severe that the first) and now can’t do much of anything (especially borrow money at reasonable rates) and its people are suffering.
Iceland, which thumbed its nose at the foreign banks, is now able once again to borrow money and its people and economy are recovering.
Gee, which one has had the better result?
japa21
@joes527: What they are discovering, however, is that all the grandmas and grandpas out there actually do care about what happens to their kids and grandkids. Well maybe not all, but more than they expected.
The older generation is not necessarily as selfish as the Republicans themselves.
28 Percent
The upside, I guess, to a Republican victory in 2012 is that the country may actually hit bottom. Right now we’re more in the seriously-dysfunctional-ruining-all-our-relationships-losing-our-job-but-still-have-cash-for-one-more-fifth-of-Wild-Turkey stage.
Recovery can’t begin until enough people are willing to admit that we have a problem.
Steve
I really can’t fathom this method of argument where hundreds of peer-reviewed studies can be dismissed with the wave of a hand as pointy-headed academic garbage, but the ONE study that agrees with Republican positions get trumpeted as the absolute, incontrovertible truth. How does that sort of thing ever get taken seriously?
Chris
@28 Percent:
At this point, I kind of wonder what “rock bottom” would look like. If 2008 didn’t make people admit we had a problem…
Zifnab
@japa21: Personally, I think it’s more like the elderly are hearing “We’re going to slash entitlements” and aren’t sticking around to hear/believe all the nuance about how “Oh, but it’s not for you guys. It’s just for those guys over there. We’d never hurt you.”
arguingwithsignposts
@Xenos:
Harvard, Yale, Chicago, etc. I’m sorely tempted to discount the entire “elite” college idea as nothing more than an exercise in extending the elite.
Thoughtful Black Co-Citizen
Bu-but Harvard Elitist Ivory Tower Brain Washing SKREEEE!
mining city guy
Not too much time here for me to say anything but that this was one of the best posts I have read anywhere in a long time.I do think that the arguments in support of austerity economics are similar to the arguments that were advanced in support of supply side economics.
schrodinger's cat
I am well aware of this piece of specious research by Alessino, it has been thoroughly debunked by Konczal and Jayadev. A Boom not bust is the right time for austerity, said Keynes and he was right
ellenelle
too fitting that alesina holds the nathaniel ropes chair at harvard’s econ dept. ropes was loyal to the crown unto his death of smallpox, his house surrounded by a threatening mob.
drkrick
@Steve: Confirmation bias. A man hears what he wants to hear and disregards the rest. It’s impossible to convince a man of something when his paycheck depends on his believing the opposite.
This isn’t a new phenomenon. The problem is that the interests of almost everyone who might call them on it have been aligned nicely to avoid much danger of contradiction. You don’t think all those journalists have been elevated to 7 figure incomes out of sheer kindness, let alone regard for their work, do you?
Chris
@drkrick:
The extraordinary thing when it comes to the average conservative voter, his paycheck doesn’t depend on that at all, in fact it’s been getting smaller and smaller for thirty years because of it.
I guess for a certain type of person, the smug conviction that you’re right substitutes for a paycheck.
burnspbesq
@Steve:
None so blind as those that refuse to see. SATSQ.
schrodinger's cat
@burnspbesq: Or like my grandma used to say you cannot wake up someone who is pretending to be asleep.
japa21
@Zifnab: Probably a combination of both. Saw a video of a Republican Reps town hall shortly after the vote on the Ryan plan. A person, who gave his age as 60, questioned the basic ending of Medicare. The representative (I apologize for not remembering who) told him that he didn’t need to worry because it wouldn’t affect him. The guy went beserk, telling him that he (the rep) must think people are selfish and don’t care about kids and grandkids. Other people in the audience were cheering the man on as he was saying this.
So yes, just hearing about entitlements being slashed has its own response, but even when explained about how it wouldn’t impact the current or soon to be recipients, that doesn’t necessarily make it all better.
burnspbesq
Oddly enough, we have as good a laboratory experiment going on right now as it’s possible to have in economics regarding the supposed stimulative effect of austerity. It’s called the United Kingdom. And the hypothesis is taking it in the shorts.
catclub
@Chris: UNemployment among college educated adults is well below the headline 9%.
In the Great depression I do not know the number for college grads – of whom there were many fewer, but overall unemployment was 25%. In Germany unemployment was 47% when the Nazis initially took power.
I do not know what unemployment is in Iraq, but I think it is amazingly high. They have regular car bombings and we don’t have that here. So there is plenty more bad available.
Mino
@Zifnab: Which is a good thing. No? Motivates the entire field.
catclub
@mining city guy: But are they any better than the arguments for phlogiston?
What about astrology?
Yutsano
OT: Wisconsin Scotty may be in trouble. Film at 11.
(WARNING: Hufflepuff link.)
GregB
@Steve:
They do the exact same thing with global climate change science.
arguingwithsignposts
@burnspbesq:
No offense, but the UK isn’t where Austerity is hitting hardest.
Samara Morgan
the problem is that the fourth estate is (temporarily) broken.
no factchecking any more.
this is because of the internet, social media, and the “freed” market.
news media now enables demagoguery instead of preventing it like happened in the dead tree days.
its a natural process in science, dr. levenson. both in evo theory of culture and in the second law of thermodynamics.
:)
Tom Levenson
@Xenos: You know who else went to Harvard?
Grover Norquist.
schrodinger's cat
@Tom Levenson: So did Dubya and the current occupant of the White House.
Yutsano
@Tom Levenson: Someone I went to college with got a baseball scholarship to Harvard, which means he had to get in first. He ended up not going because A) he hurt his ankle right before he graduated and B) he went to the campus and hated it. I’m thankful he opted for our small state school. He’s now a teacher in Vegas, of all places.
Zifnab
@japa21: @Mino: Hey, I’m all for it either way.
Robert Waldmann
Elmendorf has a PhD in economics from, you guessed it, Harvard University.
Barack Obama is also a Harvard man.
arguingwithsignposts
@Samara Morgan:
Wallah, you are so stupid. Study some media history before you spout bullshit.
schrodinger's cat
One of the frontpagers should comment on the pernicious lies Bobo is peddling in his NYT column today. The man is evil, looks harmless but is as vile as Limbaugh or Beck but more dangerous since many think he is reasonable.
Silver
@Tom Levenson:
Matthew Yglesias as well.
A professional writer, son of a novelist, grandson of two novelists, and he can’t be bothered to read his own stuff once for glaring typos. Because he went to Harvard with the best and the brightest, like Ross Douthat and Reihan Salam.
burnspbesq
@arguingwithsignposts:
The UK is a cleaner experiment. Less noise in the data. You don’t have the lingering effects of the collapse os an epic property bubble (Ireland), or a culture where tax evasion is the national sport (Greece).
Tom Levenson
@Jose Padilla: @Tom levenson:
On reading the underlying Alesina piece, there is no backtracking: he still maintains the basic positions he has outlined before, and he is careful to distinguish particular characteristics in the Italian situation that would, I think, distinguish it from any advice he would give to the US.
Money quote from Alesina and his co author:
batgirl
@28 Percent:
The old Republican party (those in actual power) would throw money into the economy (of course while favoring the rich) and once again, deficits wouldn’t matter. The new Republican party? Got me… I think they’d let the whole thing burn.
arguingwithsignposts
@burnspbesq: In that sense, you are correct. Although I’d also point out portugal. In all experiments, austerity looks bad. unless your name is david cameron, of course.
Tom Levenson
@schrodinger’s cat: Given the way this thread is going, I suppose I should out myself. I too went to Harvard, and while from where I sit the experience was very good for me, YMMV.
Still galls that I must share any kind of identity-marker w. Norquist.
Tom Levenson
@schrodinger’s cat: I should, but probably won’t. Time is a finite resource under much pressure right now. Shouldn’t have written this post, but it was percolating for a while, and finally blew up.
schrodinger's cat
@Tom Levenson: I think so did DougJ, go to Harvard I mean. I remember he mentioned it in one of the earlier threads.
ETA: Where Econ and Finance is concerned I think U of Chicago has more to answer for than Harvard. I sometimes think that Obama buys into the austerity BS because of his years at UChicago.
Linda Featheringill
@schrodinger’s cat: #31
Very subtle woman, your grandma.
arguingwithsignposts
@Tom Levenson: I don’t think the marker is “going to Harvard.” It’s expecting that that marker is some kind of thing that should give you extra cache. Look at McArgleBargle. She went to Penn and Chicago. Yet she’s utterly worthless. Her contributions to society are exactly zero.
I’d envision a world where where you went to school wouldn’t mean so much. It’s a unicorn pony, though.
schrodinger's cat
@arguingwithsignposts:
I think you are being too kind, her contributions to society are negative, less than zero.
arguingwithsignposts
@schrodinger’s cat: yes, i was being kind. and my calculator (eaten up with gastritis) cannot calculate the true amount of bullshit she puts on the scale.
bystander
Tom Levenson, dogdammit but you’re good at this kind of analysis. I drool with envy at the way you grasp it, unpack it, illustrate it, and explain it… every single time. Kudos.
schrodinger's cat
@Linda Featheringill: Thanks I miss her so much sometimes. She was a state government official when most women were content to be housewives. We used to call her Indira Gandhi!
schrodinger's cat
I just remembered we also have Harvard to thank for Balloon Juice’s favorite blogger, the one who has been a subject of elebenty front page posts. Ladies and Gentlemen, the one and only Andrew Sullivan.
Judas Escargot
@arguingwithsignposts:
IMO we did live in that world for a little while (late-50s to late-80s, maybe?).
But as with so many other things, the culture’s been backsliding to a more UK-style division of the classes (ie non-permeable, non-mobile, “don’t even bother if your daddy didn’t go here”) for quite some time.
Tom Levenson
@schrodinger’s cat: Got something cooking on that particular subject, so he won’t disappear from BJ anytime soon, alas.
He is, forgive me for this image, our cross to bear.
PS: as to why Sullivan and not Bobo — it’s because I already did a fair amount on the former and will write up what I got only a week or two or three after Sully’s provocation. Same time line might apply to Mr. Brooks. (If DougJ doesn’t get there first).
maus
Hahahahah, we’ll pay for Social Security by cutting Social Security!
Is there a way to respond to this aside from “You stupid, insincere fucking assholes”? Because I haven’t found it.
Bruce S
If Mitch McConnell had used these claims, I would actually be impressed that a lying scum had one of his staffers grab some high-falutin’ “analysis” out of academia’s butt to wave in front of a C-Span camera. But Portman was the director of OMB under the last administration and also a trade representative for Bush2. If Portman is using this kind of crap to make those broad assertions, he’s a lying scum who should know better and is no doubt fully knowledgable about just how counter to reality his assertion is.
Thehaymarketbomber
“I do not know what unemployment is in Iraq, but I think it is amazingly high. They have regular car bombings and we don’t have that here.”
I believe what you meant to say was “we don’t have that here yet.”
Ronzoni Rigatoni
@Linda Featheringill:
Good lord, girl, you’ve nailed it. Take the money away from the consumer, and who’s gonna buy? (Econ 101 or 2, I forget which). They are killing their biggest market, but there’s always China. Right. At 25c/hour, the Chinese are gonna buy your products. Paul Samuelson is spinning in his grave, and Krugman is of course shrill.
genghisjon
@Steve: I’m haveing trouble getting this link over here,Adam Curtis blog,go to, The curse of Tina.
It’s long but might give you some insight.