Larry Summers vs. The Mammon of Unrighteousness: "I do not believe that the long run can be ceded to the avatars of austerity. I am the father or stepfather of six children. Yes, on their behalf, I am concerned about the possibility that an overly inflationary psychology will develop in my country. Yes, on their behalf, I am concerned that an excessive debt not be placed upon them. But I am vastly more concerned, because I care about their long-run future, that a slack economy will not provide them with adequate jobs when they leave school. I am vastly more concerned, on behalf of their long-run future, that they will live in a country with decaying infrastructure that will not permit investment to maintain leadership. I am more concerned on their behalf that inadequate resources forced by countercyclical austerity will stunt the ability of their generation to be educated. I am more concerned, on their behalf, that excessive austerity-oriented policies will lead to slower economic growth, and as a consequence to ultimately higher debt-to-annual-GDP ratios--and more pressure, in terms of higher tax burdens, on the future. Those concerns, which come out of the improper management of current conditions, seem to me to be a larger issue especially for the long run than the concern that somehow unstable and overly expansionary policy starting from where we are now will stunt the opportunities that are open to them…. [S]tarting from where the United States or much of Europe or much of the rest of the industrialized part of the world is starting today, the risks of profound stagnation are a more pressing concern than the risks of a resurrection of stagflation."
Josh Barro: For 'Faster Growth,' Soak the Poor?: "This weekend, the Wall Street Journal assembled a redoubtable list of conservative heavies in economics (George Schulz! Gary Becker! John Taylor!) to produce a completely insane account of what is wrong with America's economy and how to fix it. The upshot of the piece is that the U.S. economy is in the tank because the government gives too much money to poor people, and so it should stop. What's most amazing about this piece is what's not in it: any acknowledgement of the specific circumstances that led to the downturn of 2008 and the slow recovery from it. There's no discussion of the housing bubble and the financial crisis, of weak consumer demand as households struggle to deleverage, or of the vast number of job seekers for each available job. Instead, the authors identify the country's pressing problems as 'excessive spending and taxes, growing debt, interventionist monetary policy, and burdensome regulations that have slowed economic growth and job creation'. Some of these conditions have indeed arisen from the 2008 crash: Recessions cause government spending and debt to rise relative to the economy. But the authors have the causation wrong: Slow growth has led to rising spending and debt, not the other way around…. The choice to ignore current economic conditions allows them to advance the same set of soak-the-poor policy solutions at any time and in any economic condition."
Noah Smith: Noahpinion: Markets in almost nothing | Corey Robin (2005): Why Did Liberals Support the Iraq War? | Patrick Wolff: What It Is Like to Be a Bat | Menzie Chinn: Econbrowser: Reflation and Expenditure Switching in a Two-Speed World |
Gideon Rachman: The making of a German Europe: "This Germanophobia is unfair. Behind all the shouting and the wrangling, German taxpayers will once again be funding the biggest single share of yet another eurozone bailout. It seems a bit harsh that Germany is extending loans of hundreds of billions of euros to its neighbours – only to be accused of neo-Nazism in return. Yet growing German power – and growing resentment of that power – are now the main themes in European politics. This is a historic irony, given that the main purpose of the whole European project, from the 1950s onwards, has been to end for ever the idea that Germany is simply too powerful to coexist comfortably with its neighbours. The stock phrase – in Berlin, as much as in Paris or Brussels – was about the need for a 'European Germany, rather than a German Europe'. After the Cyprus crisis, however, it looks increasingly like this is a German Europe – because the direction of a continent in crisis is being shaped, above all, by the ideas and preferences of politicians and officials in Berlin. It is true that the European Commission, the IMF and the European Central Bank took the lead in the Cyprus negotiations. But it was always clear that no deal could go through without the German government’s input and assent. The fact that the lead figure from the ECB throughout the crisis has been Jörg Asmussen, a German member of the bank’s executive board, rather than Mario Draghi, the Italian president, also served to put a German face on the crisis. When they step back from the fray, German leaders must wonder how it came to this? How has a European project that was meant to end any notion of conflict between Germany and its neighbours led to a resurgence of anti-German feeling? And is the damage permanent?"
Annie Lowrey: Do Millennials Stand a Chance in the Real World?: "For my grandmother’s generation, the economic boom that followed World War II expanded the middle class and its share of the nation’s wealth. Our great recession, however, came after three decades of wage stagnation for a huge swath of middle-class American workers, which is one reason income inequality has yawned to levels not seen since the late 1920s. And since the worst days of the recession ended, inequality has continued to grow. Corporations that shed workers became leaner and more profitable. Members of the 1 percent have taken nearly all the wage gains made in the recovery. Their incomes bounced back. Nearly everyone else’s fell. Worse, our savings rate before the recent crisis was near a record low…. This recession’s emphasis was never on making do with little; for many millennials, it has seemed more about wondering why they had to make do with so little when so few had so much…. [Lisa] Kahn has started comparing recent graduates during the recent recession with recent graduates in the 1981-82 recession. She said the initial wage losses were comparable, and the trend looks set to repeat. 'My inclination is pessimism', Kahn said. 'If anything, these guys might experience something worse.'"
On March 26, 2013:
- Liveblogging World War II: March 26, 1943 http://delong.typepad.com/sdj/2013/03/liveblogging-world-war-ii-march-26-1943.html
- Noted for March 26, 2013 http://delong.typepad.com/sdj/2013/03/noted-for-march-26-2013.html
- Mark Thoma Laments the Gramscian Hegemony of the Overclass http://delong.typepad.com/sdj/2013/03/mark-thoma-laments-the-gramscian-hegemony-of-the-overclass.html
- The Astonishing Increase in Holdings of U.S. Treasury Debt: Yet More "Yes, Sir John Hicks Told Me So" Weblogging http://delong.typepad.com/sdj/2013/03/the-astonishing-increase-in-holdings-of-us-treasury-debt-yet-more-yes-sir-john-hick-told-me-so-weblogging.html
- Brad DeLong (2011): The Interest Rate That Did Not Bark in the Night: The Surge in U.S. Treasury Debt and the Non-Reaction of Rates: Tuesday Hoisted from Archives Weblogging http://delong.typepad.com/sdj/2013/03/brad-delong-2011-the-interest-rate-that-did-not-bark-in-the-night-the-surge-in-us-treasury-debt-and-.html
- Lawrence Summers, Axel Weber, Mervyn King, Ben Bernanke, Olivier Blanchard at the LSE: "I Do Not Believe the Long Run Can Be Ceded to the Avatars of Austerity" Weblogging http://delong.typepad.com/sdj/2013/03/mervyn-king-ben-bernanke-olivier-blanchard-lawrence-summers-axel-weber.html