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The Fiscal Policy of Herbert Hoover

Matthew Yglesias on How Richard Fisher Also Lives in a Fantasy World (But in This Case, Unlike Reihan Salam, There Is No Upside)

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Matthew Yglesias concludes that Federal Reserve Bank of Dallas President Richard Fisher is living in a fantasy world:

Richard Fisher Doesn’t Know There’s A Recession In Texas: Dallas Federal Reserve President Richard Fisher recently voted against monetary stimulus and explained why in a speech delivered earlier this week. The method is to first start with a long discussion of the relative strength of job growth in Texas, then offer a brief discussion that reveals Fisher doesn’t seem to understand how monetary policy works, and then conclude with a staggering analysis of the Texas labor market which appears to entirely neglect the fact that the unemployment rate in Texas is over 8 percent….

Despite the fact that Texas has severely limited social services and an education system that faces great challenges, people and businesses have been picking up stakes and moving to Texas in significant numbers over a prolonged period…. Jobs have been created for American workers in Texas in several different sectors, not just in the oil and gas and mining sectors. People have taken those jobs of their own free will, even though the jobs may not measure up to the compensation levels everyone would like. And yet Texas, like all states, is subject to the same monetary policy as all the rest…. From this, I draw the conclusion that private sector capital and jobs will go to where taxes and spending and regulatory policy are most conducive to growth.

Fisher seems to be badly confused here…. [H]e’s concluded that the whole country could get out of recession if it only had public policy as good as Texas’ public policy. But Texas is experiencing the same severe labor market recession as the rest of the country. I promise!… Fisher should consider that in good times Texas adds jobs faster than people whereas in bad times it adds people faster than jobs:

Texas population growth is a constant. It says good things about the state of Texas. But… as Fisher says, “Texas, like all states, is subject to the same monetary policy as all the rest.” Sometimes the labor market variables are pointing in a good direction, other times they’re pointing in a bad one. This is one of the bad times. But Fisher doesn’t seem to have noticed.

Me? I don't think migration to Texas says good things about superior public policy in the state of Texas.

I think it says good things about air conditioning and the conquest of malaria and yellow fever.

Before air conditioning (and the conquest of malaria and yellow fever) and after the discovery of fire it makes a lot of sense to live in Boston or Detroit or Cleveland or Chicago rather than Atlanta or New Orleans or Dallas or Houston. After air conditioning, not so much.

But Matt's big point is well-taken: it is astonishing that Fisher does not seem to realize--that nobody on his staff has gotten him to realize--that the unemployment rate in Texas even with the current energy boom is 8.3%.

That really should cause some marking of beliefs to market on Fisher's part. It hasn't.