Tag: We Need a Better Press Corps

Must-Read: Greg Ip: Needed: A Contingency Plan for Secular Stagnation

Posted on by Brad DeLong

Must-Read: Um. No. Larry Summers is right. The sharp and usually-reliable Greg Ip is wrong. This opinions-of-shape-of-earth-differ-both-sides-have-a-point framing is simply wrong.

The right level of the debt-to-GDP ratio is primarily a function of r-(n+g), the difference between the real interest rate r on Treasury debt and the real growth rate g of productivity plus the real growth rate n of the labor force. A reduction in r accompanied by an equal or smaller reduction in (n+g) is not a first-order reason to reduce government spending or the deficit now–or to postpone or cancel plans to increase the deficit right now that would otherwise be good policy

Greg Ip: Needed: A Contingency Plan for Secular Stagnation: “If Larry Summers is right…

…the most direct response is more expansionary fiscal policy…. But policy makers are rightfully wary about acting in the face of so many contradictory signals. In the U.S., unemployment is moving lower and stocks are hitting new highs. Bonds could be pricing in secular stagnation, or merely a greater bias toward hyper-stimulative monetary policy by central banks…

Why are policy makers rightfully wary? All Ip says is:

Paolo Mauro of the Peterson Institute for International Economics notes that countries have often overestimated their long-term potential growth, resulting in too-high deficits and debts…

And chasing the link:

Paulo Mauro: Fiscal Policy in the Era of Stagnation: “Policymakers often mistake a long-lasting growth slowdown for a temporary slowdown…

…and systematically fail to increase the primary fiscal surplus sufficiently when the long-run economic growth rate declines. Economic history provides several examples of debt crises or near-crises caused by unexpected, long-lasting slowdowns in economic growth that were not recognized in time…. Ignoring a permanent slowdown in the rate of economic growth can lead to policy mistakes. For example, a country projecting a stable government debt ratio of 100 percent of GDP over the next decade or two would experience an increase in that ratio to 140 percent in 10 years if growth turns out to be 1 percentage point lower than assumed. As deficits rise, the ratio would balloon to more than 200 percent after 20 years…

Source: P. Mauro, R. Romeu, A. Binder, and A. Zaman, 2013, A Modern History of Fiscal Prudence and Profligacy (link is external), IMF Working Paper 13/5, Washington: International Monetary Fund.

The implication Ip takes from this is simply wrong. Slower future growth is a reason to slow the future growth of real government spending. It is a reason to cut the level of spending now–or to avoid increases in the level of spending that would otherwise be good policy–only if the slower expected growth is unaccompanied by an equal reduction in Treasury interest rates. But that is not the case: our reduction in expected future economic growth is accompanied by a larger reduction in Treasury interest rates.

Must-Read: David Warsh: The Downside of Outrageous

Posted on by Brad DeLong

Must-Read: The always interesting and usually thoughtful David Warsh gets this one, I think, very right:

David Warsh: The Downside of Outrageous: “If there is one man beside Trump himself whose spirit will haunt the hall… Cleveland… it is Robert L. Bartley…

…as editor of the editorial page of The Wall Street Journal,  Bartley spearheaded the creation of the say-anything, stop-at-nothing rules that ultimately led to Trump’s success in gaining the Republican Party’s nomination…. After taking over the editorial page in 1972, he became the most influential administrator of the rules of American public debate in the last third of the twentieth century… began the populist revolt that has since found its apotheosis in Trump…. As a small-government libertarian, I never subscribed to the Journal edit page’s supply-side orthodoxy…. Reagan won the presidency in 1980, and Bartley won a Pulitzer Prize for editorial writing. The editorial page had become immensely powerful, and has remained so.  Bartley told an interviewer in 1981, about the time Wanniski was fired for train-station-electioneering for a supply-side insurgent candidate, ‘Jude had a tremendous influence over the tone and direction of the page. He taught me the power of the outrageous.’…

I can pinpoint the day the page lost me altogether. It was March 18, 1993, with a famous editorial, whose title, ‘No Guardrails,’ has since become a WSJ battle cry. A physician who performed abortions in Florida had been ambushed and killed by a protester in Florida. The editorialist, Daniel Henninger, wrote…. “The date when the U.S… began to tip off the emotional tracks… is August 1968…. The real blame here… falls on the intellectuals–university professors, politicians and journalistic commentators… [who] defended each succeeding act of defiance–against the war, against university presidents, against corporate practices, against behavior codes, against dress codes, against virtually all agents of established authority.” There was something downright creepy about that editorial…. From the short-lived administration of Gerald Ford to the zero-based budgeting and deregulation under Jimmy Carter, from disinflation under Paul Volcker to tax simplification and Social Security stabilization under Ronald Reagan, the signal events of those years constituted a retreat from the excesses of the Sixties….

By 2001, Bartley was ill. He stepped down…. The editorial page soon began a relentless campaign for the invasion of Afghanistan and Iraq. Bartley died in December 2003, a week after receiving the Presidential Medal of Freedom…. Is it fair to blame the chaos surrounding this year’s Republican nomination on Bob Bartley?… I think so. No one in my lifetime systematically removed more of those guardrails, the norms governing good-faith political and economic discourse, than he. Trump is the downside of forty years of WSJ ed page comment too often just like his: outrageous, sulfurous, and, all too often, half-baked.  Bartley is dead; long live Bartley…. James and Lachlan [Murdoch] have their work cut out for them. Sometime in the next few years they must replace [Bartley’s protege Paul] Gigot, 61, with an editor capable of restoring credible focus…

Must-Read: Heather Boushey: Investing in Early Childhood Education Is Good for Children and Good for the Economy

Posted on by Brad DeLong

Must-Read: Ross Douthat’s citations here are to journalist Joe Klein’s 2011 unprofessional trashing of Head Start and Republican Tennessee political Kevin Huffman, plus Baker, Gruber, and Milligan (2008) and Lipsey, Farran, and Hofer (2015). These are not the four citations that anybody would choose who is not actively attempting to misrepresent the state of knowledge about early childhood education programs.

This is one of the many, many things that makes me think that the New York Times does not have a long-run future. Its only possible edge is to develop a reputation as a disinterested information intermediary as the legacy position it had gained as a result of its role as central place for upper-class New York print ads ebbs. Things like this make developing such a reputation materially harder.

Smart New York Times executives would kill the op-ed page and give its budget and its newshole to David Leonhardt to fill, and then back off and let him do his thing. But these are the executives who let Nate Silver walk at least in part because of the political staff. As Nate said:

This guy Jim Rutenberg…. Jim Rutenberg and I were colleagues at the New York Times in 2012 when 538 was part of the New York Times. They were incredibly hostile and incredibly unhelpful to 538, particularly when 538 tried to do things that blended reporting with kind of more classic techniques of data journalism…. When we went to New Hampshire… the New York Times political desk is literally giving us the cold shoulder like it’s some high school lunchroom…. We filed the story pointing out… that Rick Santorum had probably won the Iowa Caucus, a story that involved a combination of data work and reporting…. They were apoplectic because their Romney sources were upset…. A story that… got things totally right pissed them off because they didn’t get the scoop and it went against what their sources wanted…

But the executives aren’t that smart…

Heather Boushey protests about the lack of journalistic quality control here:

Heather Boushey: Investing in Early Childhood Education Is Good for Children and Good for the Economy: “Ross Douthat used his New York Times column to express frustration that hoping for a “substantive debate about domestic policy” in this presidential election year is “delusional”…

…He imagines a scene from a future debate between… Hillary Clinton and… Donald Trump… over the benefits of early childhood education. Douthat even added several hyperlinks… links that alas fall short on revealing where the evidence actually stands today….

Randomized control trials that follow children from pre-school through adulthood… children who participate… do better in school, are more likely to attend and graduate college, and are less likely to smoke, use drugs, be on welfare, or become teenage mothers… the Carolina Abecedarian Study… the Milwaukee Project… Project STAR… Raj Chetty and his co-authors find that kindergarten test scores are highly correlated with outcomes at age 27, such as college attendance, home ownership, and retirement savings. Like in the Perry Preschool/High Scope study, in Project STAR, researchers found that while the cognitive effects on test scores fade as a child ages, the non-cognitive effects did not. Of course, not every study found such results… the Early Training Project….

Overall, though, the evidence points to the conclusion that investing in early childhood is important for future outcomes both for the children themselves and our economy more generally. If columnists provide hyperlinks to real-life academic studies to buttress fantasy debates between the two presidential candidates, they should at least point to the best studies available. In this case, the preponderance of evidence shows that early childhood education works for the children, their families, and the broader U.S. economy.

Must-read: Noah Smith: “Brad DeLong Pulpifies a Cochrane Graph”

Posted on by Brad DeLong

Must-Read: Very welcome backup from the very-sharp and extremely hard-working newly ex-academic Noah Smith. I very much hope his new career path is very successful: it deserves to be…

Noah Smith: Brad DeLong Pulpifies a Cochrane Graph: “I’ve always been highly skeptical of John Cochrane’s claim that if we simply launched a massive deregulatory effort…

…it would make us many times richer than we are today. Cochrane typically shows a graph of the World Bank’s ‘ease of doing business’ rankings vs. GDP, and claims that… if we boost our World Bank ranking slightly past the (totally hypothetical) ‘frontier’, we can make our country five times as rich as it currently is…. Brad DeLong, however, has done me one better. In a short yet magisterial blog post, DeLong shows that even if Cochrane is right that countries can move freely around the World Bank ranking graph, the policy conclusions are incredibly sensitive to the choice of functional form….

DeLong… decides to do his own curve-fitting exercise. Instead of a linear model for log GDP, he fits a quadratic polynomial, a cubic polynomial, and a quartic polynomial…. Cochrane’s conclusion disappears entirely! As soon as you add even a little curvature to the function, the data tell us that the U.S. is actually at or very near the optimal policy frontier. DeLong also posts his R code in case you want to play with it yourself. This is a dramatic pulpification of a type rarely seen these days. (And Greg Mankiw gets caught in the blast wave.)…

You’d think Cochrane would care about this possibility enough to at least play around with slightly different functional forms before declaring in the Wall Street Journal that we can boost our per capita income to $400,000 per person by launching an all-out attack on the regulatory state. I mean, how much effort does it take? Not much. And this is an important issue. An all-out attack on the regulatory state would inevitably destroy many regulations that have a net social benefit. The cost would be high. Economists shouldn’t bend over backwards to try to show that the benefits would be even higher. That’s just not good policy advice.

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Play with the R-code if you want to see how much a more flexible functional form wants to say that the U.S. has the optimal “Business Climate”: http://tinyurl.com/dl20160505c. I.e.:

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Why don’t we have a better press corps yet?

Posted on by Brad DeLong

I am beginning to think that the highly-estimable Kevin Drum needs his meds adjusted–not those affecting the rest of his body, those seem to going better than I had expected, but rather those affecting his neurotransmitter levels. For he fears to be descending into shrill unholy madness…

I feel his pain. I, too, had hoped that the coming of independent webloggers giving an unmediated public-sphere voice to those with substantive policy knowledge, plus the arrival of the Matt Yglesiases, Ezra Kleins, Nate Silvers, and so on who were interested in making the world a better place through policy-oriented explainer and data journalism would shame the press corps into behaving better.

But no: it’s still, overwhelmingly, horse-race coverage, and bad horse-race coverage, by those who have not even learned how to assess horseflesh, jockey skill, and the track:

Kevin Drum: Republican Tax Plans Will Be Great for the Ri—zzzzz: “Our good friends at the Tax Policy Center…

…have now analyzed—if that’s the right word—the tax plans of Donald Trump, Jeb Bush, and Marco Rubio. You can get all the details at their site, but if you just want the bottom line, you’ve come to the right place…. Unsurprisingly, they’re all about the same: middle income taxpayers would see their take-home pay go up 3 or 4 percent, while the rich would see it go up a whopping 10-17 percent. On the deficit side of things, everyone’s a budget buster. Rubio and Bush would pile up the red ink by $7 trillion or so (over ten years) while Trump would clock in at about $9 trillion. That compares to a current national debt of $14 trillion.

No one will care, of course, and no one will even bother questioning any of them about this. After all, we already know they’ll just declare that their tax cuts will supercharge the economy and pay for themselves. They can say it in their sleep. Then Trump will say something stupid, or Rubio will break his tooth on a Twix bar, and we’ll move on.

Must-Read: Simon Wren-Lewis: Politically Impossible

Posted on by Brad DeLong

Must-Read: The writer, BTW, is Chris Giles. In light of this, does the almost-always excellent Financial Times have a significant quality-control problem here?

Simon Wren-Lewis: Politically Impossible: “An article in the Financial Times recently said of me…

…‘He has opposed deficit reduction when the economy was weak and when it was strong.’ Ah yes, this would be the same economist who has suggested the left aims to reduce the current deficit (all current spending less revenue) to zero, that pre-crisis fiscal policy in the Euro periphery should have been much more contractionary, and has championed fiscal councils as a way of eliminating deficit bias.

Should I have demanded a retraction? I didn’t: life is short, maybe it was a kind of joke, or even a misprint, and if not perhaps it said more about the writer than it did about me…. Equally it makes no sense obsessing about the need to reduce deficits in a recession and then turning a blind eye when surpluses are spent in a boom. Unfortunately just that kind of inconsistent thinking became hard-wired in the form of the Stability and Growth Pact (SGP), with its focus on a limit of 3% for deficits. Those who say that all that was wrong with the SGP is that it was not enforced have learnt nothing. This is why we need to move influence away from the Commission and towards independent national fiscal councils.

Must-Read: Ezra Klein: Were the Questions at CNBC’s Debate Really so Hostile?

Posted on by Brad DeLong

Must-Read: As one moderately-senior editor once told me: “On an average day, I learn more from Ezra Klein than from their entire national news staff.” This is why:

Ezra Klein: Were the Questions at CNBC’s Debate Really so Hostile?: “Fox News moderators were more aggressive in their questioning…

…and more focused on creating conflict–but… its choice of targets, and its angles of attack, suggested it had the GOP’s best interests at heart…. [In] CNN’s Republican debate… it was clear… that… tough questions were meant to strengthen the GOP…. CNBC… focus[ed] its debate around economic policy, and so its angles of attack reflected critiques of the candidates’ plans on taxes, immigration reform, monetary policy, and more. But since the candidates’ plans on those issues tend to broadly reflect Republican thinking on those issues, the questions put CNBC in opposition to the Republican Party broadly….

Ted Cruz… lamented that the moderators weren’t asking substantive questions, when the questions, up till that point, were more substantive…. But he was right that the questions were different from those asked by other networks, harder for the assembled candidates to answer, and more embarrassing for them to flub…. CNBC, in focusing on policy concerns, picked a more journalistically important line of questioning, but one that the organizing party found much more offensive. The resulting backlash is the organizing party’s effort to remind CNBC and all other networks that, ultimately, it controls these debates, and media organizations that want to host a debate and benefit from the accompanying ratings and the prestige need to remember that they are meant to act as the party’s partner in these debates, not as its critic.