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[Update: Here's a new study on tax cuts and the impact they have on economic growth.]


In my last post I declared a link war on the question of whether government stimulus or austerity is the best approach for fixing an economic slump. Results were fascinating.

Apparently both sides of the stimulus-versus-austerity debate can point to historical data and say, "See, my way always works." I was not expecting that. I mean, isn't everyone staring at the same historical data?

It turns out that the historical data is more like a Rorschach test. One economist can look at the data and see a bunny rabbit while another sees a giraffe. You and I haven't studied the raw data ourselves, and we probably aren't qualified anyway, so we are forced to make our decisions based on the credibility of economists. And seriously, who has less credibility than economists? Chiropractors and astrologists come close.

Prior to declaring a link war on this question I assumed one set of economists were data-ignoring political partisans and their critics were honest patriots raising their voices to save a troubled world. After reviewing the links I have ruled out that interpretation. I think it's more likely that the data is legitimately subject to interpretation and economists are filtering what they see through their political biases.

I reject the notion that one side is cynically ignoring the data to help get their preferred political party in favor no matter the consequences. I think the data is genuinely ambiguous.

I have read (okay, skimmed) the links that many of you provided. I've sorted the better ones into categories so you can judge for yourself. And I am ready to declare a verdict in the case of stimulus versus austerity.

My judgment is that while some of the economists involved might be entirely right, while the economists on the other side might be nothing but clever crackpots, there is no mechanism for citizens such as us to sort the credible from the crackpots. If you read the links below and declare one side an obvious winner, you just might be a special sort of idiot who thinks he's brilliant. It looks to me as if both sides have equally strong-sounding arguments based on data. But to be fair, I can't rule out the possibility that I'm an idiot; the circumstantial evidence is piling up.

When faced with a decision of this complexity, in which experts disagree, and I have no reliable mechanism to discern truth, I choose the path that is least expensive to me in the short run. Whenever the long run is 100% unpredictable, it makes sense to maximize your short term situation. In my case that means favoring lower taxes and huge cuts in government spending. If your income is directly influenced by government spending, you should be in favor of stimulus and lower taxes.

If you believe one set of economists over the other because one side's arguments sound more convincing, you're either an idiot or an economic genius, and realistically, you can't be sure which one you are.

Below are the better links that many of you provided, grouped by category. At the end I included links from people who argue that monetary policy is the real solution, not stimulus versus austerity.

I dare you to study the links and conclude that one side is a clear winner.

Most Entertaining Link

This musical video of economists John Maynard Keynes and F.A. Hayek debating is awesome in just about every way. Starts slow but worth the wait.

http://econstories.tv/2011/04/28/fight-of-the-century-music-video/

 
Austerity is Bad Links

http://www.manifestoforeconomicsense.org/

http://www.manifestoforeconomicsense.org/

http://en.wikipedia.org/wiki/Great_Depression

http://www.voxeu.org/article/procyclicalists-fiscal-austerity-vs-stimulus

http://www.dailykos.com/story/2012/06/01/1096532/-Austerity-or-stimulus-A-quick-note-about-that-jobs-report

http://articles.philly.com/2012-07-03/news/32509117_1_austerity-stimulus-program-new-jobs

http://krugman.blogs.nytimes.com/2010/10/25/sam-janet-and-fiscal-policy/

http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html

http://www.democracynow.org/2012/5/17/end_this_depression_now_paul_krugman

http://krugman.blogs.nytimes.com/2012/09/12/public-investment-in-the-slump/

http://www.bbc.co.uk/news/business-17836624

http://liberalconspiracy.org/2012/03/29/compare-how-the-uk-and-usa-recovered-from-recession/

http://www.guardian.co.uk/politics/2012/jul/19/david-cameron-austerity-measures-interview

http://www.conservatives.com/Video/Webcameron.aspx?id=b3b3d2c1-353a-4d53-bef2-c5ab79fbae5d

http://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme

http://www.imf.org/external/pubs/ft/scr/2012/cr12190.pdf

http://www.rollingstone.com/politics/blogs/national-affairs/what-part-of-austerity-isnt-working-dont-people-get-20120617

 

Austerity is Good Links

http://www.forbes.com/sites/richardsalsman/2012/06/26/fiscal-austerity-and-economic-prosperity-pt-iii-why-government-spending-retards-growth/

http://www.adamsmith.org/research/articles/the-results-are-in-spending-cuts-not-tax-hikes-are-the-road-to-recovery

http://www.usgovernmentspending.com/spending_chart_1970_2017USp_13s1li111lcn_G0t

http://www.usgovernmentspending.com/spending_chart_1970_2017USp_13s1li111lcn_F0t

http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

http://distributedrepublic.net/archives/2006/04/21/chartistry

http://www.cato.org/publications/commentary/realworld-cases-prove-spending-restraint-works

http://www.cato-at-liberty.org/spending-restraint-works-examples-from-around-the-world/

http://www.cato-at-liberty.org/canadas-spending-cuts-and-economic-growth/

http://www.heritage.org/index/country/spain

http://www.heritage.org/index/country/greece

http://www.nationalreview.com/corner/299233/show-me-savage-spending-cuts-europe-please-veronique-de-rugy

http://www.cato.org/publications/commentary/austerity-works

http://www.firstprinciplesjournal.com/articles.aspx?article=1322&theme=home&loc=b

 

Monetary Policy is the Thing

http://www.businessinsider.com/who-is-scott-sumner-2012-9

http://krugman.blogs.nytimes.com/2011/10/19/getting-nominal/

http://www.ngdp.info/nominal-GDP-level-target-proponents.aspx

http://krugman.blogs.nytimes.com/2011/06/20/woodford-on-monetary-and-fiscal-policy/

http://www.ngdp.info/

http://blogs.ft.com/martin-wolf-exchange/2012/04/17/fiscal-and-monetary-policy-in-a-liquidity-trap

http://blogs.ft.com/martin-wolf-exchange/2012/04/20/fiscal-and-monetary-policy-in-a-liquidity-trap-part-ii

http://krugman.blogs.nytimes.com/2011/07/05/liquidity-trapped/

http://www.bloomberg.com/news/2011-07-05/the-sorrow-and-the-pity-of-another-liquidity-trap-brad-delong.html

http://en.wikipedia.org/wiki/Market_monetarism

http://www.themoneyillusion.com/

 
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Sep 19, 2012
“GIVE me a one-handed economist,” demanded a Harry Truman. “All my economists say, ‘on the one hand...on the other'”
 
 
-6 Rank Up Rank Down
Sep 19, 2012
It's not my occasional abusive posts that's responsible for these impressions of "bullying". It's because you realize that you're hopelessly out of your depth in any debate against me on these issues. You simply don't have an answer to many of the arguments I've raised, and you realize your libertarian dogma is threatened.

If people tried to engage me in matters of substance, then I would let up with the barbed comments. But that seldom happens. The few answers to the arguments I've raised are the lazy, ignorant sort, and usually question-begging regurgitations of the very articles of the libertarian faith that I'm trying to debunk in my posts.

Never in all my days on the Internet have I seen a community where people talking nonsense get a free pass because they throw in a few insults. If a creationist posts his fallacies on an evolutionist forum, then he will promptly get his intellectual ass handed to him, whether or not he accuses them of lacking "nimbleness" or whatever. If a crank physicist posts his refutations of Einstein but loads them with a few expletives, then he will still be refuted, and indeed the refutation of his crank physics will animate the community more than the insults. If a noob computer programming announces that everyone is doing things the wrong way and posts his error-ridden code, then the community won't treat him gently, but they will also point out his errors.

Here we find a quite different phenomenon. We find free-market libertarians alluding to mistakes in the arguments I post, but the few attempts to refute me have been half-hearted and based on unsupported, idiosyncratic premises (such as that Sweden is a xenophobic country with an average IQ 20 points higher than the US).

The natural conclusion seems to be that libertarianism is more a religion or a sub-culture or a way of life than an intellectual position. Is anyone going to prove me wrong, for instance by stepping up to the plate and trying to refute the logical proof that debt-reduction can't improve an economy? (The only effect of debt reduction is to increase availability of loans. But loans are a stimulus and their effect is to bring up the debt again. Thus, debt reduction itself does not improve the economy. At best it can be a means to an end, where the end is future stimulus.)
 
 
Sep 19, 2012
Perhaps now you'll stop saying, "As President I'll do what a consensus of the best economists advises."

 
 
+2 Rank Up Rank Down
Sep 19, 2012
is there a way to just ban Therion after a certain number of his abusive posts?

Or is this forum, like so many others, the province of just a few?
 
 
Sep 18, 2012
I tend to agree that the best link of the bunch was the one you highlighted in the previous post on countercyclical policy.

That being said, I go back to the original master Adam Smith, who pointed out that the <i>overall</i> position of both governments and individuals should be austerity, if for no other reason than that it is much easier to change from austerity to stimulus than vice-versa.

Of course he was also of the opinion that people in general tended towards austerity, which I'm not sure is true today.
 
 
Sep 18, 2012
@Atlantadude

[Better to give a quiet thumbs down and move on, than to argue with an obstinate fool. It saves the rest of us from having to wade through it all.]

Sorry. Didn't notice your post til now. Will shut up on this topic now.
 
 
-9 Rank Up Rank Down
Sep 18, 2012
I "fail to remain focused" because I prefer not to clog up the thread with even more content-free bickering, and one poster has already complained about having to wade through it. I'm sorry if you lack the nimbleness of mind to flit between one subject and another without losing your bearings. But don't expect others to cater to your weakness.

Still waiting for the rebuttal of my logical proof that debt-reduction cannot improve an economy.
 
 
Sep 18, 2012
@Therion

[Still no attempted counter-argument to my logical proof that debt reduction cannot improve an economy, any more than it can make a person wealthy.]

Yet again you fail to remain focused on whatever it is were talking about. I don't even remember that topic, which means very likely A) I had more important things to say about whatever post that was a part of B) you were veering away from the topic that time too so I didn't comment on it or C) you're confusing me with someone else and I never was a part of the discussion you're talking about.
 
 
-4 Rank Up Rank Down
Sep 18, 2012
Whtllnew, as usual, a post from you that is completely devoid of substance.

Still no attempted counter-argument to my logical proof that debt reduction cannot improve an economy, any more than it can make a person wealthy.
 
 
Sep 18, 2012
Better to give a quiet thumbs down and move on, than to argue with an obstinate fool. It saves the rest of us from having to wade through it all.
 
 
Sep 18, 2012
@Therion

[Sorry that you feel you're being victimized by the stronger intellect, but it's hard to see how I'm bullying anyone by writing a few comments which are quite normal in temperament for political discourse on the Internet.]

Its not just me dude. You've also been leaning into Scott, Drowlord and other folks here pretty hard. And as for seeing how you're bullying anyone, do the phrases 'Absolute nincompoop' and 'People talking about "debt" are idiots' ring a bell? As for normal temperament for political discourse on the internet, I don't doubt you could find a forum where you would be considered quite tame, but I'm sure Scott wants this place to be better than that. And aside from you and a few folks like you it is. As for stronger intellect get real. I'll grant you that parts of what you say seem like they might come from a strong intellect but its usually mixed in with such hallucinations and/or bombast that I cannot think of you as an intellectual.

[I didn't say rich people are awful; I was actually referring to business people, and I was making a subtle point about the tendency of greed to agglomerate with other noxious qualities.]

Fine. You think of BUSINESSPEOPLE as completely awful. Which means you have difficulty seeing things from their point of view.
 
 
Sep 18, 2012
One interesting thing is that many of the pro-austerity papers define austerity as _limiting the growth_ of government, rather than drastic cuts. One of the CATO papers talks about how Canada limited government growth to 1% per year to solve their problem. That is a different thing to the definition of austerity of cutting government spending by 5% on top of previous cuts as was done in Greece. The slow way may solve the problem without the dramatic drop in GDP.
 
 
-7 Rank Up Rank Down
Sep 18, 2012
whtllnew:

[Do you think that if you bully the folks here enough they'll stop disagreeing with you and let you 'win'?]

Sorry that you feel you're being victimized by the stronger intellect, but it's hard to see how I'm bullying anyone by writing a few comments which are quite normal in temperament for political discourse on the Internet.

[Come to think of it that would explain why you have so much trouble understanding what folks write here, why you think of rich people as COMPLETELY awful and why you have so much trouble seeing the flaws in your 'tax the domestic bondholders' idea. ]
I didn't say rich people are awful; I was actually referring to business people, and I was making a subtle point about the tendency of greed to agglomerate with other noxious qualities.

And still nobody has put forward a credible argument against the "tax the domestic bondholders" idea. Rather there were a fewlazy suggestions that if such a thing happened then nobody would bother with loans any longer (demonstrating an almost child-like mathematical illiteracy and ignorance of the theory of probability -- you might as well argue that because insurance firms lost billions of dollars to Hurricane Katrina, there won't be any more insurance).
 
 
Sep 18, 2012
i think the question itself is flawed.

austerity means solving problem, stimulus means hiding it. it depends on what you are trying to solve.

if you want to heal the disease, you take the medicine (painful in short term). if you want to mask symptoms you take a hit of drugs/alcohol (relief in short term).

obviously the party in power will want to hide, so i dont hold it to much against corrupt obama or bush. its the parties who are out of power that voted this in (repub house, dem senate) that are the real breakdown of checks and balances.

if boosting gdp while lifting up broken companies is possible, its still unhealthy and will cause more problems than solve. this is efectively kicking the can down the road, just like waking up in the morning with a hangover and drinking a fifth of vodka. you arent gonna quit anytime in the immediate future, you just made sure of that. hangover is gone tho, but yes you are F'ed up.
 
 
+3 Rank Up Rank Down
Sep 18, 2012
If you liked the music video, it's actually the second in a series on Keynes vs Hayek (but on the topic at hand). Here's the first, about boom & bust cycles, this time as a rap anthem:
http://econstories.tv/2010/06/22/fear-the-boom-and-bust/
 
 
Sep 18, 2012
@Therion

[[So where do you get 'spam a load of links' from? ]

Because you said "too little too late", you absolute nicompoop. As if that dumb war of link spamming was enough to invalidate or render obsolete all future arguments.]

Sorry, but I still don't see what gives you the right to suggest I was asking for a spam load of links. And come to think of it your first post on the matter contained a lot more links than anyone else' up to that point. Not that Im complaining about that, simply pointing out that you were obviously link spamming there.

And why do you have to come down so hard on the folks who disagree with you so often? Do you think that if you bully the folks here enough they'll stop disagreeing with you and let you 'win'? Or do you have trouble seeing things from the other guys point of view?

Come to think of it that would explain why you have so much trouble understanding what folks write here, why you think of rich people as COMPLETELY awful and why you have so much trouble seeing the flaws in your 'tax the domestic bondholders' idea.
 
 
-9 Rank Up Rank Down
Sep 18, 2012
[So where do you get 'spam a load of links' from? ]

Because you said "too little too late", you absolute nicompoop. As if that dumb war of link spamming was enough to invalidate or render obsolete all future arguments.

I've even given a logical proof that debt reduction cannot possibly improve the state of the economy. You don't care, because isn't about logic; it's about self-profit.
 
 
Sep 18, 2012
@Kingdinosaur

[As I see it, we have two options: test the extremes and all possibilities in between, which given the organic nature of economic may be impossible on a large scale because the extremes are mutually exclusive, or you just pick a side and hope it's right. ]

I agree that your idea of scientifically testing the different approaches is, ignoring all other considerations, the best way to determine the best economic model. The catch, though, is the 'ignoring all other considerations' part. Unfortunately, we're playing with people's lives here, which makes testing all sorts of economic models kinda unpalatable.

[There is another possibility: the data might not be really ambiguous and what's really going is one side or the other (maybe both) is just a bunch of economic idiots and they are really good at murkying the waters. Just because we assume the data is ambiguous doesn't mean it is, one group or both just might be very convincing liars.]

I find it hard to believe that any of the three sides in the recently concluded link war lack real historical data to back up some of their claims.
 
 
Sep 18, 2012
As I see it, we have two options: test the extremes and all possibilities in between, which given the organic nature of economic may be impossible on a large scale because the extremes are mutually exclusive, or you just pick a side and hope it's right.

In a way it's like the religion thing and more subjective than objective. So until we get the facts we have to pick a side as some course of action must necessarily be taken (the government just closing shop and spending nothing is a valid if extremely improbable course of action).

I tend towards austerity measures as it promotes individual freedoms more.


There is another possibility: the data might not be really ambiguous and what's really going is one side or the other (maybe both) is just a bunch of economic idiots and they are really good at murkying the waters. Just because we assume the data is ambiguous doesn't mean it is, one group or both just might be very convincing liars.
 
 
Sep 18, 2012
@Therion

[No need to bother with these things called "arguments"! Just spam a load of links and declare it a wash!]

Yet again you display a lack of comprehension of what other folks are writing. In my comment I suggested dooby should have included 'a link or two'. So where do you get 'spam a load of links' from?
 
 
 
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