Wednesday, June 8, 2011

More red meat for PL


Patrick_L said...

a) Feldstein starts out by basically calling for a LARGER stimulus than the Obama administration supported, aligning him with the ranks of progressive economists like Paul Krugman. Like Krugman, Feldstein seems to also supporting an even more classic Keynesian-stimulus package (i.e. direct government spending), though he and progressive economists would differ in that progressive ones would call for domestic nondefense direct government spending as the best mix of short and long-term impact.

b) Next, Feldstein is incorrect on the effects of tax rates currently being considered. However, he is correct that lowering rates through broadening the base is more preferable if we are going to get more revenues- something which Feldstein has come out strongly in favor of. Feldstein for instance would violate the No New Taxes pledge in an instant, judging by his past statements.

c) a long-term deficit deal in law would be helpful growth, though Feldstein- like many anymore, appears to be grossly exaggerating the impact of any such deal. The causal explanations aren’t there for how it would have a significant impact growth. A deal is better at giving us breathing room and having fiscal policy be an additive element to allowing economic growth works its magic on the debt and economic prosperity.

d) Feldstein is being na├»ve for an economist and government policymaker when he criticizes the Obama administration on the dollar. He concurs that Obama and Co. are doing the right thing for the economy by allowing the dollar to “weaken,” thereby boosting export growth. However, the American public hates the idea of the dollar “weakening” because they are too misinformed to understand what that means and why in this time it’s a good thing. This long-standing public ignorance on currency economics isn’t helped by elected Republicans frequently talking about the horrors of Obama allowing the dollar to weaken. Anyways, the markets know exactly what Obama is doing because they know it’s the economic and political smart thing to do, and that every President in recent memory has tried to follow smart dollar policy while feigning allegiance to the ridiculous “strong” dollar in order to satiate the foolish American public.

e) I agree that it would be nice to have a deal on deficit reduction, and that it would be nice to have a stronger position from Obama. However, Feldstein’s remarks make it clear he would reject Paul Ryan’s approach for multiple reasons, so I would have thought Feldstein would understand the political dangers of Obama too quickly moving onto a specific position that Republicans would try to negotiate from as opposed to. The gap right now between Obama and Ryan is the appropriate field for a deal to be made, and any further public movement by Obama would set up a scenario where we are debating between Senate Republican fiscal ideas, Paul Ryan fiscal ideas, and Republican study ideas.

TJE said...

Patrick_L said...

financial sector shocks= slow recoveries. worst recession since Great Depression, especially on key metrics for recovery like housing sector and scale of financial sector implosion. Blah blah blah

(It's very likely that if the U.S. had practiced government and monetary policy like it did in the 1930's, we would have entered a depression. The only difference is the much more effective response this time, a response which even conservative- yet sensible- economists like Feldstein which should have been larger to be truly effective).

TJE said...

Patrick_L said...

a) while I haven't read Gretchen's book, I am familiar enough with her New York Times work to know that how Mead characterizes her work implies that her arguments have dramatically narrowed and been simplified (to inadequate levels) in this book, or more likely Mead is mischaracterizing/simplifying her book and arguments.

b) Yes Fannie and Freddie were harmful to the economy, their leadership was disgusting in its pursuit of personal gain over prosperity for American's economy, and yes they seem likely to have corrupted politicians, or at least many politicians have placed false confidence in the institutions. Politicians from both parties contributed to the poor oversight of Fannie and Freddie.

c) However, Fannie and Freddie were only contributing factors to numerous other factors that caused the financial crisis. Significant blame can be placed on Wall Street for business practices that are still unchanged and seem to promote firm and individual gain over American economic strength. This is one of Gretchen’s most memes, to excoriate Wall Street business practices, their management, and the too-big-to-fail mentality. Democrats during Clinton times can be blamed for unraveling key financial sector oversight regulations, and in the last two decades for joining many government actors of both parties in defending Fannie and Freddie when there was substantial evidence that the institutions were ineffective at their mission and engaged in detrimental business practices. Gretchen also frequently criticizes failure of key regulators and economic policy mangers (all under Republican supervision, whether Bush’s executive branch regulators or Alan Greenspan’s Fed.) for allowing Wall Street to run amok.

d) Anyways, if Republicans were successful in capitalizing on the “Fanniegate” idea Mead portrays here, it would be unfortunate because it’s inaccurate. There were many contributors, both public and private, Democratic and Republican, that enabled or caused the financial sector crisis.