Notes from the Road

January 31st, 2012 at 12:06 pm

I’m sure it’s partly me, though Paul K has the same problem, and he’s awfully clear.  But it is very hard these days to get people to accept the logic and the results of Keynesian stimulus.

Not everyone, but many just can’t believe the government spending could possibly do anything useful on the jobs front, or on any other front, for that matter.  If you show them very simple slides like these, showing the sequencing–things were really bad, the Recovery Act (and monetary stimulus) came on, things get less bad, then stimulus faded and things started to get bad again (GDP and job growth slowed)—they are not convinced.  They have a different sequencing in mind: things were bad, stimulus passed, things are not all better.  Ergo, it was a flop.

 

Sources: BEA, BLS (h/t: HS)

If you show them nonpartisan CBO analysis showing that the unemployment rate would have been higher without the stimulus, they’re more favorable to their own sequencing then any egghead’s counterfactuals.

Maybe I’m just talking to the wrong people, or maybe I’ve not yet found the right words, the right narrative, the right slides.  Or maybe, since Reagan, the gravitational pull of the “government is the problem” mantra has strengthened to an irresistible point for many of us.

That’s bad, because government is neither the problem nor the solution.  It’s a critical component of a functional society, and when the market fails, it must step up.  To ignore that is to lose the ability to self-correct, and systems that cannot self-correct are systems that cannot survive.

 

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18 comments in reply to "Notes from the Road"

  1. cat says:

    Why not make those graphs for 1926-1945 and leave off the dates? I can’t think of a cleaner transition from the austerity policies to Keynesian stimulus, but then I’m not an expert.


  2. foosion says:

    One common response is to ask for more empirical evidence – show me proof stimulus clearly worked in these cases. Having a few more cases would be handy, although the anti-stimulus crowd always has some excuse for discounting evidence.

    Another is to claim that debt is evil. Sometimes this is part of a larger morality play. For example, debt financed stimulus rewards the imprudent and profligate while hurting the good people.

    The anti-government crowd can’t believe government can do any good.

    Obama was not helpful when he went from stimulus to debt reduction and talked about government needing to tighten its belt, when he should have talked about jobs and the need for government to step up when private entities are standing down. The Republican machine continues to be the opposite of helpful.

    Empirical evidence, the paradox of thrift or the simple notion of objective facts is way beyond the ken of our news media.

    Convincing those who don’t want to be convinced or those whose salary depends on not being convinced isn’t easy.


  3. Chris G says:

    >If you show them very simple slides like these, showing the sequencing–things were really bad, the Recovery Act (and monetary stimulus) came on, things get less bad, then stimulus faded and things started to get bad again (GDP and job growth slowed)—they are not convinced.

    For the benefit of communicating Recovery Act facts to people open to persuasion by evidence, have you considered creating versions of those plots with Recovery Act spending plotted on the righthand axis? My thought is that it might be instructive to illustrate the correlation between GPD and employment changes with spending petering out.


  4. reflectionephemeral says:

    “Or maybe, since Reagan, the gravitational pull of the “government is the problem” mantra has strengthened to an irresistible point for many of us.”

    The Southern Strategy was a gambit when it was hatched in the early 1970s. Now, though, GOP rhetoric and policy are wholly and completely derived from Southern Strategy talking points about how awful the government is– except, of course, when government is targeting out groups like the prisoner, the stranger, and the sick.

    What was the last Republican-created policy innovation? (Other than the ACA, I mean). They’ve simply abandoned all beliefs about policy in exchange for resentment.


  5. marcel says:

    If you show them very simple slides like these, showing the sequencing–things were really bad, the Recovery Act (and monetary stimulus) came on, things get less bad, then stimulus faded and things started to get bad again (GDP and job growth slowed)—they are not convinced.

    An alternative story that can be told by any fresh water economist worthy of that name (even those near salt water):

    Things were really bad, but rational expectations based on all available information at the time indicated that things would get less bad, so fiscal and monetary stimulus would not be too harmful.

    Then new information came in indicating that things would get bad again (slower GDP and job growth), and optimal behavior was to batten down the hatches and let stimulus fade.

    For any situation you present I can come up with a rational expectations Just So story. And for just $25, no $2500, no $250,000, my course, individually Taylored to you, will show you how you too can develop rational expectations Just So stories carefully Taylored to any economic situation.


  6. Jean says:

    Is there a model that takes into account people’s beliefs about the economy? Belief systems are a major source of inertia and play an important role in economies, I would think.

    I have long believed that reality IS the model. If we start from that premise, where would the best next step be?


  7. Joe says:

    I saw your presentation today and thought it was very convincing. I would submit that others who felt the same were hesitant to say so for fear of mixing politics with the workplace. Great presentation.


    • Jared Bernstein says:

      Thank you for sharing that info!


      • Phil says:

        Jared,

        You, Krugman and Goolsbee are some of the few that actually make any sense out there.

        For a good 30-40% of the population facts, logic and the truth does not matter. They just hate Obama. Doesn’t matter how well Obama performances, they just hate him. Part of this is just a long-term hate of “liberals” (for no real reason or logic), part of this is that Obama is black and a threat and part of this is a failure to believe that what they have been told by the GOP has been wrong all these years. They are in denial. No amount of arguing or facts will change that. Sad really, as I have not seen this to the same extent in other countries of the world.


  8. Fr33d0m says:

    The mind of the average repugnicon will not allow input from sources outside of their propiganda network. Anything counterfactual must be liberal/socialist/bad/wrong. Facts are irrelevant. You cannot convince them, but you can limit their ability to influence others. So keep that chin up sparkey. Don’t feel so glum. There is value in what you do.


  9. Barry igas says:

    Jared’ Jared, Jared..your problem is that .you keep insisting on living in a fact based reality.

    Keep up the good work (and posts).


  10. piddlesworth says:

    People are skeptical of counterfactuals based on economic theory, so what you need to do is eliminate the theory talk and present a data set of how different countries responded to the current crisis as well as how they responded to the Great Depression, and then contrast with respect to the policies enacted by each country in response to the two crises as well as contrasting between different countries’ policies in the same crisis.

    For example, it turns out that you can make a very robust case that those countries which initially turned to strict austerity now but not back then are the ones doing significantly worse now (e.g. the UK) while those which initially turned to austerity back then but initially used stimulus this time are doing far better (e.g. the US).


    • piddlesworth says:

      If you want to make this story really clear in a single figure, choose twelve countries and do a scatter plot with one axis being the difference in government stimulus between the three years after great depression and the three years after the current recession (both as percentages of potential GDP) and then have the other axis be the difference in the percentage change of real GDP four years after the pre-crisis peak for each crisis, with each country being a single point.

      If your counterfactual holds up generally, then larger changes in stimuli (or negative austerity) from one crisis to the other should correspond to larger changes in GDP growth (i.e. smaller declines in GDP) from one crisis to the other, yielding a clear positive relationship.


  11. Sharon says:

    “Keep the government’s hands off my Medicare!”

    As a friend used to remind me, “It’s just that simple and just that complex.”

    There’s a large group of Americans whose media diet consist of Fox News, Rush Limbaugh, and whatever Beck wannabe is on WMAL in the afternoon. Those are a rather badly informed group of people. Those are people who are impervious to charts, tables, and graphs that aren’t sourced from trusted media/institutions.

    They’ve been told that the establishment media is liberal and they lie. Those folks are beyond hope.

    I do have friends who fall into the centrist or moderate camp, and your charts and links have been a very illuminating tool. I’ve managed to persuade some friends that the ARRA wasn’t a waste, and I’ve edged a couple into agreeing with my contention that it should have been larger.


  12. Jill SH says:

    Suggestion: I remember that WaPo list of greatest charts of 2011. How about you keep a running list of pertinent charts, like the two shown here, on one side of your blog? I sometimes have trouble recalling the topic that held a chart that I want to pull up and share with the brother-in-law or cousin, and a handy list would be most useful.

    Thanks, and as always, keep up this good and desperately needed work.

    PS. My pat answer to the “trickle down” theory. (A previous post?) It’s really “trickle up” — Walmart didn’t become the biggest retailer in the world selling mink coats and Jaguars to rich folk. They made it by selling a lot of stuff really cheap to an awful lot of modest income people. And they pay their workers just enough to be able to shop only at Walmart.


  13. AndrewBW says:

    For many people “government is the problem” is the gospel truth, and there’s simply no getting through to them. Far better to start talking to the young people who weren’t around for the Reagan years, and try and get through to them before their minds are completely closed.


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