The other day I found myself in conversation with one of my fellow students about whether or not the British government had too large of budget cuts too soon in the economic recovery. I argued that it was fairly self-evident that it had done so, considering the superior economic performance of most nations that had refrained from issuing cuts or embarked on a policy of stimulus. The response he gave me was an interesting one–he argued that the advantages being enjoyed by the stimulus countries were short term, and advised me to look at France, a country that had refrained from austerity and has recently had its credit rating reduced by Moody’s, is seeing stagnant growth rates, and has a host of other problems. I responded that Eurozone countries were in a different kind of economic crisis from countries like Britain and America, and that different rules applied–this was met with scepticism, as if I were trying to weasel my way out of the point. So today I would like to make the broad argument that the economic problems being experienced in non-Euro countries like America, Britain, Japan, and Canada are of a fundamentally different nature from the kind being experienced in France, Spain, Portugal, and Greece. So different, in fact, that comparing the former to the latter is intellectually useless.
Tag: Paul Krugman
Misconceptions: “Obama has Vastly Increased the Size of the Government”
It is a commonly held belief that the Obama administration has been spending money all over the place, increasing the size of the government and the number of people it employs. There is a bit of a problem with this, though–it is factually inaccurate. Today I intend to illustrate and prove that this belief is not in line with reality.
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The Mother of All Output Gaps
There’s an interesting assumption going on behind the estimation of the output gaps (the difference between the economy’s current output and the economy’s estimated maximum potential output)–that not only did the economy decline during the recent crisis, but that the economy’s potential declined as well. This assumption leads to governments believing that their economies are less capable than perhaps they are, that the output gaps are not especially large, and that there is little revenue to be raised to offset stimulus spending, but what if it is not true? The idea comes from Capital Economics, a macroeconomics research company, has received attention from the Financial Times and Paul Krugman, and now it will receive attention from me as today’s topic.
Paul Ryan’s Convention Speech Analysed
Paul Ryan’s convention speech went over pretty well on the right in the United States. Jim Geraghty of the National Review had this to say about it:
This speech, and his warmth and sense of connection when delivering it, almost unnerved me. I started worrying that I was seeing what I wanted to see, that I was hyping a pretty good speech delivered pretty well in my own mind. Except my Twitter feed was exploding. The delegates were going nuts. And it just seemed to be getting better and better as it went on. Conversational, direct, funny, detailed . . . this was Reaganesque, guys. I was a kid when Reagan was president, so I got lulled into a false sense of what American presidents were — I thought they were all that good. This felt like that.
You can read his full post here. Perhaps this was indeed the case for Mr. Geraghty. I myself was struck by the sheer number of untrue, openly fallacious claims in it, and today I would like to highlight them.
Fiscal Cliff Madness
Sneaking up on the US government, slowly but surely, is the fiscal cliff–the agreement congress made to cut spending across the board in many sensitive areas if a bipartisan deficit reduction plan could not be agreed to. This was a bad idea from the outset, but you wouldn’t know it from listening to the Democratic Party, and that’s both a problem, and the topic of today’s post.
Benjamin Studebaker 