I disagree. If you are the President of the United States, you are not allowed the same latitude with hyperbole as regular people. You will — and should-be taken at face value. If you are going to ignore the above advice, then you’re going to be called on it!

That’s fine; call him on it. But he’s going to be who he is, regardless. At the very least, the media needs to stop hyperventilating every time he goes hyperbolic. It’s a waste of energy. Calmly call him on it and move on.

You fail to mention that I also explained why the Carter and Reagan years were exceptions to the rule, which matters. Also, I referenced previous work in which I looked at the very items you highlighted: control of Congress, underlying business cycle. I can’t be expected to re-write old articles every time, else every post would become encyclopedic. I’m happy to have a separate discussion regarding these effects at a separate time.

My bottom line point is that the economy will at times generate “events” which have nothing to do with partisan politics. Analyses that aggregate economic stats by party ignore both like headline risk (e.g., 70s Oil Crisis) and the business cycle. It’s pleasurable to think that one’s party does a better job of managing the economy than the other, but the economy has a life of its own, as well.

Another issue is that the economy is SO large that events that start building under one administration might not reach climax until another party is in office. The housing bubble that burst in 2008, for example, started to build in 1998.

“Caused” is too broad a term. “Major contributor to” would be more appropriate. In that case, government fiscal policy was a contributor to the 2008 financial crisis. Yes, along with other factors — which is why I would never say a single factor “caused” a recession in what you rightly point out is a very large ship. But that doesn’t mean it can be ignored.

I completely agree that a financial crisis will always require numerous variables to explain. In my view, allowing Frannie to underwrite crap loans was a major reason why 2008 was (and is) so devastating, but had they not, investment banks still would have been doing so, and there still would have been a bubble that burst. Would that bubble have been so large as to take down Bear, Lehmann, and AIG, had Frannie not been participating? That’s anybody’s guess, but intuitively, the bubble would not have been so large and the crisis not so extensive had Frannie not been in the casino.

I disagree with your first statement. Ignoring “headline risk” because it always exists is rather like ignoring chain smoking because “risk of death” is a constant for all humans. Contributing factors matter and the strength or weakness of the Federal government, including the Federal Reserve, to adequately respond to crises is important. Precisely because they exist, they should be planned for.

Point is that in any reasonable period of time, there is likely to be a headline event which adversely affects the economy. I try not to blame politicians for Acts of God. Did Bush cause Katrina? No. Could FEMA have been better prepared? Definitely. Did Bush do something to make FEMA poorly prepared? Possibly. Is there a guarantee that the outcomes would have been different had Bush left FEMA alone? No guarantee.

So, I generally don’t list Katrina as a Bush fuckup, certainly not in the same way as Iraq was.

However, if he fails to achieve his desired objectives in negotiation and if he furthermore leaves the tariffs in place, then we are no longer in uncharted territory. The effect of these types of tariffs are perfectly well known: whether they are imposed as a protectionist measure, for revenue generation or through miscalculation is irrelevant.

Hm. We do know what broadbased tariffs do…….not so obvious what targeted tariffs do. And Trump’s not running broadbased tariffs.

At some point, I’m sure I’ll agree that the tariffs should be lifted, if China and the EU refuse to cave. But I’m not there yet, and I’m not entirely sure that such a limited tariff scheme has the potential to be catastrophic. We may find that SE Asia is happy to pick up the production that the Chinese are losing. Time will tell.

I’d also add that the corporate tax restructuring proposed by President Obama topped off at 25% rather than 21% and did have some important differences from the one signed in to law by President Trump. Whether these are “significant” differences is, presumably, an arguable point.

Well, I don’t think 4 percentage points is enough to make one scheme “good” and the other “bad”. The more interesting part of the bill is how foreign profits will be treated, and the elimination of incentives for megacorps to store up wealth overseas. Again, time will tell; but the corporate tax code definitely needed modernization.

I would make a very strong argument that after a decade of QE, we cannot consider anything pre-crisis as “normal”. I don’t disagree that we need to get back to that condition, but I wouldn’t make the assumption that it will be painless or risk free.

I don’t assume that either. QE has always reminded me of Friedman’s book “Money Mischief”. If Milton were alive, perhaps he’d add a chapter. :-)

There are clear periods of acceleration and though the trend line has been upwards since the 1960’s, it is wrong to say that the slope has been the same.

Looks roughly the same to me.

Image for post
Image for post

Interestingly, that acceleration of the ratio in the early 1990’s was when GWB and Clinton were RAISING taxes.

And to say that politics can’t fix inequality is untrue — demonstrably untrue, just look at the 1940’s and ‘50’s in our own history.

I’d say that had more to do with 20 years of accelerated manufacturing demand due to 13 years of war and (overlapping) 12 years of being the only source for the European rebuild than it did with politics.

(Of course, some cynics refer to war as “politics by a different means” so if you use that definition, I suppose your view of the matter is true. However, warfare is not a particularly desirable way to stimulate an economy and lower unemployment, I wouldn’t think.)

Which is only to say that inequality grows so long as we do nothing:

Hm. The increase in the GINI started at the same time as the War on Poverty, Medicare, and Medicaid. So, large initiatives which should have decreased inequality …….

Thank you for adding this analysis. I don’t mean to make excuses, but my followers are overwhelmingly not policy wonks; nevertheless, perhaps I oversimplified.

I’m overly sensitive about this point, because people often talk about “Reagan cutting taxes” (when he actually didn’t — he just lowered marginal rates) and pretend that the 50–70% rates “prove” that we can have a vigorous economy even if we return to those rates, which is decidely not true.

there is plenty of evidence to show that the multiplier effect in tax relief fell off a cliff in the 2000’s;

On personal rates? Completely agree.

3. I’d argue that military spending doesn’t count as a “real” stimulus — Keynes might have been unhappy with it given his experience in the First War, but he wouldn’t have said it didn’t count.

The point to be made when speaking of Keynes is that Keynes believed in balancing budgets during times of plenty and then spending into the economy (incuring deficits in the process) to minimize the effects of recession.

So, because we *never* balance the budget, I consider it disingenuous to say that we’re engaging in “Keynesian stimulus” when we’re incurring deficits during recessions; you may be deficit spending into the recession, but you’re not doing it according to Keynesian principles.

I don’t like it when politicians use the dead as political cover. :-)

Written by

Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store