Just a brief further thought on the anti-Keynesian flip-out. Consider three propositions:

1. Deficit spending is expansionary, other things equal.

2. Deficit spending is always expansionary.

3. Only deficit spending is expansionary.

Keynesian economics basically asserts proposition 1. Testing that proposition is tricky, but that’s always the case in economics; you have to look for natural experiments, or be very careful about controls. Christy Romer talks about this in her excellent speech (pdf) on the topic. But when you do it right, the evidence strongly supports proposition #1.

Proposition #2 is, well, stupid. It’s what you see in bad comment threads, where people rant about how if Keynesian economics was right, Greece would be a miracle economy.

And proposition #3 is worse. Which is why I am boggled to see professional economists apparently believing that this is the proposition to focus on.

Via Digby, I see that Keith Poole’s Voteview site has produced estimates of presidential positions on a left-right scale since 1945.

I’ve long been a great admirer of the work done by Poole and his collaborators. What they do is use roll-call votes to map politicians’ positions into an abstract issue space. You can think of this as a sort of iterative process: start with a guess about how to rank bills from left to right, use that ranking to place politicians along the same spectrum, revise the ranking of bills based on the politicians, and repeat until convergence. What they actually do is more complicated and flexible, and allows for multiple dimensions; but that sort of gets at the general idea.

And it turns out that US politics really is one-dimensional, that once you know where politicians stand on a scale that clearly has to do with taxation and the size of the welfare state, you can predict their votes very well. There used to be a second dimension, clearly corresponding to race; but once the Dixiecrats became Republicans, that dimension collapsed into the first.

The new result comes from identifying cases where presidents clearly endorsed or opposed legislation, and using those cases to place presidents on the left-right scale. Here’s what they find, with up meaning moves to the right, down moves to the left:

So, Obama is the least liberal Democratic president since World War II, and presumably the least liberal since Woodrow Wilson.

I’m not bashing Obama, by the way; I wish he took stronger stands, but I think he’s moving in that direction; also, even if his health reform was devised by Heritage and implemented by Mitt Romney, it’s a lot better than nothing.

The point, instead, is that this very moderate Democrat is portrayed by the right, not to mentioned the aforementioned Romney, as a radical redistributionist — when the real radicals are on the other side. And now we have numbers.

Recent facts have not been kind to the political right. A better-than-expected jobs report; a renewed focus on inequality, driven both by CBO research and by the gift of Mitt Romney’s candidacy. What to do?

The answer is to throw a bunch of bogus numbers at the issues, in the hope that something sticks, or at least that the discussion becomes confused.

First, about that jobs report: all the usual suspects have jumped on the routine BLS population adjustment to claim that the numbers were cooked. The real story here is that the BLS estimates unemployment based on a monthly survey; this tells us what fraction of workers are unemployed. To turn that into a number of unemployed, the BLS estimates total working-age population; but it updates those estimates only once a year. So there’s usually a step up or down in the totals each January, signifying nothing.

Back in the Bush years there were a lot of bogus claims of huge job growth reflecting a step up in the population numbers. Now we have Rush Limbaugh, Fox, etc., claiming that a step down somehow implies fake calculations. Still not true. And the thing that makes this so tiring is that they keep trotting out the same old bogosity, no matter how many times it has been refuted.

Next up, inequality denial. The Census Gini figure hasn’t moved much since the early 1990s — but as Jon Chait says, we know perfectly well why: it’s because Census numbers are top-coded, that is, cut off at high income levels, and the big gains have come way up the scale.

How do we know that? Partly, just look around: walk around New York’s pricier neighborhoods and tell me that inequality hasn’t increased. But also, income tax data. Here’s what the IRS tells us about income shares at the top:

INCOME SHARES

Notice that the rise is almost entirely concentrated in the top 1 percent; even the bottom half of the top 10 percent went nowhere, which tells you once again that this is about the 1 versus the 99, not the top 20 versus the lower class. And yes, the data are overwhelming support for a rise in inequality.

Oh, and Chait tells us that the usual suspects are also rolling out the old “the rich in America pay more taxes than the rich in other countries” thing. Yes — because the American rich are much, much richer.

In a way it’s almost a relief to find these guys coming up with new fallacies. Brad DeLong catches the WSJ looking at estimates that federal workers get 2 percent more salary and 48 percent more benefits than private-sector workers — and concluding that this means that they are overpaid by 50 percent.

The important point to make here is that all these bogus numbers are coming from seemingly authoritative sources — Fox News, which is a big organization, the WSJ editorial page, the American Enterprise Institute. You could not imagine a similar level of statistical dishonesty from, say, The Nation, or Washington Monthly, or EPI.

This is what I mean when I say that the left and right aren’t symmetric. People of all persuasions lie; but the right has a whole institutional structure of lying that has no counterpart on the left.

Keynesian economists made some pretty clear predictions around 3 years ago – predictions that were very much at odds with what anti-Keynesians were saying. We said that as long as the economy remained deeply depressed, even a huge rise in the monetary base would not be inflationary, and that even huge budget deficits would not send interest rates soaring. And we said that fiscal austerity would be contractionary, not expansionary.

All these predictions have been borne out. And some of the anti-Keynesians seem to be in the process of acknowledging, at least in a grudging way, that they got it wrong.

But some anti-Keynesians have tried to save their dignity, or something, by attacking supposed Keynesian propositions that nobody actually, you know, proposed. The usual one is to claim that Keynesians predicted great results from the Obama stimulus (which I very noisily did not). But Tyler Cowen has come up with something truly strange. He seems to believe that any good news anywhere somehow refutes Keynes. Hints of recovery in Ireland (which proved a false dawn)? Keynesianism is wrong! A relatively encouraging month on the jobs front? Keynesianism is wrong!

I’d say that this was attacking a straw man, but that would be an insult to straw men. What is going on in Cowen’s head?

The good folks at EPI are upset by my colleague David Brooks’s claims that the gap between the top 20 and the bottom 30, not the gap between the top 1 and everyone else, is what really matters.

As you might guess, I’m with Larry Mishel on this; but I thought it might be useful to have a calm discussion of what someone might mean by saying that the rise of the top 1 percent isn’t important.

One thing such a person might mean is that it’s unimportant in quantitative, dollars and cents terms. But this is just false. The CBO inequality report confirms what independent studies have been saying: the rise of the top 1 percent has absorbed a large fraction (almost half, by my reckoning), of economic growth, leaving a much smaller pie for everyone else. If we look at Gini indexes, a measure of overall inequality, CBO has calculated them both with and without the top 1 percent:

This says that inequality has risen about 0.11 overall, but only 0.06 if you exclude the top 1 percent; so by this admittedly imperfect measure, again around 45 percent of the story is about the rise of the top 1.

Now, David doesn’t focus on any of these things; instead, he talks about the “social gap.” I think we could argue about that; children of both the middle class and the elite may be borne in wedlock, but there are other ways in which the elite, more and more, lives in a different universe. The main point I’d make, however, is that social mores are not on the policy agenda; taxes and spending are.

And if you ask how the parties differ — how the GOP agenda differs from the Democratic agenda — it’s all about the top 1 percent versus everyone else. The GOP wants to cut taxes on capital gains and the top tax bracket, issues that mean nothing even to Americans at the 95th percentile. It wants to privatize Medicare, which would create a lot of insecurity even among upper-middle class families, but wouldn’t trouble the truly wealthy.

Put it this way: the actual policy agenda of American conservatives serves the interests of Mitt Romney, not the Bobos.Maybe you think they should have a different agenda, but the fact is that they don’t.

And I guess I’d say that the attempts to shout down discussion of the 1 percent are in large part an attempt to distract our attention from that fact.

Regular readers know that I have a thing about Arcade Fire; but I’ve been taking a break, even in my personal listening.

So, for some reason I’ve been craving their stuff again, this song (and this performance) in particular:

No, not me — nothing like a 13-hour flight from Moscow to Houston to treat a cold. But the jobs report was definitely the best news we’ve had in a while.

The usual caveats apply: it could be a blip, it might be an artifact of seasonal adjustment, etc.. Also, the gap remains huge. Suppose that we need 100,000 jobs a month to keep up with population growth, and that we’re 10 million jobs in the hole — both conservative estimates. Then we need about 7 years of growth at this rate to restore full employment.

Alternatively, note that this month’s job gain roughly equals the average job gain during the Clinton years — all 8 of them. And unemployment at the start of that run was higher than it is now.

Still, genuinely good news. And I’m surprised that there wasn’t more action on Intrade; I’d say that Obama’s chances are looking significantly better.

I’m in Moscow, and utterly wiped by the combination of cold, jet lag, and too many interminable panel sessions. Normal blogging should resume this weekend.

I’m giving a talk in Paris tomorrow. Here are some slides; they won’t come as a shock to regular readers, but it may be useful to see them all in one place.

Read more…

So what’s different, you ask? Well, intermittent too. Nightmare travel week looming.

Jared Bernstein has been emphasizing, rightly, the extent to which our weak recovery is being undermined by cutbacks at the state and local level:

But it’s even worse than he says. Why? Because if you look at what’s being cut, it’s heavily focused on investment:

That is, we’re sacrificing the future as well as the present. Oh, and the cuts that aren’t falling on investment in physical capital are largely falling on human capital, that is, education.

It’s hard to overstate just how wrong all this is. We have a situation in which resources are sitting idle looking for uses — massive unemployment of workers, especially construction workers, capital so bereft of good investment opportunities that it’s available to the federal government at negative real interest rates. Never mind multipliers and all that (although they exist too); this is a time when government investment should be pushed very hard. Instead, it’s being slashed.

What an utter disaster.

Further thoughts on the observation that the current British slump has now gone on longer than the slump of the 1930s. Is Britain unique?

No, it isn’t.

The NIESR has developed a monthly GDP series for Britain, which lets it use real-time data for the comparison. I can’t replicate that, but I can use the Maddison historical data and IMF data — including projections for 2012 and 2013 — to do some comparisons. When you do this for the UK, the worse-than pops right out (I use annual data; year zero is 1929 or 2007, and real GDP is expressed as a percentage of the pre-crisis peak in each case):

And here’s Italy:

France and Germany are doing much better than in the early 1930s — but then France and Germany had terrible, deflationist policies in the early 1930s. (It was the Brüning deflation, not the Weimar inflation, that brought you-know-who to power).

With two of Europe’s big four economies doing worse than they did in the Great Depression, at least in terms of GDP — and that’s three of five if you count Spain — do you think the austerity advocates might consider that maybe, possibly, they’re on the wrong track?

A further thought on the observation that Britain’s slump has now gone on longer than the slump in the 1930s: it’s worth remembering the rapturous reception the Cameron austerity program received here, not just from the right, but from centrists. Here’s David Broder:

Cameron and his partners in the coalition have pushed ahead boldly, brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.

Heh heh, silly economists. Broder went on to urge Obama, after his salutary midterm defeat, to “do a Cameron” and agree to sharp cuts in the welfare state.

It’s kind of remarkable how none of the Very Serious People even considered the possibility that people like me might be, well, right.

Landon Thomas has a very nice piece — aside from one error — comparing the situation of Wales within the sterling area, also known as the United Kingdom, to that of Greece within the euro area.

Just to get the error out of the way: Thomas credits the idea that fiscal integration makes a currency union more workable to Robert Mundell. Actually, Mundell was only about factor mobility; the fiscal integration point came from my colleague and friend Peter Kenen. Here’s a good discussion (pdf) of their contributions.

Anyway, as Thomas says, Wales is a relatively poor, backward economy — according to Eurostat, poorer than Greece — that shares a currency with a large area that is more affluent on average. But it has very high labor mobility in and out, and is fiscally integrated with the larger region. So the shared use of the pound is not anything like the problem posed by shared use of the euro.

All this is standard optimum currency area theory, as devised by Mundell, Kenen, and McKinnon long ago. What remains remarkable is how blithely the creators of the euro disregarded all that. This time, they decided, was different.

Sorry about the lack of posts — hard to blog when you’re coughing your lungs out. Here’s something I’ve been listening to lately: