Country ... USA
Politics 2012 ... Policy Options

Niall Ferguson has upped the ante ... but in the process may have mobilized Obama supporters to address the socio-economic policy options more aggressively

COMMENTARY
Paul Krugman ... Thank you ... hopefully there can be a mature discussion about the policy options and the impact decisions made by corporate leadership in the banking and the general corporate community have had on macro-economic performance, not to mention the 'austerity' strategy in many of the States and local government either for ideological reasons or simply because of the ongoing financial crisis. For me, the stimulus at the Federal level less the cutting back at the local level was never going to be enough to get the unemployment down significantly. This was aggravated by the decisions of big corporations to retrench in the US even if expanding overseas ... and no metrics whatsoever to get these actions into any accounting for societal impact. The last three years have not been a sprint out of the 2007/2008 crisis, but a steady and low risk improvement that has stabilized the US economy quite well ... with, as I have already observed. with very little help from the broader corporate and investor class.
Peter Burgess

There are multiple errors and misrepresentations in Niall Ferguson’s cover story in Newsweek — I guess they don’t do fact-checking — but this is the one that jumped out at me. Ferguson says:

The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012–22 period.

Readers are no doubt meant to interpret this as saying that CBO found that the Act will increase the deficit. But anyone who actually read, or even skimmed, the CBO report (pdf) knows that it found that the ACA would reduce, not increase, the deficit — because the insurance subsidies were fully paid for.

Now, people on the right like to argue that the CBO was wrong. But that’s not the argument Ferguson is making — he is deliberately misleading readers, conveying the impression that the CBO had actually rejected Obama’s claim that health reform is deficit-neutral, when in fact the opposite is true.

More than that: by its very nature, health reform that expands coverage requires that lower-income families receive subsidies to make coverage affordable. So of course reform comes with a positive number for subsidies — finding that this number is indeed positive says nothing at all about the impact on the deficit unless you ask whether and how the subsidies are paid for. Ferguson has to know this (unless he’s completely ignorant about the whole subject, which I guess has to be considered as a possibility). But he goes for the cheap shot anyway.

We’re not talking about ideology or even economic analysis here — just a plain misrepresentation of the facts, with an august publication letting itself be used to misinform readers. The Times would require an abject correction if something like that slipped through. Will Newsweek?

Anyone who has read the last few parts of Ascent of Money knows that Ferguson is in love with himself and is as dumb as a sack of hammers. Aug. 19, 2012 at 8:19 p.m.REPLYRECOMMEND49

Paul,

No ideology? He is an ardent Republican and was an adviser to John McCain in 2008. I had to read Wikipedia to learn Niall Ferguson’s bio. You have a subsection under Niall’s entry:

'Exchanges with Krugman In May 2009, Ferguson became involved in a high-profile exchange of views with… Paul Krugman... arising out of a panel discussion hosted by Pen/New York Review on 30 April 2009, regarding the U.S. economy. Ferguson contended that the Obama… policies are [both] Keynesian and monetarist, in an incoherent mix… that the government's issuance of a multitude of new bonds will cause an increase in interest rates. Krugman… extended the criticism to China and the European Union, as both pursued policies more in accord with Ferguson's stance than Krugman's. Krugman argued that Ferguson's view is 'resurrecting 75-year old fallacies' and full of 'basic errors'. He also stated that Ferguson is a 'poseur' who 'hasn't bothered to understand the basics, relying on snide comments and surface cleverness to convey the impression of wisdom. It's all style, no comprehension of substance.' In 2012, Jonathan Portes, the Director of the National Institute of Economic and Social Research, noted that subsequent events had shown Ferguson to be wrong: 'As we all know, since then both the US and UK have had deficits running at historically extremely high levels, and long-term interest rates at historic lows: as Krugman has repeatedly pointed out, the (IS-LM) textbook has been spot on.'

Here Is My Favorite Niall Nonsense

While it is hard to pick just one out of Ferguson's plethora of prevarications, this really stands out:

'Under this president’s policies, the debt is on course to approach 200 percent of GDP in 2037—a mountain of debt that is bound to reduce growth even further.'

Just exactly how is this 'mountain of debt' - even assuming the numbers are correct - 'bound to reduce growth even further?'

Even 'Deficit Hawk' Paul Ryan was in favor of increasing spending to stimulate growth as documented in his letters requesting grants to his district. Basic Keynesian principles call for much higher debt in recessions to stimulate growth and many GOPers today have argued that cutting defense spending now will gut the economy of jobs.

Where is Niall's evidence that increased federal debt is 'bound' to reduce growth further. Is there any right-wing economist out there who offers proof that increasing U.S. debt would actually cause a reduction of growth?

The plain fact is that over the past 4 years, federal debt has grown exponentially and the economy is much better because of it. Even Romney acknowledges that drastic spending cuts would devastate the economy which is why everyone wants to avoid the sequestration of spending due on January 1.

Niall just makes stuff up and never proves anything.

Aug. 19, 2012 at 7:19 p.m.REPLYRECOMMEND34

Slipped? Greenlighted!

Aug. 19, 2012 at 4:50 p.m.REPLYRECOMMEND29

This error is disgusting. My bet is the Newsweek will not correct it.

In addition, the Newsweek cover is disgusting. I am repulsed by this trash.

Aug. 19, 2012 at 4:47 p.m.REPLYRECOMMEND72

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Paul Krugman ... Thank you ... hopefully there can be a mature discussion about the policy options and the impact decisions made by corporate leadership in the banking and the general corporate community have had on macro-economic performance, not to mention the 'austerity' strategy in many of the States and local government either for ideological reasons or simply because of the ongoing financial crisis.

For me, the stimulus at the Federal level less the cutting back at the local level was never going to be enough to get the unemployment down significantly. This was aggravated by the decisions of big corporations to retrench in the US even if expanding overseas ... and no metrics whatsoever to get these actions into any accounting for societal impact.

The last three years have not been a sprint out of the 2007/2008 crisis, but a steady and low risk improvement that has stabilized the US economy quite well ... with, as I have already observed. with very little help from the broader corporate and investor class.