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Wednesday, December 28, 2011

Sumner, Krugman and Credibility

      In his most recent post, Sumner claimed in the comments section that Krugman has “zero credibility” on the issue of Fannie and Freddie and their impact on the fianancial crisis.

      The reason for such a dismissal is because here Krugman has had an agenda. Ok, and Sumner thinks he has no agenda?

       No one has more of an agenda than him and is fellow market monetarists, which by the way is not a point against them. I mena why would you listen to someone who has no agenda? Such a fellow is not very interesting.

      But Sumner it seems to be is not always os cirumspect about what his agenda is. He wants to write not only for the Right but to the liberals as well, but is his agenda in the interest of the liberals?

      To the extent that he is any kind of monetarist the answer may be no, as monetarism is basically about trying to ensure that the government never intervenes on fiscal matters at least where this might help the nonrich.

      This last qualification-‘at least not for the nonrich” is why someone like Sumner has good things to say about supply side policies. As I’ve made clear in previous posts, I’m not a “pure fiscalist” if that means that I deny monetary policy has any impact. But the extremes to what people like Sumner, Christensen, etc. think monetary policy can achieve seems to me almost science fiction.

      If a meteor hits the earth wiping out Europe and Asia, no amount of monetary policy-even level NGDP targeting is going to be at all helpful.

     To really figure out where Sumner is coming from I find it helpful to listen to the eager lover of all things austerity, Morgan Warstler. Listen to him explain the financial crisis:

     “the argument is that IF there was no assumption of bailout, FDIC, and GSE there wouldn’t have been sub-prime lending to deal with.”

     “There is nothing wrong with requiring 20% down and forcing banks to sit on their loans rather than selling them off.”

      “There is nothing wrong with 55% home ownership instead of 64%… in the same vein, we WANT lax land use regs that push housing costs down, we want more renters, we want people to not view home ownership as a short or mid term investment.”

      Yeah, the GSEs and FDIC-FDIC caused there to be subprime lending??!-caused the crisis.

       Here he explains Sumner’s agenda for him. I had pointed this out to him:

        “If NGDP is the road map to making the public unions eat it and putting us all on the South Carolina Model then you should be making this case to Paul Ryan, Eric Cantor, and Boehner not “liberal softies” like us.” However, Morgan explains it for us:

       “Scott KNOWS this argument, he WANTS to first win your side over… he thinks it is good strategy.”

       So the point is to somehow convince us liberals that “public unions have to eat it”, the minimum wage should be eliminated, etc. Still Morgan reveals that NGDP is but one road to success:

        “in fact we could do without level targeted NGDP with something like a Balanced Budget Amendment.”

        So NGDP is just another path toward achieving a balanced budget amendment? Well, Morgan, it should be obvious to you why Scott prefers NGDP to directly demanding BBA-as you said above it’s his goal to win us over first. No liberal is going to be won over by BBA but NGDP could do the trick. In any case I like Morgan as he is the first to tell you what GOP strategy really is. Scott on the other hand will work to seem non-partisan or at least a little above such squabbles.

       I have no problem that Sumner has an agenda, but if he is trying to win us over we better be clear that this agenda is not Morgan’s.

       For an idea of Morgan’s agenda check out his website-it is heavy on Christianity, though for him Christianity seems to mean an austere, indifferent government for the plight of the nonrich.



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