Even as Matthew Yglesias continues to defend Keynsian economics, he appears to have sincerely pivoted away from his own stats.

Even as Matthew Yglesias continues to defend Keynsian economics, he appears to have sincerely pivoted away from his own stats.

We all enjoy taking the occasional shot at Matthew Yglesias, but credit where it’s due: at least he’s willing to take the occasional shot at his own side:

Even as the Obama administration continues to defend the American Recovery and Reinvestment Act from its critics, the White House appears to have sincerely pivoted away from the idea that a higher level of aggregate demand would reduce unemployment and instead embraced the notion that there’s basically nothing that can be done in the short-term.

He brings up Obama’s “ATMs cause unemployment” comment from a few weeks ago (and makes a decent point of rebuttal), and then gives us a chart:

Yep. Swiped it. Then he says:

It shows that the housing crisis and the problems in the banking sector led to a historically unprecedented drop in personal consumption. It also shows that while consumption has ticked back up, it hasn’t returned to its pre-recession trend level.

Maybe it isn’t back at its “pre-recession trend level” yet, but — assuming Yglesias’ data is good — it has exceeded its pre-recession high. According to his own chart, personal consumption expenditures are higher in 2010 and 2011 than in 2009.

All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services.

True dat, but as Yglesias himself has already shown, households aren’t spending fewer dollars — they’re spending more dollars.


One strategy would be to ensure that all else is not equal and that government spending fills the gap opened up by the collapse in private spending.

As he himself has just shown, there’s been no “collapse” in private spending. Still: more government spending!

But that hasn’t happened. Federal spending has continued roughly at trend levels, and state/local spending has also fallen below trend. The result is mass unemployment.

Greater personal spending plus “normal” growth of federal spending (as Yglesias’ describes it) plus a slight decline in local spending equals “mass unemployment.”

The thing is, his hypothesis isn’t wrong. Greater consumer spending should have a positive effect on the economy. His own numbers show greater consumer spending, and yet the economy continues to sputter.

Why would that be, I wonder?

Via Memeorandum. More brilliant commentary at The TrogloPundit.

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