How I Am Reality Based, and Republicans Aren’t
Lofty title, eh? Got your attention though. 
Mr. Lynne sent me this very interesting link, whereby mathy statistics geek Mark C. Chu-Carroll eviscerates some of the “but the New Deal didn’t do anything to help us out of the Great Depression” arguments circulating around Republican circles.
But to argue that unemployment was not reduced by hiring three million people? That’s idiocy. And Ms. Shlaes (and most of the people citing her) know it. In fact, she basically admits it herself, but handwaves her way past it: “To be sure, Michael Darby of UCLA has argued that make-work jobs should be counted. Even so, his chart shows that from 1931 to 1940, New Deal joblessness ranges as high as 16% (1934) but never gets below 9%. Nine percent or above is hardly a jobless target to which the Obama administration would aspire.”
Read that carefully. She’s admitting that WPA programs reduced unemployment by nearly half. (And even that’s using skewed figures. Different ways of estimating unemployment during the Depression range as high as 25%.) But even in the midst of her argument about how the New Deal didn’t decrease unemployment, she’s admitting that it reduced unemployment quite dramatically.
As I said, this is a typical way of using statistics in a misleading way. Pick a statistic that measures quantity A, and use it as if it measures quantity B. You can see arguments like this all over the place.
But he’s egalitarian, and brings up a myth some progressives talk about too.
To cite another example, this time from the other side of the political spectrum: when criticizing the Bush administration’s fiscal policies, you constantly hear people talking about the Clinton surplus. They tell you that under Bill Clinton’s fiscal policies, the federal government’s budget went from operating at a huge deficit to a huge surplus.
The problem is, there was no surplus. There was never a real surplus under President Clinton. It’s once again a game of switching metrics.
[snip]
When someone talks about the surplus, they’re playing a misleading game by using invalid metrics. But by citing one quantity (total government income including money borrowed from social security), and pretending that it represented a different quantity (total government income from general taxes), they can dishonestly claim to have balanced the federal budget, and produced a surplus.
I’ve been saying that since Bush’s initial “let’s cut taxes cuz we got a surplus” bull in 2000. The surplus wasn’t really a surplus, but a surplus in Social Security receipts, deliberately saved up over the previous two decades for the baby boomers under a tiny SS tax increase under Reagan and his Democratic Congress, one of the few long-sighted fiscal things Regan ever did (or allowed to happen). Remember Al Gore’s “lock box” argument in presidential debates? Yeah, that’s what this was all about.
Sure, some liberals talk about the surplus in the manner Mark mentions. But really, it was Republicans using this same claim as a justification for tax cuts that got us into some serious hot water very early on. I wonder who did more damage?
And that, my friends, is how I am reality-based more than my Republican friends. Because I’d rather speak the truth than score political points. (Er, regarding talking about a Clinton surplus, I mean. I hope I score some political points for pointing out how I don’t like to score political points.) 
February 10th, 2009 at 11:45 pm
What a coincidence, I just started reading Shlaes’s book.
Alex Tabarrok already covered this over at Marginal Revolution and he explains why your critique is wrong:
http://www.marginalrevolution.com/marginalrevolution/2008/11/unemployment-du/comments/page/2/
He hits it on the head here:
Moreover, it’s quite reasonable to count people on work-relief as unemployed. Notice that if we counted people on work-relief as employed then eliminating unemployment would be very easy - just require everyone on any kind of unemployment relief to lick stamps. Of course if we made this change, politicians would immediately conspire to hide as much unemployment as possible behind the fig leaf of workfare/work-relief.
There is a second reason we may not want to count people on work-relief as employed and that is if we are interested in the effect of the New Deal on the private economy. In other words, did the fiscal stimulus work to restore the economy and get people back to work? Well, we can’t answer that question using unemployment statistics if we count people on work-relief as employed.
The whole of idea that the New Deal prolonged the Depression is not a vast rightwing comspiracy. They did a survey some years ago found that HALF of all economic historians agreed that the New Deal prolonged the great depression. If anyone is interested in the subject, I suggest reading FDR’s Folly by Jim Powell, America’s Great Depression by Murray Rothbard, or Depression, War, and Cold War by Robert Higgs.
And just so we’re clear. FDR was simply following Hoover’s footsteps much in the same way as Obama is following in Bush’s footsteps. I know you Dems like to think you’re different, but you guys are doing the same thing as your precursors, only in larger quantities. (To be fair, Reagan basically followed Carter’s footsteps when it came to deregulation, but I doubt you want to admit that too).
If only Ron Paul were president!
February 11th, 2009 at 8:30 am
If only economics were required in high school. But, given that we can’t teach the science of evolution, I suppose it’s too much to ask to teach economics.
>>Moreover, it’s quite reasonable to count people on work-relief as unemployed.
Right. Ask someone who’s unemployed with no income if they think that’s the same as being paid on some work-relief program. One can’t feed their family, the other can. Increasing the number of people that can put groceries on the table by 45% matters to people. Strangely, it doesn’t count to Republicans.
The licking stamps example would stimulate the economy and create jobs far beyond just the people directly hired to lick stamps. The stamp lickers would buy bottled water, which requires people employed at grocery stores, people transporting food, people buying gas, and people manufacturing water bottles, and people filling water bottles. Maybe they’d drink from the tap, which necessitates them renting a home with a water faucet, buying a car to get home, buying a dog to guard the home, and buying a vacuum to get the dog’s hair off the couch.
The simple point is that money given to people at the bottom will be spent many times over, having a multiplying effect through the economy.
February 11th, 2009 at 4:37 pm
This is not true:
An example of the latter kind of tax is social security, which is only supposed to be used to pay social security benefits. Any excess in social security is supposed to be put away for future retirees.
The Social Security Act requires, by law, that excess Social Security taxes - above and beyond the cost of that year’s benefits - be put in the general fund along with income taxes. It is not “supposed to be put away for future retirees.” It is against the law to do so. Social Security, like the Marine Corps and TANF and NASA, is funded year-to-year, with that year’s tax receipts and/or debt.
What’s more, it isn’t even true that there is a “metric error” in saying that the US government ran a surplus in the late 1990s. It is true that that figure includes Social Security income. You know what else it includes? Social Security expenditures!
February 11th, 2009 at 4:42 pm
If I define “unemployed” as meaning “people who haven’t waited on me in the last week,” it’s, like, 99%. This is fun!
It’s notable that neither of Josh’s arguments are about economics, but rather politics. He doesn’t like the implication that counting people working a certain variety of job has for public policy, and that’s supposed to be a valid reason for changing the definition of employed.
February 11th, 2009 at 6:45 pm
Mike: The multiplier effect vastly overblown at its worst and relative weak at best. And by your argument, we might as well convert to socialism since government spending will increase the multiplier effect infinately!
Joe: How are my definitions political? I can turn you logic the other way and say the government sent a check to everyone last year, so now they have income and can be counted as employed. We now have 0% unemployment!
Did you actually read my post? As Tabrrok points out:
“There is a second reason we may not want to count people on work-relief as employed and that is if we are interested in the effect of the New Deal on the private economy. In other words, did the fiscal stimulus work to restore the economy and get people back to work? Well, we can’t answer that question using unemployment statistics if we count people on work-relief as employed.”
The question being debated is whether the New Deal prolonged or helped get us out of the depression. Statistics are just numbers until we give them meaning. In this case, Shlaes’ numbers are much more useful for analysis.
February 12th, 2009 at 8:58 am
Your definitions are political, Josh, because 1) you insist on diverging from the longstanding, accepted definition of the term “employed” - using it in a manner that would make all police, firefighters, Congressmen, judges, and DPW workers unemployed - and 2) your stated reasons for doing so are explicitly political.
Of course if we made this change, politicians… How is that not political? “If we did this, politicians will….” That’s politics!
The question being debated is whether the New Deal prolonged or helped get us out of the depression. Statistics are just numbers until we give them meaning. In this case, Shlaes’ numbers are much more useful for analysis. The government, and private analytical organizations, disaggregate public and private jobs all the time. The government keeps track of their own employment levels - how do you think they know how to send out pay checks?
February 13th, 2009 at 9:12 am
No Joe, what changed was the government’s role from provider of essential services to makeshift work employer.
“Of course if we made this change, politicians… How is that not political? “If we did this, politicians will….” That’s politics!”
Umm you have it backwards. Tabarrok is talking about if we made the change to how YOU want to caculate unemployment. It’s actually the people on your side who want to use an alternative measurement for unemployment. You’re the one who’s diverging, so if you want to argue that this makes one political, then it looks like you’re the one making political arguments.
February 15th, 2009 at 4:23 pm
No Joe, what changed was the government’s role from provider of essential services to makeshift work employer.
Oh, OK. Just as long as your argument for changing the definition of “employed” is rooted in economics, and not political theories.
Tabarrok is talking about if we made the change to how YOU want to caculate unemployment. There is not change to how I want to calculate unemployment. People employed by the government have always been counted as employed.
Police, Fire, DPW, federal-state-local-county office workers, military personnel, human services - these positions have always been counted as employed workers.