September 03, 2003

Why Oh Why Can't We Have a Better Press Corps? Part CCCXXVII

*Sigh.* Why oh why can't we have a better press corps? Part of a phone conversation with a reporter who refused to accept my answer to his question, "Is the deficit good or bad?"

Me: "Short-term countercyclical deficits when unemployment is high are good: they boost employment and production, keep the economy from falling further into recession, and make us a richer society. Moreover, confidence that the government will act to stabilize the economy reduces risk, raises investment, and helps long-run growth. However, long-term structural deficits are bad: they drain the pool of savings that businesses rely on to fund investment spending, reduce the stock of productive capital, and slow economic growth."

Him: "But are deficits good or bad?"

Me: "The best policy has substantial short-run deficits when unemployment is relatively high, but substantial surpluses on average over the business cycle."

Him: "Why are you evading the question? Are deficits good or bad?"

It shouldn't be that hard, should it? I mean, if the pigs can teach the chickens and the sheep of Animal Farm the key slogan, "Four legs good! Two legs bad!",* we economists should be able to teach the press corps of America the slogan, "Countercyclical deficit good! Structural deficit bad!", shouldn't we?

*Sigh.*


*I always wondered what the chickens and the other fowl thought of that slogan, actually. It does have the unfortunate implication that avians are class enemies, after all...

Posted by DeLong at September 3, 2003 02:43 PM | TrackBack

Comments

Wings count as legs.... The issue was brought up in the novel.

Posted by: Nicholas Weaver on September 3, 2003 02:49 PM

Well, I and millions of others wouldn't know a countercyclical deficit from a structural deficit, so even if you teach the good people of the press to recite it, we readers will no more know what it means than "four legs good, two legs bad".

And to follow up Nicholas Weaver's comment, Snowball (Trotsky-figure) explains to the birds that "A bird's wing, comrades, is an organ of propulsion and not of manipulation. It should therefore be regarded as a leg." (p41 in my edition).

Posted by: Tom Slee on September 3, 2003 03:07 PM

"Why are you evading the question? Are deficits good or bad?"

Another distressing encounter with one of those terrible simplifiers who constitute the fourth estate ...

Posted by: Abiola Lapite on September 3, 2003 03:34 PM

Hey, this kid earns somewhere between $20,000/pa (in Albert Lea, MN) and $115,000/pa (in San Jose) -- and he is far more under the thumb of the boss, and far more vulnerable to unemployment than most of the people he talks to. He has 40 minutes until deadline, and he has a line to fill in a script. If he can't get you, he'll have to move on down the pecking order. Don't be a time-waster.

Posted by: jda on September 3, 2003 04:06 PM

"Why are you evading the question? Are deficits good or bad?"

Yes. Just say yes. The answer is always "yes" or...

orange.

Posted by: dennisS on September 3, 2003 07:05 PM

One of my favorite journalistic gaffes is "igon value" from one of Malcolm Gladwell's New Yorker pieces. I guess he and his editors never took a single linear algebra course. (I actually really dig Gladwell's pieces in general).

http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm

Posted by: ETC on September 3, 2003 07:45 PM

Would it hurt so much to say "There can be times when a reasonable deficit is good, if you spend the money right. *This* deficit is bad, it's too big, and they're not spending the money right." ??? That's pretty quotable, and seems to fit what I (and, I think, you) think the truth is.

I usually agree with your headbanging on the press -- but is it so terrible to package what one has to say in ways that lend themselves to quotation?

Ok. Soundbites. There. I said it.
-mf

Posted by: Michael on September 3, 2003 08:14 PM

http://www.online-literature.com/view.php/animalfarm/3?term=birds

"Four legs good, two legs bad." This, he said, contained the essential principle of Animalism. Whoever had thoroughly grasped it would be safe from human influences. The birds at first objected, since it seemed to them that they also had two legs, but Snowball proved to them that this was not so.

"A bird's wing, comrades," he said, "is an organ of propulsion and not of manipulation. It should therefore be regarded as a leg. The distinguishing mark of man is the hand, the instrument with which he does all his mischief."

The birds did not understand Snowball's long words, but they accepted his explanation, and all the humbler animals set to work to learn the new maxim by heart. FOUR LEGS GOOD, TWO LEGS BAD

Posted by: Chris on September 3, 2003 08:28 PM

"Would it hurt so much to say "There can be times when a reasonable deficit is good, if you spend the money right. *This* deficit is bad, it's too big, and they're not spending the money right." ??? That's pretty quotable, and seems to fit what I (and, I think, you) think the truth is."

Hypothetical response: "You're STILL not answering the question, Professor DeLong! Why won't you just tell me whether deficits are good or bad?"

Never underestimate the human capacity for obtuseness.

Posted by: Abiola Lapite on September 3, 2003 08:31 PM

Can you imagine this guy in his personal life? He's thinking about buying a house, and he stuck: are debts good or bad? Let's say he gets over his fear, and buys a house. Now he knows that debts are good. Then he wanders into a casino, and sees that they let you use credit cards to buy chips...

Posted by: Walt Pohl on September 4, 2003 02:00 AM

Tom Slee's response worries me, but he is not a reporters assigned to write a piece on the deficit. If Tom doesn't know the difference between structural and cyclical deficits, it is because of reporters like the one in question.

I appreciate that, as some correspondents suggest, making a reporters life easy is a good idea. This guy, however, was assigned the job of calling a university professor in economics and former Treasury Department officials, to gather up quotes for an article meant (ostensibly, anyhow) to inform his readers about the federal deficit. Right about now, he should be having that dream about showing up for the final exam and realizing you missed all the lectures. Instead, he accuses Brad of avoiding the question. Maybe he could have asked the difference between structural and cyclical deficits (or between "structural" and "cyclical") rather than behaving like a cocky little #^%@. Me? I give reporters one chance to be polite, two chances to admit when they need clarification.

Come on, Perfesser, name the reporter.

Posted by: K Harris on September 4, 2003 04:35 AM

In further defence of ignoramuses...

I do agree with K. Harris that he could have asked for an explanation of the terms, but our host/interviewee could have offered one too. I have worked in more than one scientific and technical profession, and it just isn't that hard to avoid the jargon of the discipline/trade/whatever.

The phrase "countercyclical deficit" is jargon. Useful in its place, but exclusionary in day-to-day discussion with the general public. Same with "structural deficit".

On thinking a little about them, and having read a lot of economics for a non-economist, I did realise what they meant. But is it really so hard to do what Michael, above, says, and give a rough-and-ready description? I don't think so. Of course, Abiola Lapite may be right and the reporter may still not get it, but let's give the guy the benefit of the doubt for the moment.

Oh, and by the way, just to help me understand how this discussion relates to the current US deficit, exactly what part of the business cycle is the US in? I'm assuming this is an obvious question that everyone agrees on, right? :-)

Posted by: Tom Slee on September 4, 2003 05:33 AM

"countercyclical deficits" boy is that a classic example of experts issolated by their own vocabulary. A double negitive meets a bicycle!

What the press is offering you is the chance to tell your story to the public in terms the public can understand. If the press can't understand you that's not their fault. It is the very very rare reporter who has the skill to translate from the expert's knowledge into that of the masses. It is far more likely you the expert can do it for them - at minimum you must met them 80% of the way.

Getting a story that can be told and understood very important.

The budget is like ground water. You draw it out of the well to grow the crops. If you draw too much over the long term the well will go dry and your neighbors will get mad. Now a recession is like a fire. During a fire it's a little silly to worry about the well going dry - at that point it's important to worry about putting the fire out. But we have a problem. The president is drawing water out fast - a good first step - but he's wasting it. He's not to put out the fire. He's handing out bottled water to his friends. Maybe he's hoping they will pee on the fire? Trickle down?

Posted by: Ben Hyde on September 4, 2003 05:57 AM

"countercyclical deficits" boy is that a classic example of experts issolated by their own vocabulary. A double negitive meets a bicycle!

What the press is offering you is the chance to tell your story to the public in terms the public can understand. If the press can't understand you that's not their fault. It is the very very rare reporter who has the skill to translate from the expert's knowledge into that of the masses. It is far more likely you the expert can do it for them - at minimum you must met them 80% of the way.

Getting a story that can be told and understood very important.

The budget is like ground water. You draw it out of the well to grow the crops. If you draw too much over the long term the well will go dry and your neighbors will get mad. Now a recession is like a fire. During a fire it's a little silly to worry about the well going dry - at that point it's important to worry about putting the fire out. But we have a problem. The president is drawing water out fast - a good first step - but he's wasting it. He's not to put out the fire. He's handing out bottled water to his friends. Maybe he's hoping they will pee on the fire? Trickle down?

Posted by: Ben Hyde on September 4, 2003 05:59 AM

When I talk to reporters about the deficit, and try to make the point Brad does, I find that they usually get it right. I usually focus on "short-run" vs. "long-run" deficits to make the distinction.

Posted by: Dave on September 4, 2003 06:22 AM

"'countercyclical deficits' boy is that a classic example of experts issolated by their own vocabulary"

Ah, come on now, it isn't that hard to understand! Certainly I'm no expert in economics (background consists of having taken the intro macro and micro courses in the '73-74 academic year, at a school better known for football than economics), and I can figure out what it means. It's a matter of speaking educated English.

Posted by: rea on September 4, 2003 08:50 AM

Can one of you economists explain something just as simple: *Why* are deficits (funded by selling bonds) good during a recession?

I mean, I can understand why printing money and spending it on stuff might stimulate the economy, especially if the inflation rate is close to (or below) zero. More money in the economy gets things going on the demand side, people buy stuff, and if inflation goes up a bit, people will buy stuff *now* rather than later when their money is worth less.

But if one borrows money from investors and then spends it, why would this be stimulative? Every extra dollar that gets spent is a dollar that would otherwise likely been invested elsewhere (increasing supply and perhaps also demand) or spent (directly increasing demand). The net effect on the economy would be fairly small, and depending on what those dollars would be doing otherwise, perhaps negative.

I suppose that if the money that bond investors lend the government was sitting around in mattresses, this would work, but even in this period of low inflation, most money *doesn't* sit in mattresses. It sits in bank accounts, allowing banks to lend it to consumers to spend or to businesses to invest. It sits in corporate bonds and stock (invested). Why should one expect that government spending would be significantly more effective at producing growth?

To flip this question around: given a serious, near-deflationary recession, why *doesn't* the government spend money it doesn't have without actually going to the trouble of borrowing it? (The trick, of course, is figuring out when to stop, to avoid hyperinflation...)

Posted by: Alex R on September 4, 2003 09:00 AM

"Why are you evading the question? Are deficits good or bad?"

"They are bad when they go on forever, but good if they are just during recessions."

Posted by: Tom on September 4, 2003 11:03 AM

Small deficits in hard times good; Big deficits you can't get out of bad.

You gotta dumb it down.

Posted by: froz gobo on September 4, 2003 12:28 PM

@Ben Hyde: fantastic metaphor. Relating to this discussion and your own site I made a Dutch translation on my site. Great. In the Netherlands we have a governent were they start discussing the use of the word "pee" in this context before even discussing the question if there is a fire ora drought!
@Brad: i get the idea the journalist was less intelligent then you maybe even less then me but in some way he was right that you were evading A question: you took his question for a purely economic one (he was phrasing it like that okay) while it was (or should have been) a political one. You had the opportunity to give a sound advice

Posted by: Fransgroenendijk on September 4, 2003 02:49 PM

Quick vocabulary check: Is this more-or-less right?
"nominal interest rate" = the one set by the fed
"real interest rate" = prime rate charged by banks

(used in brookings institute study, slide 6 or 7)
http://www.brook.edu/views/papers/gale/20021217.htm

Posted by: contract3d on September 4, 2003 04:14 PM

"Quick vocabulary check: Is this more-or-less right?
"nominal interest rate" = the one set by the fed
"real interest rate" = prime rate charged by banks"

Wrong. A nominal interest rate is just what its' name indicates - the purely nominal figure charged on a loan by a creditor.

The real interest rate is the true rate after accounting for inflation. You obtain this figure as (1 + nominal rate)/(1 + inflation rate), where both rates are stated in decimal terms, i.e, 11 percent is actually 0.11.

Neither real nor nominal rates have anything to do with fed vs. ordinary bank distinctions per se. Look up info on the following for starters: "discount rate", "federal funds rate", "prime lending rate".

Posted by: Abiola Lapite on September 5, 2003 03:49 AM

Well, as a member of the fourth estate, I can say that you were both wrong. You were wrong for not making the slightest attempt at making the issue clear for the reporter. You could have dumbed it down a bit. After all, the reporter has to do that anyway and isn't it better if you do the abbreviating? Couldn't you have held the "countercyclical" and "structural" I'm-so-smart crap and said something like, "well, it can be both good or bad. It's bad if it's a permanent long-term part of the economy, but useful if it helps pull the economy out of a recession."
The reporter was wrong for not seeing that you were trying to impress him or her with your advanced degrees and seeing that you were really saying, basically, was, "It depends."

My $.02

Posted by: groundhogx on September 5, 2003 04:33 PM

The cyclical argument is clear cut. But why would you want to have a structural government surplus, though? If you do, the debt-to-GDP ratio will asymptote to zero (assuming economic growth is positive) - surely a silly policy if future generations benefit in any way from government spending now. Shouldn't there be a structural deficit (the size of which would be a function of the trend growth rate of the economy)?

ps - I'm assuming debt interest service payments show up in the surplus / deficit

Posted by: Fergal on September 8, 2003 07:44 AM
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