Robert Waldmann quotes from a Mike Konczal post that has already been discredited. Even Paul Krugman has the good sense to avoid adopting Konczal’s losing argument. So it looks like I’ll have to shoot it down one more time.
When you have growth rates expressed as quarterly year-over-year changes, it shows a lagged growth rate. Thus the 2013:1 y-o-y growth rate is actually the economic growth from 2012:1 to 2013:1. That means it is basically showing growth that occurred in 2012. To be more specific, roughly 5/6th of the y-o-y growth for 2013:1 occurred in calendar 2012.
Now let’s suppose we are going to look at the effects of the big tax increases of 2013, including an extra 2% on payroll taxes that Krugman insisted was very important, as well as the spring of 2013 sequester and other cuts. What does 2013:1 y-o-y growth tell you? Almost nothing. The ideal would be to average 2013:4 and 2014:1, to get a point estimate of end of 2013 GDP. Then do the same for an estimate of end of 2012 data. Then compute the rate of change. We don’t even have the data yet to do that, and won’t until late April. But the data we do have suggests that the market monetarist model was almost certainly supported by 2013 data.
Mike Konczal seems to think it is important that David Beckworth used a year-over-year graph for a completely different purpose, and that I endorsed this graph. So what? Unlike Konczal, Beckworth was looking at multiyear changes, where a y-o-y approach is much more valid. And even if he had misused the graph, what possible difference would that make for the 2013 test of MM?
I can’t help thinking of whether Konczal’s criticisms amount to a credible accusation of impropriety.
I’m seeing impropriety all over the blogosphere, but people like Robert Waldmann and Noah Smith don’t seem to know how to recognize it.
PS. Waldmann also criticizes Beckworth’s graph for not including 2013 data, but as Mark Sadowski points out in the comments, the graph was posted before the release of 2013:1 GDP data.