What is Dead can never Die: American Austerity Edition

Yesterday, Sir Mathew Yglesias proclaimed that "2014 is the year American austerity came to an end"

Which kind of cracked me up. I guess the syllogism is (1) we had austerity, (2) austerity hurts growth, (3) growth picked up in 2014. (4) Therefore Austerity is over.


Here's the data series from 2000 through q3 of 2014 (and it's the same data Matt is using):

From this graph I concluded one of two things must be true depending on one's definition of austerity.

Either austerity means nominal cuts and we never had any of it, or austerity means cuts relative to trend and we are still savagely in its grasp.

Relative to the 2000-2009 decade trend, total government spending is roughly 35% lower in q3 of 2014 than it should be. Hard to say austerity is over by that metric.

When I tweeted this at Sir Mathew, he responded that it "seemed like semantics". One of us, and it could easily be me, does not know what that word means.

Financial Journalism 101

Financial journalists are like NFL cornerbacks. They have a very short memory.

No matter what happens, they always have a facile explanation, and little to no concern if the explanation is logically consistent with the explanation for yesterday's events.

I read that the stock market decline yesterday was due to "preliminary bad jobs news" and "bracing for Friday's jobs report".

If the market had surged, it would have no doubt been because the bad news meant the Fed would not be ending its various asset buying programs (the "bad news is actually good news" gambit).

And people, if the market hadn't budged........??

That's right, investors had already "priced in" the news.

Nice work if you can get it and don't mind the smell.