Monday, June 21, 2010

Someone hasn't been paying attention

and that someone is Nobel Laureate Paul Krugman:

Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?

Very hard, if the current state of political debate is any indication. All around the world, politicians seem determined to do the reverse. They’re eager to shortchange the economy when it needs help, even as they balk at dealing with long-run budget problems......So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control — without that, nothing will work.


Look, I clearly don't have a Nobel Prize or a gig at the Times, but I do remember the last year of history! The government put together a near 1 trillion dollar "stimulus" package and passed a comprehensive health reform bill.

That did happen, didn't it? Or am I just somehow plugged into the Matrix and missing the truth?

The government has enacted a big stimulus package, bailed out GM, extended unemployment benefits and the Fed has undertaken extraordinary expansionary measures. To me, this hardly qualifies as "eager to shortchange the economy".

A disinterested spectator could look at the evidence and easily conclude that old school macro policy didn't work rather than arrive at PK's conclusion which is apparently that it hasn't been tried!

It just seems to be an article of faith with Krugman, DeLong and others, some kind of twisted syllogism:

"Fiscal policy can always bring the economy to full employment. The economy is not at full employment, therefore fiscal policy has not been sufficiently applied."

On the long-run part of the equation, Krugman points, with apparently no sense of irony, to out of control health costs as the killer problem.

Wow. Just wow.

Krugman should be an anarchist at this point, shouldn't he?

He says we need currently need stimulus and health care cost control. Hey Paul, the government has spent most of the last year working on those two issues with apparently no results.

Paul, either your model is wrong or the government is totally incompetent (or both?)

7 comments:

eightnine2718281828mu56 said...

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It just seems to be an article of faith with Krugman, DeLong and others, some kind of twisted syllogism:

"Fiscal policy can always bring the economy to full employment. The economy is not at full employment, therefore fiscal policy has not been sufficiently applied."
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You appear to believe that Krugman predicted success for the stim in 2009 and is now forced into applying your proposed syllogism to defend his position.

But Krugman *predicted* the plan would be too small in the early days of 2009, which was shortly after passage; he didn't arrive at that conclusion through hindsight.

http://krugman.blogs.nytimes.com/2009/03/07/one-sided-debate/
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March 7, 2009, 7:42 am
One-sided debate

One major sin of news coverage, especially on TV, is the way certain points of view just get excluded from consideration — even if many of the best-informed people hold those views. Most famously and disastrously, the case against invading Iraq was just not heard in the months before the war.

And still it happens. According to the invaluable Media Matters, the idea that the Obama stimulus plan might be too small — a view held by many well-known economists — basically went unreported on broadcast news during the stimulus debate. Out of 59 broadcasts addressing the plan, only 3 mentioned concerns that the plan was inadequate. And it’s actually even worse than that: one of those three involved Harry Reid talking about longer-term goals on health and education — and one of the other two was me.

Meanwhile, it’s rapidly becoming clear that yes, the plan was too small.
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eightnine2718281828mu56 said...

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A disinterested spectator could look at the evidence and easily conclude...
---

that Krugman's prediction that the stim was too small was, in fact, correct.

David said...

Michael Kinsley is pissed, too.

Angus and Michael Kinsley -- Substitutes or Complements?

David said...

Oh, here's the pissed post... the pist?

http://www.theatlanticwire.com/editor-at-large/view/article/Krugman-Knows-Best-26

Tom said...

Krugman's prediction that the stimulus would fail was correct, but the "because too small" part has little to support it.

My own prediction that the stimulus would fail was also correct. I'm still clinging to a "cut regulations, bureaucracy, and borrowing" plan.

eightnine2718281828mu56 said...

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the "because too small" part has little to support it.
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Do tell? Back in January 2009 the Krugman critics were predicting that the stim would produce high inflation, rising interest rates, "crowding out" effects, etc. etc.

Eric Cantor listened to this buffoonery and decided to make a bet based on the investment advice he got from the Fox News/WSJ/Limbaugh Axis of Ignorance.

http://www.salon.com/news/politics/war_room/2010/06/18/cantor_bets_against_america/index.html

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According to his 2009 financial disclosure statement, House Minority Whip Eric Cantor is betting hard against U.S. Treasury bonds. The Wall Street Journal reports that Cantor bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF, an exchange-traded fund that "takes a short position in long-dated government bonds." Cantor is basically betting on future inflation.
...
According to the Washington Independent's Annie Lowrey, "the fund is down 31 percent this year."
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Krugman 1, Critics 0

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