Krugman - still in a tinfoil hat

Photo via Death by 1000 Papercuts.

Whenever I get bored by the political landscape - we're in a gap between GOP primaries right now - there are a few places I can go to get inspired to write something.  I've been busy of late and I haven't been doing that, but today I have some bandwidth and I went back to one I haven't in quite a while: Paul Krugman.  For a Nobel Prize winner, he rarely fails to bring a tinfoil hat perspective to the table.  With the Supreme Court taking a look at the Constitutionality of Obamacare, Krugman has decided that he needed to scold the Supreme Court on their lack of understanding of how health care is different from broccoli.

Krugman tells half a story

The Krugman answer.

Paul Krugman, economist, propagandist, and Keynesian ideologue looks to Europe and sees a failure of countries' attempts at austerity in helping their economies - as if the problem was one that could be solved overnight.  The same liberal logic used to defend president Obama - the recovery will take time - doesn't get applied when Krugman looks at the success or failure of solutions that don't fit his world view.

Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

(emphasis added)

The interesting point is that austerity measures don't produce results overnight, just as president Obama said there were scores of shovel-ready projects that would lift the country out of recession almost immediately turned out to be pure fantasy, it is fantasy to suggest that austerity, during a downturn would provide nothing but roses is a false claim.  Nobody suggested it would.

As for the lessons of history, in the early 1980s the deep economic recession under Reagan was deepened by the high interest rate policy which was designed to deepen the pain but significantly shorten the period of pain.  Krugman has not learned the real lessons of history - that long term solutions are not the best short term solutions.  Looking at the austerity measures taken in Europe in countries that had previously been on unsustainable paths, the long term is set up far better than additional stimulus efforts would have provided.  The point is - the results are not in this has just started.  True, it's painful, that's what happens withdrawal symptoms of an addiction.  But give it 10 years and you'll see an entirely different set of circumstances.  

The sad part of the proof will be this - if Krugman gets his way and Obama gets re-elected, the matter of proving the effectiveness of austerity measures will be easier because the United States will become the control group for the European austerity experiment. Spendthrift American government will end up being the cautionary tale Austrian school economists teach to a new generation of European economic students.

Hurricane Irene and the Broken Window Fallacy

Couldn't fit further left on the page.

So many people have spoken about the Broken Window Fallacy (myself included), that it's become a given that bad news and damage are not good for the economy.  That is it seems, unless you are Nobel Prize Winning economist, and progressivist shill Paul Krugman.

How someone wins a Nobel Prize in economics when they are calling for an alien invasion (or a faux one) is unclear.  How they get one when stuff they should know is blindly ignored is baffling.  How they get credence from a liberal media looking to elevate their side of the economic debate is less surprising, but it doesn't make it smart.  The New York Times may want to do some background checking on Mr. Krugman's economic prowess before continuing to push him as an expert because in the case of Hurricane Irene, he's got one more thing to add to his personal list of wrongness. He falls victim to a perfectly refutable idea that destroys his credibility in other matters completely.

Krugman - Ever Entertaining

If you don't see the humor in the twisting and turning of Paul Krugman on the economy to try to make reality fit his Keynesian vision you'll just want to rip your hair out.

Debunking Krugman, With Quotes From Krugman

This is rich.  Flawed economist, Obama cheerleader and socialist Paul Krugman last week had an article in the New York Times about how Democrats and Republicans view the unemployment situation differently both intellectually and morally.  His take is that the Republican view is dire, anti-human and evil.  His reasoning is that 'textbook economics' proves they are both intellectually and morally wrong.  On the opposite side of the ledger:  Paul Krugman's OWN TEXTBOOK.

Hat tip to Carpe Diem for the story (via James Taranto in the Wall Street Journal via Don Boudreaux).

Here's the relevant excerpt from the NYT piece and then from his textbook.  

The Op ed:

What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment.

The Krugman textbook:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries.

He also says in the Op-Ed piece that Republicans live in a  different universe from him - Yeah, it's called reality.

The Right's (better) Krugman

The conservative movement has a plethora of economists backing its point of view. We've got our better version of Keynes in Milton Friedman. We've got Adam Smith. But who do we have in the 2000's that is our answer to Paul Krugman (NY Times liberal economist and pundit)?

Well, there's Peter Wallison. Who, you might ask, is Peter Wallison? He's the guy in 1999 who predicted a Fannie Mae and mortgage market collapse.

He's this guy;



Why bring this up now? Because he is asserting (rightly so) that the direction on the current financial crisis with respect to Fannie Mae and Freddie Mac is 180 degrees wrong.