Krugman’s Hackery on Deficit Hawkery

Just about everything Paul Krugman writes nowadays is in some way related to rationalizing the Obama deficits. Now, Krugman’s a smarter man than I, but I think it’s pretty clear that his partisanship drives his economic analysis these days, rather than the other way around.

Yesterday Krugman turned a case against the euro into a mind-boggling attempt to justify Greece’s fiscal shenanigans over the past few years:

Right now everyone is focused on public debt, which can make it seem as if this is a simple story of governments that couldn’t control their spending. But that’s only part of the story for Greece, much less for Portugal, and not at all the story for Spain.The fact is that three years ago none of the countries now in or near crisis seemed to be in deep fiscal trouble. Even Greece’s 2007 budget deficit was no higher, as a share of G.D.P., than the deficits the United States ran in the mid-1980s (morning in America!), while Spain actually ran a surplus.

So because the U.S. ran a budget deficit of about 5% of GDP when existing public debt was about 50% of GDP, that makes it OK for Greece to run a deficit of just under 5% of GDP when existing public debt was about 100% of GDP? As for Spain and Portugal, the rigidity of their labor markets contributes to unemployment – and in Spain the popping of an enormous housing bubble has intensified the effect. He continues:

The problem is that deflation — falling wages and prices — is always and everywhere a deeply painful process. It invariably involves a prolonged slump with high unemployment.

Oh really? Tell that to economists who study the classical gold standard. From about 1880 to 1914, prices dropped on average 2% per year, even as the Second Industrial Revolution motored on. And here comes the inevitable payoff:

The deficit hawks are already trying to appropriate the European crisis, presenting it as an object lesson in the evils of government red ink. What the crisis really demonstrates, however, is the dangers of putting yourself in a policy straitjacket. When they joined the euro, the governments of Greece, Portugal and Spain denied themselves the ability to do some bad things, like printing too much money; but they also denied themselves the ability to respond flexibly to events.

Because everything has to relate back to defending the U.S. government’s unconscionable fiscal excesses. If Krugman really thought monetary pump-priming is always necessary to get a local economy back on track, he would favor abolishing the dollar and breaking the U.S. up into optimal currency areas.

More to the point, Krugman’s (lack of) concern about budget deficits is strangely selective. Back in 2004, he castigated the Bush Administration for “enormous” budget deficits and “irresponsible” tax cuts. So much for the objectivity of the scholar.

5 thoughts on “Krugman’s Hackery on Deficit Hawkery

  1. Nice points. I have to say, though, that Krugman’s tiresome defense of Obamanomics is less grating than his loathing of Bush was. Bush literally made his head come unscrewed, I think. Every column was simply him screaming “Bush is so evil I can’t stand it anymore!” It was terrible commentary.

    Isn’t it a shame that Krugman, probably the columnist with the best economic credentials in the history of punditdom, has to also be one of the most rabidly partisan? What a loss. And now he likes to pretend that all reasonable economists are Keynesians, even though Keynes has been lying completely dormant for decades in academic economics.

    I miss the days back when Krugman used to write intelligent articles for Slate, about things like how everything really comes down to sensible monetary policy. (Then he went on to completely dis Friedman, the father of monetarism).

    I should stop, before my head comes unscrewed!

  2. You know, I didn’t read Krugman much back then, mostly I think because the NYT was behind a paywall then! 😀 But I think his head (for serious economics) has come unscrewed. Actually, he seems to be a great example of what political behaviorists call “partisan rationalization” – he’s a strong partisan identifier who subconsciously takes cues from party elites on what he should think.

  3. Yes, Krugman is a partisan rationalizer. Lots of liberal pundits went to shrill factor of one million during the Bush years, and it stuck.

  4. “[Krugman’s] partisanship drives his economic analysis these days, rather than the other way around”

    Why all the hostility towards Paul Krugman?

    He’s an unabashed fan of Keynesian macro-economics and his views on fiscal (and monetary) policy flow from that. They have been consistent for the 15 years that I’ve read him regularly.

    You evidently don’t agree with those views and a lot of the time, I don’t agree with them. But they’re hardly “partisan” … Krugman has applied them even-handedly to the US, France, Greece and Japan. What Japanese party has he sold out to?

    1. The problem is that he doesn’t apply those views consistently. Right now he’s defending big deficits everywhere (even in good times!) because his favorite administration is running big deficits. But in 2004, he was a deficit hawk. Even on trade, he’s dramatically weakened his strong, previous view that unilateral free trade is essentially always the best policy, in favor of “tough action” against China.

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