Why oh why can't we have a better Paul Krugman?

Geoffrey Manne —  5 February 2009

Krugman’s latest opinion piece is here. Like me, Paul is beating the same drum over and over (oh, and by the way, like at DeLong’s place, my comments mysteriously don’t show up on his blog.  Odd.  I swear I am civil and engaged. I’m not sure why I am blacklisted.  Could it be that I disagree vehemently? Nah.)  At any rate, here’s a taste:

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.  It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive.

Now, I think the Republicans are as abominable as the next guy (or at least as abominable as the next Democrat).  But Paul’s desire to score political points at the expense of reality really renders him senseless.  I’d actually like to see what he has to say.  I wish he would engage as an adult in the “deadly serious debate” before us.  And yet all he can muster is blithe dismissal of arguments skeptical of the net value of the massive government spending porkfest before us as “old cliches about wasteful government spending and the wonders of tax cuts.”  Oh, and the Democrats, who have never spouted cliches in their lives, of course, are forced on the defensive–helpless, noble stimulators, brought low by the crass politicking of the Republicans.

Except there is a strong economic case–not mere political cliches, whether Paul agrees with it or not– that suggests that tax cuts might work better (and more quickly).  There is evidence (in the very text of the bill) that this has turned into an embarrassing and ineffectual wish list of Democratic shibboleths instead of a “targeted, temporary and timely” stimulus package.  There is evidence that the long-term (and we’re not talking that long-term–I plan to be alive in 2019, you?) effect of the current plan is net negative.  But never mind all of that–it’s just Republicans playing politics (this part is true of the elected officials, I assume, but Krugman would thusly tar the ideas of Barro, Mankiw, Murphy, Lucas, Becker, Cochrane, Zingales, etc., etc.) and Democrats trying to save the world (this part is patently false, of course).

Why of why can’t we have a better Paul Krugman?

Geoffrey Manne

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President & Founder, International Center for Law & Economics

6 responses to Why oh why can't we have a better Paul Krugman?

  1. 
    John Limberakis aka Econotics 10 February 2009 at 9:21 am

    1) “First, tax cuts, like monetary policy, won’t work in a liquidity trap. The whole problem is that private industry isn’t “taking risks” in the first place.” I think we can argue if we are indeed in a liquidity trap, and secondly the private sector, at least a significant % of the private sector, needs to fix their balance sheets and de-lever before taking on more risk. Collectively we as a society have made, what I believe are, poor decision in regards to debt and spending. Why is the suggestion that we should have some lean years to repair the damage that has been done so taboo? Lefties tend to argue that if we don’t pass a stimulus my idea would lead to massive deflation and the sky falling. I’m skeptical.

    2)”spending on public goods shouldn’t be judged in terms of narrow profit-maximization metrics. They should be judged on their overall benefit to society, and ability to help fuel the economy. Projects like Amtrak provide many less tangible benefits, like pulling polluting cars off the road, providing a far safer form of transportation, and allowing people to travel to different cities and spend money.” The CBO factored all of that into their analysis and still concluded a net loss of .1-.3% GDP by 2019. Government run amtrak loses money – either create more rail infrastructure and privatize it or don’t spill money into more deficit. The last benefit you mentioned was that the increase in public transportation allow people to travel to different cities and spend money. This is a valid point but we live in a society where roads, highways, and airports connect everyone to everywhere. There is a diminishing marginal return on building more roads.

    3) “Third, what happens when people save a portion of their tax cuts? Less goes into the economy. But all of the gov’t spending goes into the economy, so isn’t that more stimulative?” Two things: when people “save” their tax cuts what do you mean by that? If they save it by investing it that is money injected into the economy, if they save it by giving it to banks that helps increase lending and recapitalize the banks. Government spending may go into the economy but it is only a short term stimulus – there is no such thing as a free lunch. Government spending leads to higher baselines which means expansive government! We already have 30% of GDP in the hands of government, do we want more? Where do you want to draw the line? The fiscal stimulus won’t fix the banks, or our balance sheets – it won’t solve the housing burst… so what’s the point? If the 15,000 tax credit for home buying is enacted that might be the exception to the aforementioned point.

    Lastly there could be a contradiction of ideas – you say that we shouldn’t judge the fiscal porkulus by narrow profit-maximization metrics implying that it wouldn’t pass (so multiplier effect in long run is 1? If both are detrimental then either you oppose both, or have determined that without intervention the economy will be worse off then – .1-.3% GDP by 2019. If so can you explain why you believe that?

  2. 

    I don’t find those WSJ critiques you post to very convincing.

    First, tax cuts, like monetary policy, won’t work in a liquidity trap. The whole problem is that private industry isn’t “taking risks” in the first place.

    Second, the argument that the Democratic “shibboleths” have a “negative return on investment” misses the mark–spending on public goods shouldn’t be judged in terms of narrow profit-maximization metrics. They should be judged on their overall benefit to society, and ability to help fuel the economy. Projects like Amtrak provide many less tangible benefits, like pulling polluting cars off the road, providing a far safer form of transportation, and allowing people to travel to different cities and spend money.

    Third, what happens when people save a portion of their tax cuts? Less goes into the economy. But all of the gov’t spending goes into the economy, so isn’t that more stimulative?

  3. 

    More importantly, the Democrats should be on the defensive on this one. If you propose spending $1 trillion+, then the onus of proof is on you not the other guy. So far, they really haven’t done a good job of that, they’ve just been trying to scare people into going along.

  4. 

    Sorry but this spending bill is only rewarding the Democrats partisan supporters. A stimulus should go to the people who need the help not to those who don’t. Half the spending is going to unionized labor. They already have jobs. Why Obama let the socialist side of the party write it shows a lack of knowing what he’s doing. Maybe if he spent some time being a Senator instead of campaigning for four years he would know that.

    And yes my fellow Democrats I’m a proud Republican.

  5. 

    The problem is that one side’s “serious debate” is the other side’s “political cliche.” Sadly, this problem exists on both sides of the debate. It appears that Obama is attempting compromise. My concern is that we get so wrapped in debate that nothing is done. Perhaps that is the preference of some involved in this process.

  6. 

    Even though I am a Democrat who normally agrees with a lefty point-of-view, I have also been banned from commenting at DeLong’s site after disagreeing with him on one issue. (My comments were also removed.)

    When you are deleting civil comments just because someone doesn’t agree with you, you are a hack. Plain and simple.