At this point I have whiplash from reading Paul Krugman’s blog. I am swamped with stuff so I won’t document the below claims with links; perhaps I’ll come back and do it for posterity. In any event, for the last several years, Krugman has been complaining:
(1) Europe and the US are engaged in “unprecedented” fiscal austerity. The actual policies these people are implementing are insane. For some reason–perhaps to appease the “invisible bond vigilantes” by summoning the “confidence fairy”–policymakers think they need to bring deficits down “now, now, now,” not realizing that the time for budget tightening is down the road, after we’ve returned to full employment.
(2) What’s even more heartbreaking, is that there is no justification for any of this madness. Intro econ courses teach this stuff. Unfortunately, the Very Serious People (VSPs) have hijacked the debate, abetted by a few prominent economists who should know better: guys like John Cochrane and Casey Mulligan. Krugman has been lamenting that nobody listens to him. He, Brad DeLong, and the other people who have been just hitting it out of the park with their predictions, have zero influence on policy. They have been the Cassandras of the Great Recession.
(3) The CBO just announced that the deficit this year will be $200 billion lower than they thought back in February. This difference in forecast is due to $98 billion in lower total outlays–again, this fiscal year alone–and $105 billion in higher expected revenues. To repeat, this change in the CBO’s forecasts occurred from just February to May. At the same time, officially reported economic growth in the first quarter was 2.5%, which is tied for the 6th best out of the last 8 quarters. The official unemployment rate continues to steadily fall. The Fed is even considering pulling back QE3 because of the surprisingly strong job growth.
(4) Paul Krugman cites this as yet another moral and prediction victory on his part. He explains that cutting the deficit by 25% this year alone proves he has been right all along. Further, the deficit scolds are again shown to be fools. Fortunately, Krugman can explain to us the psychological motivation of these scoundrels. In Krugman’s words:
[T]hink about the personal career incentives of the professional deficit scolds. You’re Bowles/Simpson, with a lucrative and ego-satisfying business of going around the country delivering ominous talks about The Deficit; you’re an employee of one of the many Pete Peterson front groups; and now, all of a sudden, the deficit is receding, and you had nothing to do with it. It’s a disaster! [Emphasis original.]
So I’m really confused at this point. Apparently policymakers have been listening to Krugman all these years, as they slash spending and raise revenues to bring this year’s deficit down 25% in just a few months. And, the economy hasn’t hit an additional hiccup in the face of this unprecedented fiscal austerity, just like Krugman has been predicting.
I was pleasantly surprised by this NPR story this morning, which said that the Fed’s zero-interest-rate policy was turning savers into collateral damage. But if you listen closely, around 3:30 you’ll recognize a familiar voice.
I actually haven’t looked into it too closely, being of the “dog bites man” flavor. Here’s my main reaction to it, but I want to give people here a chance to correct me:
This scandal isn’t so much that the IRS was harassing political opponents, like forcing them to hire legal teams and spend a bunch of money just to tread water. Rather, the extra scrutiny was on applications for tax-exempt status.
In other words, what the Tea Party and other groups were being threatened with, was to have to pay the same onerous taxes that…the secretary down the street has to pay.
That’s just how awful our default tax code is, that when the government selectively makes certain people have to bear the full weight of it, we shriek out in horror.
(So, is the above basically right, or were, say, individual Tea Party people targeted for a full audit that ruined their lives etc.?)
==> Some people complained to me when this came out, but I thought Russ Roberts did a good job keeping Sumner honest in this interview. At the very end, Russ says something like (not exact quote), “You tell interesting an interesting story, Scott, it might even be true.”
==> Joe Salerno on the Fed realizing low interest rates might be a problem.
==> Some funny “memes” about the White House scandals and the press.
==> Tom Woods plays with fire. Although the lady in the video is speaking nonsense.
==> JP Koning uses a very Misesian argument about why stocks aren’t a good hedge against inflation.
In a recent post Krugman wrote:
Antonio Fatas is annoyed at Gillian Tett, who talks to the I-see-bubbles crowd and assumes that they have The Truth — namely, that those crazy central banks are flooding the world with liquidity, driving asset prices to crazy levels, and it will all end in terrible grief. Pretty much the same discussion we’ve been having about the armageddon hedgies.
As Fatas says, it’s hard to see what exactly in the data supports this view. Short-term interest rates are near zero because the economy is so depressed, and will stay that way for a long time. Long-term rates are low because people, rightly, expect short-term rates to stay low for a long time. What about stocks? Here’s profits versus the S&P 500…
[Here Krugman inserts a chart showing a decent fit between the chart of after-tax corporate profits and the S&P500 from 2004 to the present.]
Then he admits:
Now, there are some real puzzles here. Why have profits been so strong in a weak economy? Why, with profits so high, don’t businesses find reason to invest more (equipment investment is actually fairly strong, but construction remains weak). (For the seriously wonkish, why do average and marginal q seem to be so different?)
But these seem to be real-side puzzles, not monetary/financial puzzles. I don’t see anything in the data that has the “signature” of what you’d expect if the big problem was that Ben Bernanke is flooding the market with artificial liquidity that has nowhere to go. [Bold added.]
Put aside the laugh line for a minute. What I want to focus on is this: Krugman is here admitting that he is puzzled at why businesses aren’t investing more, and he says this is a “real-side” problem.
Hasn’t he spent the last few years shouting down people who suggested that? I distinctly remember on TV Krugman mocking George Will for blaming “regime uncertainty” (not Will’s term), and Krugman said matter-of-factly businesses weren’t investing because of weak demand.
Did Arnold Kling get control of Krugman’s account for an hour and sneak this one in?
Anyway, this looks like a bubble’s John Hancock to me:
Krugman asks (of his own chart), “Does that scream ‘bubble’ to you?”
Help me out here. The only reason this IRS scandal has any traction, is that the IRS itself admitted it had targeted Tea Party and other groups. There were lots of conservative types complaining about special scrutiny before, and nobody cared.
So why did the IRS come forth with this? And doesn’t it seem weird that all the other scandals broke at the same time?
I have no real explanation for all of this, I’m just very surprised. It would be like Krugman saying, “You know, the big drop in even short term deficit projections, despite (what I have described as) massive fiscal austerity, and all with no ill effect on unemployment, is really really awkward for the Keynesian position. I’m sorry I misled my readers; I’ll try to restore your confidence in IS/LM in the future.”
But Krugman would never say such a thing; instead he would run victory laps. It would be left for his critics to allege it. So is the IRS more intellectually honest than Paul Krugman?
Check out this news story:
KEENE – The city has filed a lawsuit against six citizens, part of a group dubbed Robin Hood of Keene that patrols downtown armed with video cameras and pockets full of change to fill expired parking meters.
Also known as Robin Hooders, the six are associated with the Free Keene group.
“They say video recording or talking to them is harassing them, but I don’t agree with that,” “Robin Hooder” James Cleaveland said of parking enforcement officers. “So they want to establish a safety zone of fifty feet.”
Members of the group place cards under windshield wipers that read, “Your meter expired; however, we saved you from the king’s tariffs, Robin Hood and his Merry Men. Please consider paying it forward,” and includes an address where donations can be sent.
Now I actually know at least some of these people–a lot of the people who live in Keene go to the Porcupine Freedom Festival (“Porcfest“)–and I asked them if they were being obnoxious to the meter maids. My general impression is that they were mostly being courteous, though admittedly people generally get uncomfortable with cameras.
Here’s a clip showing an educated young lad quoting Lysander Spooner to a guy who doesn’t really appreciate it, I’m sure.
I wish I had more time to devote to this story, but I’m too swamped with work. Anyway I just wanted to pass this along as a great example of a way would-be activists to get the message out in a way that is likely to win sympathy, particularly if everyone involved is courteous.