I am really busy with work deadlines, so not much blogging for another two weeks or so. But in the meantime, I wanted to point something out, though I don’t have time to buttress my claims with links. Here is my observation: Paul Krugman will say that government spending has surged under Obama (and Bernanke has engaged in monetary stimulus) when he wants to blow up right-wingers for their failed predictions, yet referring to the same period of time he will say that government spending has actually been either normal or even contractionary, when explaining why his Keynesian solutions haven’t fixed the economy. To spell it out more clearly:
==> Right-wingers warned that massive Fed and federal stimulus would lead to rising interest rates and price inflation. Krugman argues that we’ve had massive Fed and federal stimulus, but low interest rates and price inflation, so therefore the right-wingers’ views are totally refuted.
==> Krugman has recommended massive Fed and federal stimulus to fix the economy. He argues that we haven’t had massive Fed and federal stimulus, and that’s why the weak economy doesn’t refute Krugman’s views.
This isn’t simply a matter of “too little.” Krugman has argued that there was no surge at all in government spending under Obama, properly defined, certainly not in the last few years. And yet, he has no problem pointing to a right-winger warning of crowding out or inflation made in, say, 2010, as proof of what an idiot that guy is.
Krugman is allowed to disagree with what constitutes a large stimulus, either fiscal or monetary. But he’s not allowed to say we had a large stimulus when that fact embarrasses right-wingers, buta small stimulus when that fact rescues Keynesianism.
P.S. Let me give you one quick link to show what I mean. In this post, Krugman ridicules Paul Ryan for his “Paulite/Randite [sic]” monetary theories, in particular citing Ryan’s warnings on interest rates and price inflation. Krugman shows a chart starting in January 2011 of these two series. Year/year consumer price inflation rises to almost 4 percent around August 2011, then drops sharply. The yield on ten-year government securities also drops sharply around July 2011.
So, this would really be embarrassing for Paul Ryan, if the Fed engaged in a massive expansion of its balance sheet, starting in mid-2011, or if the federal government ramped up its spending in mid-2011. Yet the reality is the exact opposite. The Fed’s balance sheet stopped its massive expansion on a dime right at this time, and the federal government’s surge in “current expenditures” also turned around in early 2011.
I’m not trying to be coy here. Obviously people like me thought the absolute level of even officially reported consumer price inflation was going to be higher during the last 5 years than it was, in reality. But I just want to point out how blind Krugman is to any problems with his worldview. He can point to a chart that is prima facie great confirmation that the Fed and federal government move interest and price inflation rates in the directions that the “austerians” say, and thinks this somehow blows them up. To add insult to injury, he explicitly accuses them of being ignorant of, and impervious to, the empirical evidence.
UPDATE: As even Paul Ryan could have predicted, I have people in the comments saying that Krugman never denied that were was a surge of spending under Obama. OK, he literally mocks that notion in this post. But I’m just doing a “gotcha” I guess.