Sorry my teeming fans, I’m still bogged down with work. But I can’t resist drawing your attention to Krugman’s post today, entitled “Our Incredible Shrinking Government,” in which he said:
Still, the report does highlight the role that shrinking government purchases of goods and services are playing in holding the economy back. And yes, I mean shrinking, not just growing more slowly than I’d like. Transfer payments like Medicare and Social Security are rising (although unemployment benefits are falling), but government purchases of stuff — mostly at the state and local level, where the stuff in question includes hiring schoolteachers — has been in fairly rapid decline.
He then shows a chart of government purchases after the dot-com crash and now our Great Recession, and concludes: “By this measure, the era since the Great Recession began has been marked by unprecedented fiscal austerity.”
So let me try to express my point differently:
Suppose you came up to me (or to Peter Schiff, or George Will, or any other “austerian”) in January 2009, and you said, “I think this is going to be awful. They will call it the Great Recession. Bob, what do you recommend?”
I would say, “Unprecedented fiscal austerity! Massive cuts in government spending like no one has ever seen!”
Then you say, “Bob, if we followed your advice, would interest rates shoot through the roof?”
I would say, “Of course not you fool! Why would they do that if the government implemented unprecedented fiscal austerity.”
Is Krugman denying that the austerians would have said this? So doesn’t the historical record, since the Great Recession began, validate their model? If you want to argue against them, you’d have to point at the high unemployment. That would be the problem with their recommendation for austerity, which–according to Krugman–the government obeyed.
P.S. I know, I know. This is me willfully ignoring Krugman’s caveats, subtleties, and cul de sacs. For example, in the quote above, he said, “BY THIS MEASURE, the era since the Great Recession began has been marked by unprecedented fiscal austerity.”
Yet this is exactly the kind of thing I’m talking about. Krugman will use some Measure A by which we’ve had unprecedented monetary and fiscal stimulus, when he wants to ridicule the austerian warnings about price inflation and interest rates. Then, when Krugman wants to explain why the economy is still crappy, he will cite some Measure B by which we’ve had unprecedented fiscal austerity.
To repeat, Krugman can use whatever measure he wants. But he can’t switch measures between blog posts, depending on the point he wants to make. Either Krugman thinks we’ve had unprecedented fiscal austerity since the Great Recession began, or he doesn’t.