Another Bang-Up Prediction From Krugman, On Employment and the Sequester
UPDATE below.
Russ Roberts reminded me of Krugman’s discussion of the sequester back in February:
But the legacy of [the Bowles/Simpson deficit commission] lives on, in the form of the “sequester,” one of the worst policy ideas in our nation’s history.
Here’s how it happened: Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Obama agreed to a grand bargain on their terms. Mr. Obama, alas, didn’t stand firm; instead, he tried to buy time. And, somehow, both sides decided that the way to buy time was to create a fiscal doomsday machine that would inflict gratuitous damage on the nation through spending cuts unless a grand bargain was reached. Sure enough, there is no bargain, and the doomsday machine will go off at the end of next week.
…
So here we go. The good news is that compared with our last two self-inflicted crises, the sequester is relatively small potatoes. A failure to raise the debt ceiling would have threatened chaos in world financial markets; failure to reach a deal on the so-called fiscal cliff would have led to so much sudden austerity that we might well have plunged back into recession. The sequester, by contrast, will probably cost “only” around 700,000 jobs. [Bold added.]
Let’s see how that Krugman prediction has panned out so far:
But don’t worry, this poses no problem for Krugman, champion of “let those who make bad predictions about the economy go work at Starbucks.” For when I brought up the infamous Romer/Bernstein botched unemployment prediction, in the context of my (price) inflation bet, Krugman actually said, “In short, some predictions matter more than others.” I’m not taking him out of context; that’s what he said.
UPDATE: OK, “Joe” in the comments has convinced me that this is not necessarily a smoking gun against Krugman, since he wasn’t predicting a loss of 700,000 jobs right away. Depending on how you calculate the baseline of job growth, Krugman could understandably think that the actual results are consistent with his claim.
So here is how I would phrase everything if I were Krugman in order not to be ‘wrong’ since I all ready know it is impossible for ME to be wrong about something.
Look the 700,000 jobs I spoke of ARE GONE, we should have that many more jobs in an ever increasing recovery, instead what has happened is that due to the horrible Republicans who stopped who because of the restraints they have placed on the economy we should have at this point 200,000 jobs a month. Instead we are simply slowly growing at a rate that is ridiculous and only due to the idiocy of those who believe that you can’t borrow your way out of a recession. After all, this is nothing more than a liquidity trap and if we simply made it so that we had more money moving out there the economy would be fine. P.S. if we had doubled the stimulus we would have been back to normal much faster. Honestly I know everything and I have never been wrong. I am Paul Krugman and since I know EVERYTHING about economics that means unless you agree with me you can’t be right.
So my prediction is true, you can’t disprove that we would not be better off now without the sequestration. Those Evil Republicans are the cause of so much suffering. Besides I predicted the housing bubble. I am always right, don’t listen to anyone else. After all I have a column in the New York Times, that means I am read in ever Starbucks cafe in the nation! I know a liquidity trap when I see one! And Starbucks has Liquid, I know they do I am Paul Krugman…
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I think my sarcasm got a little to over the top there. Honestly when I read something that Krugman writes it almost feels like this is how he is talking to people. Like the world revolves around HIMSELF… and yes that is HIMSELF in caps…
Right, just like the economy was worse than they realized in January 2009, apparently the economy was much better than they realized in February 2013.
“The sequester, by contrast, will *probably* cost “only” around 700,000 jobs.”
A probable prediction is obviously, by definition, fallible, and may turn out false.
Given that Krugman never said this was a *certainty,* and given that the future is uncertain, you’re making a mountain out of a molehill.
You are hilarious Lord Keynes. I guess in my inflation bet, I said it was a certainty that CPI would do blah blah blah, right? And all the guys warning that interest rates would rise with trilliion-dollar deficits, they said, “This is absolutely certain.” ?
(1) no, Bob Murphy, I assume that your inflation bet also made a prediction that was doing so with some degree of probability.
(2) As for Austrians or Austrian fellow travelers making predictions with alleged certainty, you need only look at Marc Faber’s outrageous prediction in 2009 that hyperinflation in the US was a 100% certainty:
http://www.youtube.com/watch?v=zJaDuERV7c8
Hope you enjoy the taste of humble pie.
What are you talking about LK? So Krugman only ever criticized Marc Faber? If he said “100% certainty” then that was stupid. We can’t be 100% certain the sun will rise tomorrow.
Krugman was saying the sequester was one of the worst policy decisions in history, and that it was a fiscal doomsday machine. So when he said “It will probably cost…700,000 jobs” you think he was basically saying, “Or there might be no noticeable effect on employment at all; that’s just as likely in my mind”?
“Krugman was saying the sequester was one of the worst policy decisions in history, and that it was a fiscal doomsday machine”
No, Bob Murphy, reading his post in its entirety it is clear that the “fiscal doomsday machine” talk was a bit of over-the-top rhetoric from Krugman.
In fact your own quotation of him shows that:
“The good news is that compared with our last two self-inflicted crises, the sequester is relatively small potatoes. A failure to raise the debt ceiling would have threatened chaos in world financial markets; failure to reach a deal on the so-called fiscal cliff would have led to so much sudden austerity that we might well have plunged back into recession. The sequester, by contrast, will probably cost “only” around 700,000 jobs. “
Note: “the sequester is relatively small potatoes”.
You can complain legitimately that Krugman was being unclear or inconsistent in use of language, but as always one must read things in context with the understanding that rhetorical devices and figures of speech must be allowed for in interpretation.
LK –
“You can complain legitimately that Krugman was being unclear or inconsistent in use of language, but as always one must read things in context with the understanding that rhetorical devices and figures of speech must be allowed for in interpretation.”
>> Fine, then would a fair interpretation of Krugman be that he considers 700,000 jobs lost as “small potatoes?”
Total employed US labour 2013: about 136 million
What percentage is 700,000 of 136 million? Can you do the math?
Shouldn’t we be using a smaller denominator than 136 million, like total number unemployed actively looking for jobs?
What percentage is 700,000 of 136 million?
0.514~%
I didn’t do the math, though.
No, what I did is check my very large division table. 😉
LK –
I know the math. I’m talking about interpreting Krugman. So why would he place quotes around “only?” Do you honestly think he did that to emphasize its relative insignificance? Or in typical Krugman fashion, might he be condescendingly jabbing those who think that 700k is an insignificant number.
If I say, “I will probably go to the grocery store tomorrow”, then I am saying that with some degree of probability I will go to the grocery store tomorrow.
Lord Eugenics strikes out.
Exactly, which is why forecasts are meaningless and worthy or being totally ignored.
worthy of*
LK –
You have to be joking. Just out of morbid curiosity, what would the data have to look like in your mind for Krugman to eat crow on this prediction? Or are you merely suggesting that we can dismiss any Krugman “prediction” so long as he doesn’t qualify it with 100% certainty (or conveniently, if it just turns out plain wrong?
I would say all predictions are fallible, a small number of them go on to become infallible but only after they cease being predictions.
Then again, I don’t believe that fate is already written, but I haven’t got a proof on that one.
I have yet to understand how you can claim this prediction is incorrect. Much of the sequester has barely even begun to take effect…I have friends who work as contractors for the government whose hours are getting cut starting THIS month. So let’s assume that cuts start biting 30,000 off new employment numbers every month for 20 months….that adds up to 600,000 jobs lost due mostly to incremental losses that wouldn’t make a huge blip in monthly employment reports….thus allowing you and Scott Sumner to claim victory while having no way to prove the counterfactual is incorrect.
If you want to have access to all of Krugman’s twists and turns over the years, I highly recommend Jeremy Hammond’s book. $4.99 from Kindle.
http://tinyurl.com/m54zen2
Look at the numbers and you see his prediction is about right. Job growth slowed by 66K/month. Spread that out over a year and you have 792K jobs. Seems like he nailed it.
Nov 2012: 247K added
Dec 2012: 219K added
Jan 2013: 149K added
Feb 2013: 339K added – prediction made (rate of job growth 239K/month)
March 2013: 142k
April 2013: 199k
May 2013: 176k
June 2013: 188K
July 2013: 162K (rate of job growth 173K/month)
Joe, yes, if you very conveniently choose your frame of reference to make the baseline high, then it looks like a good prediction.
I guess the natural thing would be to go back to November 2012 and stop there. There was a non-arbitrary reason you left out October 2012’s number of 160K, right?
I still think that one is fudging the definitions of terms to intentionally be vague with predictions if “cost 700,000” doesn’t mean “we will shortly have 700,000 jobs less” but only refers to an unprovable counterfactual. I thought these guys were all about empirical evidence, but apparently they are about nothing of the sort.
Joe, I still think you are very conveniently choosing your baseline, but you have a valid point that Krugman (and the forecasters he linked) weren’t predicting that full drop right away, so I updated the post. Fair enough.
Bob, make sure that you save ALL of Krugman’s past writings and archive them. They will eventually be deleted from the nytimes.com website.
In my experience, people always end up, sooner or later, trying to delete wrong stuff from the internet. In these cases, I’ve been glad to have such articles, YouTube videos, etc. saved on my own computer.
http://www.pkarchive.org/
Joe: So the reduction of 66K jobs/month, between the average of the four month period ending 2/13 and the average of the 4 month period ending 7/13, was caused by, and only by, the sequester. You think that because, why? Was there anything else going on in the economy, in terms of interest rates, levels of capital investment, consumption, savings, price inflation expectations, foreign exchange rates, state increases or decreases in spending, new health care laws, or thirty or fifty other things?
Or are you saying none of those other things changed in the slightest, the only thing different or changing in the world between 11/2012 and 7/2013, so the change in jobs added must be entirely attributable to the effects of the sequester?
“Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Obama agreed to a grand bargain on their terms.”
Notice how The Krugster whines that Republicans actually had the temerity to use what little leverage they had as a bargaining chip with The Dear Leader. Why, how dare they! Everyone knows that the correct role for Republicans is to impersonate a political opposition and then cave at the first sign of resistance. Who knew they had a few vertebra left?
Notice also how he characterizes actual political opposition as “hostage taking”. This is a ludicrously hyperbolic phrase that was being regurgitated widely by left wing propagandists at the time. It’s no different than Rush Limbaugh’s claim that Obama wants the economy to tank so he can take advantage of a manufactured crisis. Neither claim makes much sense to a rational person but it is what you would expect from a craven partisan hack.
Just to refresh memories on the debt ceiling negotiations, Obama had this to say in OPPOSITION to doing so in 2006 (in 2007 and 2008 he didn’t even bother to vote on the issue).
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
Is there any doubt that if this quote had come from the mouth of a Republican politician, Professor Krugman would treat it with complete contempt as the blathering of an idiot?
My advice at the time when Obama won election for the second time was that the Republicans should have let him do what he wanted.
Trying to mess with stuff in a disaster just gets you blamed for the outcome, and realistically the Republicans are not in a position to fix anything. The “sequester” was a token effort, meaningless in the bigger picture, and if you look at the line above it had no effect whatsoever either positive or negative.
The Democrats have been building this failure narrative to keep themselves protected from their own actions, much better to hand them plenty of rope and let them get on with what they do best.
A couple thoughts:
1. Let’s remember counterfactuals. This post doesn’t seem to make any obvious goof-ups with counterfactuals, but Russ seemed to.
2. We didn’t get our paycheck cut by 20% until a couple weeks ago. This is presumably true of many other agencies too.
3. This is tough to see in levels. It looks to me like 2013 job growth was slower than, say, the last quarter of 2012 , but it’s tough to eyeball (and this is on top of it being tough to see without a counterfactual).
Daniel, right, I updated the post. Russ explicitly brought up the counterfactuals, so I don’t see why you’re zinging him.
The whole of empirical macro-economics is one big counter factual. Every measurement is what it is, and it isn’t anything else. Everything else is someone’s imagination.
“It looks to me like 2013 job growth was slower than, say, the last quarter of 2012 , but it’s tough to eyeball”
Presume it was. This is simply unprovable. If Krugman meant “we’d have 700,000 less jobs than we otherwise would have had”, then this is an unprovable counterfactual, at least empirically. He’d have to back that up with a logically derived set of laws, and state his premises, and so forth – a lot of things that Austrians do, but supposedly “scientific empiricists” do not.
If he meant that we’d actually have 700,000 jobs less than we had when he made the prediction, he’s just flat out wrong.
Either way, he’s a bad economist, but a really good Democratic pundit.
Bob, supposedly austerity is about spending cuts ands austerity. However, I look at the BEA numbers and see:
Total expenditures (billions of dollars)
I 2012 5741,4
II 2012 5796,8
III 2012 5782,4
IV 2012 5831,4
I 2013 5754,8
II 2013 5799,6
Or
Current expenditures (billions of dollars)
I 2012 5568,9
II 2012 5636,5
III 2012 5627,9
IV 2012 5653
I 2013 5630,1
II 2013 5681,3
That’s higher than before and the pace at which is grows is not slowing…. any thing that I am missing here?
Ron Paul: No Real Cuts In Sequester ~ CNBC 3/1/2013
[WWW]http://www.youtube.com/watch?v=JOjK94kwn0U
Ron Paul’s Texas Straight Talk 3-4-2013 ~ The Sequester Crisis And What Should Be Done
[WWW]http://www.youtube.com/watch?v=gRewcs-KH2U
Whats the point in arguing over statistics? What’s the point in arguing over the unemployment rate? By doing so you’re basically conceding to Krugman and the mainstream view that employment matters over production.
Lord Keynes,
I believe the point about Krugman is that he is ‘always’ right. Even when he is wrong about the economy.
Second if the United States has Gained Jobs even with the Sequestration in effect could we not suggest that Krugman was incorrect in his belief as to the effect of Sequestration without regard to the increase in employment?
Third, What effect did the ‘last two self inflicted fiscal crisis’s’ actually do that was detrimental? I am assuming he is talking about the ‘debt ceiling’ in which Sequestration was the result to failed compromise and then at the turn of this year the debate as to whether to increase taxes or not on the ‘rich’ only?
These by way of ‘financial crisis’ and ‘self inflicted’ are pretty damn small, forgive my language, if you examine it in hind sight. What REAL consequence have we experienced due to the grand standing of Republicans, Krugman would have you believe the Down Grade in Credit was DUE to the grand standing of Republicans. Not according to the credit reporting agency… And as for the additional $150 Billion in taxes that we now pay because of the increase in Social Security and the additional $40 Billion on the ‘wealthy’ I agree that $80 Billion in cuts in the Federal Government are ‘small potatoes.
Anyway, the point is Krugman cannot be wrong. At least according to himself. Since he uses vague terms all the time it allows him, as you stated in previous posts the opportunity to examine his words in anyway that he would like in forecasting forward. I can do the same thing.
“The Syrian conflict may well be detrimental to the health of the nations economy. But this is nothing compared to what may occur if Republicans and Democrats to not come together on a compromise on the Debt Ceiling and creating a clear path forward. ( Now I will bash Democrats the way Krugman bashes Republicans ) If Democrats would simply understand that the overall economic health of the nation were an important asset moving forward and stop fighting the Republicans for a clear way forward to fiscal accountability then no future fiscal crisis would be repeated. But due to their intransigent nature I can already predict that the Democrats will remain a stumbling block forward on the road to fiscal accountability and health. This is despite the honest and endearing endeavors of the stalwart Republicans that have fought hard and due to pressures from both the White House and the Senate, ultimately acquiesced to the terrible demands of Democrats and continued to give Carte Blanche to sycophants and bureaucrats.
If these issues are resolved to the Republicans satisfaction we have great growth in front of us as a Nation, if not the growth rate will be stifled from where it would have been.
Now do you not see how ALL of these statements are ‘true’ and that all of them are then in hindsight going to be accurate? The economy WILL grow, I can then say that the only reason it is not growing faster is because people did not do what I said, and if they do what I say then I am correct as well. This is Paul Krugman in EVERY post.