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.