I’m sure most people wouldn’t have caught this, but that’s why you kids have me on the job. In trying to show everyone how intellectually dishonest Republicans are, Krugman stretches so far that he throws his back out. Follow me:
In discussing a Pew poll on evolution, Krugman argued that Republicans moved their views during the Obama years purely as a signaling device, to show their support for their “tribe.” (Note: We’ll come back to this on Sunday; let’s not discuss evolution right now, because the point here is Krugman.) Then he likened this to how Republicans have also (allegedly) changed their views on countercyclical policy, too. He wrote:
As recently as 2004, the Economic Report of the President (pdf) of a Republican administration could espouse a strongly Keynesian view, declaring the virtues of “aggressive monetary policy” to fight recessions, and making the case for discretionary fiscal policy too. (Naturally, the only form of discretionary fiscal policy considered was tax cuts, but the logic was straight Keynesian, and could have been used to justify public works programs equally well.)
Oh, and the report — presumably written by Greg Mankiw — used the “s-word”, calling for “short-term stimulus”.
Given that intellectual framework, the reemergence of a 30s-type economic situation, with prolonged shortfalls in aggregate demand, low inflation, and zero interest rates should have made many Republicans more Keynesian than before. Instead, at just the moment that demand-side economics became obviously critical, we saw Republicans — the rank and file, of course, but economists as well — declare their fealty to various forms of supply-side economics, whether Austrian or Lafferian or both. Compare that ERP chapter with the currency-debasement letter and you see a remarkable case of intellectual retrogression.
I don’t want to spend too much time on this, but it is quite remarkable just how wrong and hypocritical the above commentary is. For example:
(1) Krugman thinks he is documenting a shift in Republican views on economic policy, presumably because of the change in Administrations (from Bush to Obama). But Mankiw didn’t sign the currency debasement letter, and I don’t ever remember him saying since 2008 that he thought Bernanke had no role to play in the recovery. Furthermore, the rank-and-file Republicans who oppose aggressive monetary policy today, certainly were not parsing the “Economic Report of the President” back in 2004. That’s not something Rush Limbaugh read on the air. And if, for some crazy reason, you had asked the average Fox News fan back in 2004, “Do you think it would be a good idea for the Fed to create more than $2.5 trillion so it can buy assets from the feds and Wall Street bankers?” the answer would have been a resounding, “No! That would wreck the dollar!” So even on Krugman’s own terms, there is zero shifting going on here.
(2) Krugman is completely full of it when he says that the 2004 case for fiscal stimulus is Keynesian. From the summary provided at the report: “Tax cuts can boost economic activity by raising after-tax income and
enhancing incentives to work, save, and invest.” So what is so inexplicable about going from that position in 2004, to a Laffer position today? That’s the same position. I realize Krugman is incapable of thinking that tax cuts can do anything except give taxpayers more money to spend, but that’s not the actual reason conservatives/libertarians favor tax rate reductions as a way to boost economic growth. (Perhaps Krugman should start reading people with whom he disagrees? Then he wouldn’t have to get his notion of conservative tax policy from a guy in a bar.)
(3) Mankiw didn’t sign the currency debasement letter, but even if he had, there is nothing in it that contradicts the 2004 report. The letter isn’t making blanket statements like, “Monetary policy can never provide countercyclical relief.” Rather, it is very specifically saying that as of November 2010, the people signing the letter thought the Fed had already done what it could, and that further QE would risk doing more harm than good. Maybe that’s right, maybe that’s wrong, but that doesn’t explicitly contradict someone arguing in 2004 that Greenspan’s lowering of interest rates cushioned the blow from the dot-com bust.
(4) I believe I have demonstrated that Krugman is on very shaky ground when trying to document a major (and politically convenient) shift in the opinion of Republicans on the effects of monetary/fiscal policy. In contrast to Krugman’s examples, I can think of a much better case of an economist who has done a complete 180 in his views since the Bush years, and moreover in a way that very conveniently lines up with his partisan stance. But in this particular economist’s view, this isn’t evidence of his perfidy; rather, he is to be congratulated for changing his position, because he has a better moral character than his foes. If anyone tries to bring up his previous writings, this economist dismisses the move as an unfair ad hominem attack, irrelevant to the correctness of his current view. Do I need to tell you who this mystery economist is? Hint: It’s not Greg Mankiw.
UPDATE: OK, in response to a comment I went and looked more carefully at the exact defense given in the Economic Report from 2004 for the earlier Bush tax cuts. And it’s true, on pages 43-44, that the author of the report (Mankiw?) gives a “Keynesian” justification in that they increase after-tax income and hence boost aggregate demand. The report then goes into supply-side considerations, but Krugman is correct if he says that there exists a Keynesian justification for tax cuts in the 2004 report. Even so, that doesn’t really document a shift in any individual Republican’s position; Mankiw (the author?) hasn’t changed since then, as far as I know, and the average Republican wasn’t running around in 2004 saying, “I just love pages 43-44 of Bush’s report!”
Note that I’m not saying Krugman has a monopoly on switching his opinions with the party in the White House. I’m just saying he really hasn’t documented his claims of massive Republican shifting on matters of economic policy in this post.