Jeffrey Sachs wrote a post critical of Paul Krugman, who lately has been running victory laps over the Obama recovery without acknowledging that he (Krugman) has spent the last two years warning of the horrible effects of sequestration. As you can imagine, the Keynesian bloggers were none too happy about it. Right now, I won’t tackle the big-picture issues. Instead I want to reassure two of the bloggers because they seem really mystified by a particular statement from Sachs.
Specifically, Simon Wren-Lewis wrote (and he was clearly referring to Sachs’ post): “[I]t is a sad day when anyone thinks that 2.3% growth is “brisk” when we are recovering from a deep recession and interest rates have remained at the ZLB. It is so very dangerous when these diminished expectations become internalised by the elite.”
That wasn’t original with him. He had been reading Krugman who had linked to Brad DeLong, who published the following post (and this is the whole thing, I haven’t cut any of it out):
I wouldn’t have called it a “sad day,” let alone suggested Sachs had “lost his mind,” but I can see why Wren-Lewis and DeLong are puzzled. It is odd that Sachs would put so much weight on a lackluster 2.2% (or 2.3%) GDP growth rate, calling it “brisk.”
But you know, that Sachs quotation in DeLong’s post has a bunch of ellipses in it. I wonder what would happen if we filled in the parts from Sachs’ post that DeLong edited out? Just for fun, let’s try it:
Yet, rather than a new recession, or an ongoing depression, the US unemployment rate has fallen from 8.6% in November 2011 to 5.8% in November 2014. Real economic growth in 2011 stood at 1.6%, and the IMF expects it to be 2.2% for 2014 as a whole. GDP in the third quarter of 2014 grew at a vigorous 5% annual rate, suggesting that aggregate growth for all of 2015 will be above 3%.
So much for Krugman’s predictions. Not one of his New York Times commentaries in the first half of 2013, when “austerian” deficit cutting was taking effect, forecast a major reduction in unemployment or that economic growth would recover to brisk rates.
Paints a different picture of Sachs’ mental health, doesn’t it? And Mr. Wren-Lewis, turn that frown upside down–it’s a happy day after all! Nobody was suggesting that 2.2% (or 2.3%) GDP growth was “brisk.”
UPDATE: Without there being any evidence in his comments as to whom he is responding (I don’t mean to me, I mean if someone raised this issue in the comments, that comment is not there), DeLong addresses the concerns I have raised in this post in this manner:
5% for one quarter does not imply >3% is likely for all of 2015. Certainly the bond market does not see such growth. You have moved from “growth has been brisk” to “growth will be sorta-semi-kinda-brisk”.
But, seriously, how many moles do I have to whack here? How many moles are you going to demand that I whack here? I try to edit quotes so that they are far and short and focused on the main point…