As many of you know, on Monday the NYT published a Paul Krugman column titled “Deficits Matter Again.” That meant I was up till 2am assembling this blog post (which analyzed every Krugman column dealing with “deficits” or “borrow” in 2016), so that the next day Tom and I could be fully informed as we recorded this podcast episode.
11:30 I agree with Krugman that most Republican politicians are no doubt hypocritical on deficits, but I make the theoretical point that one could (a) favor large tax rate reductions, even if not immediately matched by equal spending cuts, while (b) also genuinely opposing deficits. It’s just that sometimes two goals conflict with each other. So the fact that Republicans were opposed to “Obama boondoggles that will rack up debt” doesn’t prohibit them from supporting “tax cuts that primarily benefit the wealthy and increase the debt” today.
13:15 I outline the strategy in the podcast: We will first look at the two specific things that Krugman said have changed, such that now deficits matter (whereas deficits allegedly didn’t matter all during the Obama years). Specifically, Krugman says that wage growth is now the highest it’s been since the crisis, and that quit rates are back to pre-crisis levels.
14:25 I show that wage growth is, yes, the highest during Obama terms: Specifically, it was 2.9% in December. But it was 2.8% back in October. So this is not new.
15:40 More damning, yes quit rates are at pre-crisis levels, at 2.1% (the November reading). But the quit rate was 2.1% all the way back through June. So again, nothing new here.
19:00 Tom and I discuss Rand Paul, who was complaining about the Republican budget that adds $9 trillion to the debt in 10 years. Oddly, Krugman’s column contains no praise for Rand’s courage and consistency.
19:55 Tom mentions the 2010 Econ Journal Watch article which finds that Krugman is superlative in his partisanship regarding deficits. (NOTE: I read this article a while ago, so I don’t remember the specifics. Presumably the smoking gun is how Krugman was flipping out during the W. years about interest rates getting ready to spike due to deficit spending, versus his mocking of the “bond vigilantes” during Obama years.)
21:35 I explain the big project for this podcast (which again, shows up in this blog post). We got someone (Jeremy Wagner) to go through all of Krugman’s op eds from 2016, flagging any that contained “deficit” or “borrow.” Then I read each one to see if Krugman had ever started moving from his position on deficits. Quick answer: nope.
23:55 I remind everyone of Krugman’s April 2016 column in which he endorsed the theory that the world needed more “safe assets” in the form of government debt. So as recently as last April, Krugman was saying more government debt per se would be a good thing; this wasn’t merely a call for infrastructure spending that might as well be funded by deficits.
28:10 I read from the most smoking of all smoking gun columns: In this November 14, 2016 op ed Krugman recalls the dark days of the financial crisis, and then explicitly says that his “depression economics” analysis still applies, as of Nov. 14 (though not as strongly). Thus, for Krugman now to be claiming that deficits no longer matter, the case for deficits has flipped IN EIGHT WEEKS. Amazing.
31:00 I confess to Tom that I’m surprised Krugman acknowledged (in this Nov. 14 column) that Trump would actually give us a poorly designed fiscal stimulus.
33:00 I offer a cynical theory to explain this refreshing consistency from Krugman.
42:30 We tackle the very notion that there is a “depression economics” in which deficits don’t matter.
46:50 We talk about the Depression of 1920-21.
This will possibly go into the Media Hall of Fame as the most definitive Contra Krugman episode of all time, so you should go ahead and just listen to the thing.