11 Jan 2017

The Reason Contra Krugman Was Invented

Contra Krugman 14 Comments

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.

Some highlights:

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.


14 Responses to “The Reason Contra Krugman Was Invented”

  1. Dexter Morgan says:

    They have eyes but do not see, ears but cannot hear, mouths but cannot speak. And so have the apes which populate America propagated in number, eating their high fructose corn syrup as instructed.

  2. Daniel Kuehn says:

    Nobody’s going to know who I am if you pronounce my name right- you have to feign ignorance!

    • Bob Murphy says:

      It just came out like that. It’s right, right?

    • Daniel Kuehn says:

      Yep, it was right.

      I feel like I should listen to this because I think these claims that his deficit views depend on party politics is really dumb, but I am swamped tonight and tomorrow. I’ll try to soon. Hopefully you bring it – the guys making the case on my wall weren’t.

      • Bob Murphy says:

        OK I think we blew him out of the water, but I’m willing to hear your take.

        BTW Daniel I saw someone on Twitter say something like, “Krugman was right on deficits in 2010, and he’s right now, but he was wrong somewhere in between.” I think that is a fair statement for a New Keynesian academic to make.

  3. Joe S. says:

    Bob, I like your show, but Sen. Paul is not “courageous.” He’s a wealthy politician who got where he is because his dad gave him the money and contacts. It doesn’t take “courage” to vote against a bill when you’re rich like he is, and have a prestigious job guaranteed for the next 6 years. Christians who are getting killed and tortured right now in Iraq and Syria have courage. Sen. Paul just has pride and a dad who was too nice to him.

  4. Al says:


    At the 10:40 mark. I stopped after that. The videos really give you a sense of who he is.

    • Daniel Kuehn says:

      Why? (I take this to be a negative comment but maybe I’m misinterpreting you).

      He cites three reasons why we might still want to borrow (in August) – the precautionary case, the cheap borrowing case, and the need for infrastructure case – and he contrasts that with the demand based case which he says doesn’t really apply anymore. And this was all before Trump was elected.

  5. skylien says:

    Blowing out of the water doesn’t really do this one justice.

    • Bob Murphy says:

      As in, “He was blown out of the stratosphere,” or as in, “Was just a flesh wound”?

      • skylien says:

        Clearly the first (imho).

  6. Levi Russell says:

    Great show! It really boggles my mind that this guy can be so transparently partisan.

  7. Yancey Ward says:

    You are probably right about the November 14th column- Krugman was stuck with the election night prediction and needed a way out. I also think, however, he needed stretch out his conversion back to deficit hawk. I made a prediction several years ago after Obama’s election that Deficit Hawk Krugman would reappear the instant a Republican was in the White House. Like Krugman on election night, I was horribly wrong in that prediction- he couldn’t even wait the 10 days until Trump’s inauguration.

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