17 Dec 2012

Two Genuine Krugman Kuestions

Debt, Krugman 19 Comments

Normally I think I have a handle on the mind of Paul Krugman. People often send me alleged “Krugman Kontradictions,” and while I admire their zeal, I have to tell the eager correspondents, “Nah, I know exactly how Krugman’s fans would reconcile those two positions.”

But I am genuinely puzzled by two recent Krugman posts. Even I, with an almost fanatical devotion to his writings, can’t be sure what he means, because at face value his statements are so preposterous. So I’ll just document them here, and let his apologists offer hypotheses in the comments.

CASE 1: People at the Heritage Foundation Don’t Actually Believe in Supply-Side Economics

OK so Menzie Chinn and Krugman have been running a particularly absurd theme for a few weeks now, claiming that it is a contradiction for conservatives to fret about the “fiscal cliff,” since they were so stridently arguing back in 2009 that the Obama stimulus package wouldn’t boost economic growth. I was astounded that neither Chinn nor Krugman even entertained the possible reconciliation that such conservatives (a) opposed the massive boosts in federal spending in the stimulus package and (b) opposed the sharp tax-rate increases that are scheduled for 2013. You can say that such worries are wrong, but there’s nothing contradictory about them.

Well, the Heritage Foundation explicitly came out and said as much, in response to Chin. Now here’s how Krugman discussed the exchange:

Menzie Chinn is having a dialogue, or something, with the Heritage Foundation. He pointed out that their arguments against stimulus, aside from being primitive and wrong, would also imply that the fiscal cliff is harmless. They respond in part by claiming that all they’re worried about is the incentive effects — yeah, right — and also by claiming that famous economists made the same arguments.

In the above quote, what in the world does Krugman mean by the “yeah right”?! To repeat, I’m not asking people to criticize him saying that; I want to know…what does he mean by that? For example, one possible interpretation is that Krugman thinks the Heritage Foundation was relying on Keynesian theory to worry about a reduced deficit hurting the economy, and then when Menzie Chinn pointed this out to them, they scrambled and in desperation made up a story about being afraid of supply-side incentive problems from tax-rate hikes. Is that what Krugman is saying?! Is his mental model of his opponents really that messed up?

CASE 2: Krugman Wags His Finger at People Who Hold His Exact Position on the Deficit

OK, now in the very next post, Krugman writes this:

Oh, dear. This is embarrassing. Yet another Peterson deficit-scold front grouphas emerged, running a full-page ad in the Times. This time a bunch of national-security types, who should know better — plus Paul Volcker, whoreally should know better — have signed on.

It’s the usual stuff: demanding that our leaders put together

a fiscal framework that results in substantial deficit reduction over the next 10 years and structural changes to our fiscal policies that eventually balance the budget over the long term

The language on taxes seems a bit more open to higher rates than in the past, and they actually call for defense spending cuts. But what makes the whole thing absurd is that they want all of this as part of “the resolution of the fiscal cliff by the end of the year”. That is, in the next two weeks.

OK, let’s walk through this. I didn’t go look up the ad (the link doesn’t go there), but from what Krugman just said above, we can conclude the following about this group’s position:

(a) They want to reduce the deficit over the next 10 years, and eventually balance it in the long term.

(b) They want to cut defense spending.

(c) They want to get a deal in place to avoid the default changes that will otherwise kick in, in 2013.

(d) They are open to higher tax rates on upper income earners.

Somebody correct me if I’m wrong, but…doesn’t Paul Krugman endorse every single thing on this list? Isn’t it odd for Krugman to summarize a group’s views–every single one of which he himself holds–and then describe the whole thing as “embarrassing”? What the heck?!

NOTE: I’m sure if you went to the group’s website, or googled the Times ad, you could come up with some point on which they differed from Krugman’s views (meaning Krugman’s views since 2011, not in 1998, 2003, or late 2008 of course). But Krugman quoted and summarized their position in a way that reflects his own position. It would be like me saying, “This is embarrassing. Krugman says reducing tariffs can improve welfare.”

19 Responses to “Two Genuine Krugman Kuestions”

  1. Jonathan M.F. Catalán says:

    Regarding case 2, what’s “embarrassing” to Krugman is that they want those conditions worked into some kind of agreement within the next two weeks. I’d guess that Krugman doesn’t see that as a realistic possibility.

    • Rick Hull says:

      To which I would reply that it’s not like we haven’t had months of fretting already. Is it too late now?

    • Bob Murphy says:

      JMFC I agree that’s bearing the brunt of his derision, but when Krugman says “it’s the usual stuff” don’t you get the sense that this “stuff” is nonsense? E.g., could you imagine him saying, “Oh dear, this is embarrassing, people who ought to know better are demanding the usual stuff like more Aggregate Demand in order to relieve unemployment” ?

    • Matt Tanous says:

      Except he closed with:

      “It’s also evidence of the desperation of the deficit scolds, who are evidently horrified that they aren’t managing to exploit the fiscal cliff — which has nothing at all to do with our debt — to ram their agenda through.”

      As if their position, and not just how feasible it is to get through, is what is crazy. Even though he holds basically the same position.

  2. Daniel Kuehn says:

    Peterson is much more alarmist than Krugman and will often go after entitlements (aside from just saying we need to slow medical cost growth, which I think everyone agrees on). The guy said “trust me, there is no trust fund” – speaking of Social Security, and he’s called Social Security a “scam” and has proposed cutting it.

    • Matt Tanous says:

      “The guy said “trust me, there is no trust fund””

      There isn’t one. There is a set of Treasuries that must be replaced with either tax revenue or more Treasuries. The money from the Social Security taxes is spent.

      • Tel says:

        This explanation covers it pretty well.


        Clinton Budget Surpluses: Fact Four

        To arrive at his claims, Clinton conveniently, in a political slight-of-hand, ignored intra-government debt – which went up every year! Over his eight years in office, public debt decreased by $431 billion but the national debt increased by $261.1 billion, a difference of $692.1 billion! Where did that difference come from? Intra-government debt!

        And of course some time down the track, we end up with the reverse situation happening: SS want’s its money back and suddenly the deficit is huge because the IOU notes are forced to turn into actual payable money.

        Yet you still have “progressives” clinging to the notion that Social Security cannot have any effect on the deficit. Since Clinton chose to use SS to make his deficit look smaller, so the implication is Obama is going to get saddled with SS forcing his deficit much larger.

        The only answer for the Republicans is to just say “yes” to everything Obama asks for, but make him ask for it in writing. All options from here are bad.

    • Bob Murphy says:

      Daniel, right, but then you would be OK if I said, “Krugman is embarrassing, he says reducing tariffs can improve welfare!” ?

      I think you would find that odd for me to say. When pressed, I couldn’t get out of that by saying, “Oh, if you look at other stuff Krugman has said on tariffs, I disagree strongly.”

      Krugman isn’t quoting anything about SS being a scam in this blog post. As far as I can tell, he lists nothing but positions he himself holds, and then describes it as embarrassing.

      • Daniel Kuehn says:

        He sounded like he was saying it was good they were open to taxes and defense cuts didn’t he? What he said was absurd was that the other stuff (which sounds like a euphemism for cutting entitlements) would be in the package for the end of the year.

        Doesn’t that sound a little absurd? Maybe I’m misreading it.

        Anyway, I just know Krugman and Peterson don’t see eye to eye.

        I don’t get your point about tariffs.

  3. Tel says:

    I’ll just document them here, and let his apologists offer hypotheses in the comments.

    I’m not a Krugman apologist by any means, but in the interest of better understanding amongst men, I’ll make an effort to guess about the “progressive” movement and what they believe:

    KRUGMAN: Recent events have also demonstrated clearly what was already apparent to careful observers: the deficit-scold movement was never really about the deficit. Instead, it was about using deficit fears to shred the social safety net. And letting that happen wouldn’t just be bad policy; it would be a betrayal of the Americans who just re-elected a health-reformer president and voted in some of the most progressive senators ever.

    So what Krugman is saying here is that you can’t just take Peterson at face value, there’s a hidden agenda. Here is another bunch of “progressives” claiming the same thing:

    Our Take on Peter G. Peterson

    These “Fix the Debt” CEOs are the same CEOs that crashed our economy, took their bonuses, and ran, leaving the rest of America to clean up their mess. Although their calls for bipartisan cooperation hit all the right notes to the American public, we believe that the push to get a lower corporate tax rate from a bipartisan solution is the ulterior motive of these CEOs. Peterson himself has contributed almost half a billion dollars to his foundation that pushes for the reform of programs such as Social Security, Medicare and Medicaid.


    Mind you, there are still plenty of people insisting that expenditure on Social Security has no effect whatsoever on the deficit.

  4. Tel says:

    Not entirely on topic, but I liked it 🙂

    After having the opportunity to visit Burma/Myanmar and Kenya this year, two of the poorest countries in the world, I cannot help but compare and at some point conclude that indeed there are soooooooo many different kinds of poor people. My favorite would be those who remain optimistic in struggle, faithful in hope and gracious despite being in a difficult circumstance in life. The ones I dislike are those who are bitter and who force others to give them money, passing on them the blame for the world being unfair. I think countries where the latter is the primary attitude, regardless of the amount of aid being given to them, will always remain poor. )):


  5. guest says:

    You’re all going to flip out when you see this.

    I was thinking “Hey, someone is pushing Austrian Economics over at Breitbart.com.”:

    Ben Bernanke Is Out of Tools to Stem Slowdown

    The dominant economic theory for the cause of the Great Depression was Milton Friedman’s monetarist beliefs that the Fed caused a depression in the 1930s by allowing the money supply to shrink during the early years of a recession, instead of maintaining a stable amount of cash in the economy.

    When the “Great Recession” hit in late 2008, Bernanke responded as expected by purchasing a $1.3 trillion in Mortgage-backed securities to prevent the money supply from shrinking. When the economy began recovering in early 2010, the Fed appropriately discontinued bond purchases. But with the Democrats solidly controlling the Presidency and both Houses of Congress, they irresponsibly increased deficit spending and passed budget-busting new social legislation.

    Instead of allowing politicians to suffer blame for killing off the economic expansion, Bernanke abandoned monetarist stable money creation policies by cranking up the government’s printing presses with QE-2 a few days before the 2010 mid-term elections and QE-3 two months before the 2012 Presidential election.


    Neoconservative David Frum Hearts the Fed

  6. Ken B says:

    Q1: “yeah right” implies they are lying, and that they don’t care about incentive effects.
    The NRA says it cares about shooting victims — yeah right is a meme we are seeing a lot these days.
    Caring about incentives would imply caring about the unemployed, and PK is saying they only care about rewarding the Koch brothers not incenting them.

    • Bob Murphy says:

      Ken B. I like your angle here, this makes more sense than what I offered up (as an example of what I wanted). So you’re saying Krugman thinks Heritage is motivated by something like the following:

      1) They opposed the Obama stimulus package even though it would help the economy (which they may not even have known, being such awful economists), because their concern was billionaire fat cats. The stimulus did have tax cuts too, but not targeted at the fat cats. It was just more government debt that the fat cats would have to pay for down the road, so Heritage opposed it with absurd 1930s-Treasury-view analyses.

      2) They opposed the fiscal cliff, not because it would wreck the economy (which it will, by reducing Aggregate Demand), but because it contains tax rate hikes for billionaires, and Heritage wants billionaires to keep more money. Not because this will make them more productive, just because, Heritage is paid by donations from billionaires.

      3) Unfortunately for Heritage, they tried to ride the wave of (legit) concern over the fiscal cliff, in order to prevent their billionaire sugar daddies from getting a tax-rate hike in 2013. But the fools didn’t realize that this contradicted their official position vis-a-vis the Obama stimulus package. Their *actual* position was perfectly consistent: they always do whatever is in the interests of billionaires. But what they told the public didn’t match up. Faced with this contradiction, they made up a ridiculous story about supply-side worries over the fiscal cliff. Wow these liars are something to behold, they never throw in the towel.

      So Ken B., you think Krugman’s worldview is something like the above?

      • Ken B says:

        Modulo the details — I don’t read PK often — that’s the idea yes.

        • Matt Tanous says:

          So Krugman is basically making a giant fallacious appeal to motive, and ignoring that there are theories that could reconcile these positions that – while possibly wrong – have nothing to do with billionaires.

          In short, this is simply more evidence that Krugman is not an economist, but a political hack.

          • Jason B says:

            “Krugman is not an economist, but a political hack”

            This brings up one of his articles he posted today, where he said this: “health reform should have included a public option — heck, it should have gone straight to single-payer”.

            Regardless of whether or not he’s speaking from an ideological viewpoint, he is an economist, so how does he get to that position? I’m not an economist, but I know fundamental economic laws, and I cannot figure out how he can possibly get to that position. Is it ideology completely trumping his economic knowledge, or is it a combination of this is his economic view and ideology? I find it quite troubling.

            • Keshav Srinivasan says:

              Here is Krugman’s economic explanation for why the free market can’t solve the problem of healthcare:


          • Tel says:

            That’s what I was trying to say. Just on the remote chance that these are relevant:

            RULE 8: “Keep the pressure on. Never let up.”

            RULE 10: “If you push a negative hard enough, it will push through and become a positive.”

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