Consulting by RPM || Free Advice Blog

Betting Bryan on Ron Paul vs. Ross Perot

What I find most amusing about Bryan Caplan’s recent blog post about Ron Paul is that it wouldn’t surprise me if he had no idea just how condescending it is. Anyway, try this part:

Will Paul’s legacy be any more lasting than, say, H. Ross Perot’s? Doherty’s convinced that it will be. I’m still unsure…

Oh. My. Gosh.

You name the terms Bryan and I’m in like Flynn, and I’ll put up $400 to your $100. I propose that we wait until both of them have been dead for at least a year, and then we look at (say) book sales or google searches or (say) thousands of young people who hold memorial services for the guy. Like I say, you think about it and spell out the objective metric(s) and assuming no funny stuff I’m in.

Murphy Twin Spin Krugman Kracking

Ah, the best birthday present a boy could hope for! As a pure coincidence, my independent critiques of Krugman run on the same day.

In this piece at Mises.org, I take on Krugman’s recent thoughts on the Fed and employment data. An excerpt:

Steve Horwitz does a good job explaining why Krugman’s understanding of US banking history is flawed, because we didn’t have laissez-faire banking in the late 1800s. But we don’t even have to rely on such explanations for the matter at hand. Remember, these data weren’t pulled from Krugman after a session of waterboarding. He volunteered them as if they were somehow supposed to embarrass the critics of the Fed. What would the numbers have to look like, for Krugman to have admitted, “Hmm, it seems like for once, empirical reality has turned against my Keynesian nostrums”? Would the post-Fed panics have to be three times as bad?

Then over at the Institute for Energy Research (IER), I have a post talking about Krugman’s Solyndra / JP Morgan commentary. I had written this in the midst of a week where I gave up caffeine, and it shows. Look at Angry Bob:

Paul Krugman is a Nobel-winning economist with expertise on international trade, yet he has a disturbing habit of pontificating with confidence on matters where he is either deliberately misleading or is simply ignorant of the basic facts. I have previously documented this habit when Krugman commented on the Waxman-Markey cap-and-trade bill, and more recently when he carelessly repeated “facts” about mercury emissions that were obviously nonsense to anyone with common sense.

Yet even in these examples, one had to actually know the relevant literature to be able to uncover Krugman’s misleading and/or simply false claims; the layperson wouldn’t really know where to begin. It’s rare that Krugman says something that is blatantly, demonstrably false; he usually covers his tracks pretty well, so that his fans will think Krugman’s critics are simply nitpicking and demonizing the poor guy.

Well, none of that applies to Krugman’s recent commentary on J.P. Morgan’s $2 billion trading losses.

As Tyler Cowen says, do read the whole thing.

I Can Take Back the Crazy Pills–I Wasn’t Straw-Manning the Keynesians

[UPDATE below.]

In response to one of my posts on austerity, the magnanimous “Lord Keynes” quoted me and then responded like so:

(3) Murphy shows himself incompetent in even understanding basic elements of Keynesian economics. He asserts:
“First let’s consider the deficit as a % of GDP, which is how Keynesians typically evaluate stimulus in the 1930s.”
Um, no, they don’t, Murphy – at least not serious Keynesian economists. How Keynesians “evaluate stimulus in the 1930s” will be find in E. Cary Brown, 1956. “Fiscal Policy in the ’Thirties: A Reappraisal” (American Economic Review 46.5: 857–879): it does not evaluate stimulus in terms of some crude citation of deficits. There is a reason why. It is not the size of a budget deficit per se that will show you if a budget is expansionary or contractionary in terms of fiscal effects. It is perfectly possible to have a budget deficit and have contractionary fiscal policy (as in Ireland and Greece today).

At this I was taken aback–perhaps I invented this notion that Keynesian economists evaluated fiscal policy in the 1930s on the basis of budget deficits?

But no, that wasn’t it. It took me a few minutes to hunt it down, but I distinctly remember reading Christina Romer on the matter. After all, it was her incredibly misleading claims about Hoover vs. FDR that led me to pen this article.

Anyway, Christina Romer–a “serious Keynesian” I would like to think–said the following, not in her personal journal after throwing back a few beers, but in prepared remarks to the Brookings Institution, in March 2009 when she was the new head of the Council of Economic Advisors and was touting the Obama stimulus package. Here’s what she said:

One crucial lesson from the 1930s is that a small fiscal expansion has only small effects. I wrote a paper in 1992 that said that fiscal policy was not the key engine of recovery in the Depression. From this, some have concluded that I do not believe fiscal policy can work today or could have worked in the 1930s. Nothing could be farther than the truth. My argument paralleled E. Cary Brown’s famous conclusion that in the Great Depression, fiscal policy failed to generate recovery “not because it does not work, but because it was not tried.”

The key fact is that while Roosevelt’s fiscal actions were a bold break from the past, they were nevertheless small relative to the size of the problem. When Roosevelt took office in 1933, real GDP was more than 30% below its normal trend level. (For comparison, the U.S. economy is currently estimated to be between 5 and 10% below trend.) The emergency spending that Roosevelt did was precedent-breaking—balanced budgets had certainly been the norm up to that point. But, it was quite small. The deficit rose by about one and a half percent of GDP in 1934. One reason the rise wasn’t larger was that a large tax increase had been passed at the end of the Hoover administration. Another key fact is that fiscal expansion was not sustained. The deficit declined in fiscal 1935 by roughly the same amount that it had risen in 1934. Roosevelt also experienced the same inherently procyclical behavior of state and local fiscal actions that President Obama is facing. Because of balanced budget requirements, state and local governments are forced to cut spending and raise tax rates when economic activity declines and state tax revenues fall. At the same time that Roosevelt was running unprecedented federal deficits, state and local governments were switching to running surpluses to get their fiscal houses in order. The result was that the total fiscal expansion in the 1930s was very small indeed. As a result, it could only have a modest direct impact on the state of the economy. [Underlined emphasized in original, bold added by RPM.]

Now let me anticipate the obvious: Lord Keynes is going to look at the above quote and say, “Duh, that’s exactly what I said Murphy, you need to look at the output gap before determining how big a stimulus is needed. Man you Austrians are dumb.”

I hope sympathetic readers will see why, by the same token, I look at the above Romer quote and conclude: Duh, that’s exactly what I said. Christina Romer showed us that when assessing whether a government is providing stimulus, we look at the deficit. A rising deficit means rising stimulus, and a falling deficit means falling stimulus. So if we’re trying to tell whether other governments applied more Keynesian stimulus in the recent crisis compared to the US, one obvious metric is to compare the respective government budget deficits. This, after all, is how Romer compared Hoover to FDR, and FDR-1933-1936 vs. FDR-in-1937. (The fact that her Hoover/FDR comparison is bogus, is beside the point.)

UPDATE: Oops, to see Romer’s take on what happened in 1937, you need to read her Economist piece from June 2009, where she wrote:

The recovery from the Depression is often described as slow because America did not return to full employment until after the outbreak of the second world war. But the truth is the recovery in the four years after Franklin Roosevelt took office in 1933 was incredibly rapid. Annual real GDP growth averaged over 9%. Unemployment fell from 25% to 14%. The second world war aside, the United States has never experienced such sustained, rapid growth.

However, that growth was halted by a second severe downturn in 1937-38, when unemployment surged again to 19% (see chart). The fundamental cause of this second recession was an unfortunate, and largely inadvertent, switch to contractionary fiscal and monetary policy. One source of the growth in 1936 was that Congress had overridden Mr Roosevelt’s veto and passed a large bonus for veterans of the first world war. In 1937, this fiscal stimulus disappeared. In addition, social-security taxes were collected for the first time. These factors reduced the deficit by roughly 2.5% of GDP, exerting significant contractionary pressure.

So again, when Romer wants to give us an idea of how contractionary these measures were, she shows us how much they reduced the deficit as a share of GDP. This is what led me to say that Keynesians typically evaluate fiscal policy in the 1930s by looking at the deficit as a share of GDP. Romer didn’t say, “Sure, the deficit as a share of GDP went up, but the output gap rose even more, so therefore it was fiscal contraction.” No, she said such and such reduced the deficit by 2.5% of GDP, exerting significant contractionary pressure. I.e. we know there was significant contractionary pressure, because the deficit fell sharply as a share of GDP.

Dog Bites Man! or, Another Klassic Krugman Kontradiction on Keynesianism

A few days ago I began to doubt myself and said that after my two Krugman pieces ran this week in different outlets (still forthcoming), I would move on to greener pastures. I had become weary of pointing out every time Krugman pulled a rhetorical sleight of hand (often while yelling at what a bunch of jerks his critics were, while doing it).

But then “Dan” in the comments reminded me that with great recall comes great responsibility. Indeed, I have been reading Krugman faithfully lo these several years, and it is up to me to put a shoulder up against his forward rush. If not me, who?

Recall the debate we’ve all been having in the last few weeks over European austerity. Krugman et al. have been claiming that other governments tried fiscal austerity, and it blew up in their faces; clearly Keynesianism wins again, with flying colors. Boy oh boy, how much empirical evidence will these right-wing blowhards ignore in their quest to hurt poor people?

But then the Keynesians got some pushback. Veronique de Rugy, for example, produced a chart showing total nominal government expenditures for the past decade or so, and in all of the countries except Greece, spending in 2011 was higher than it had been in 2008. (It’s not in de Rugy’s chart, but Irish government spending in 2011 is about the same as it was in 2008, I get from eyeballing a different chart.) In France and the UK, spending had never gone down, in any year. (Recently it tapered off in the UK.)

So how did Krugman respond? Like this:

…some people who should know better are conceding the point that maybe there haven’t been big spending cuts. Yes, there have.

For the fact is that you can’t just look at spending levels to ask what is happening to spending programs. Here in the United States spending on unemployment insurance and food stamps has risen sharply, not because the welfare state has expanded, but because a lot more people are unemployed and poor. Similar effects are at work in European countries, which have stronger safety nets than we do. Also, some spending represents banking bailouts, not exactly what people have in mind when they talk about big government. [Bold added.]

Now if you go read the full post, and especially if you’ve been faithfully reading Krugman’s commentary on fiscal policy for the last year or two, it is crystal clear that he is basing the efficacy of Keynesianism on government consumption and investment spending. That’s why, when looking at Sweden, Krugman produced a chart comparing government C&I spending in the US versus Sweden, rather than looking at total government spending. Krugman is quite clearly arguing that (1) countries like the UK and Ireland are hurting now because (2) their governments cut back on C&I spending, and that is the relevant criterion, not transfer spending or bank bailouts.

Now I have been waiting for Russ Roberts or someone like him to pull out the trump card, but alas they haven’t yet. (Maybe they just like me to feel needed?) Anyway, here is Krugman in a NYT op ed from August 9, 2009. It’s going to be a long quote but I promise it is worth every clause:

So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

Just to be clear: the economic situation remains terrible [and Krugman lists the problems with the employment situation–RPM]…

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.
…
So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.

All of this has helped support the economy in its time of need, in a way that didn’t happen back in 1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that budget deficits — which are a bad thing in normal times — are actually a good thing right now.

In addition to having this “automatic” stabilizing effect, the government has stepped in to rescue the financial sector. You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse.

The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall. [Bold added.]

So notice some interesting things about the above:

(1) First and most obvious, when the argument went his way, Krugman was more than happy to point to automatic stabilizers as being crucial in a discussion of the efficacy of Keynesian policy.

(2) Krugman next listed the bank bailouts as part of the broader package of “Big Government” that rescued the economy. So when he said a couple weeks ago in reference to the Irish bailout “not exactly what people have in mind when they talk about big government,” he must not have included himself in the category of “people.” (See? Krugman must be a shape-shifting lizard after all.)

(3) Krugman said of the Obama stimulus package that it was “probably least” important of the three main reasons for why Big Government averted the second Great Depression. So again, when it looks like automatic stabilizers and bank bailouts go hand in hand with an improved economy, Krugman is happy to say they are the primary things to focus on. But when automatic stabilizers and bank bailouts go hand in hand with a double-dipping economy, now Krugman says they aren’t what people mean by “big government,” and the thing to focus on is true stimulus spending.

Finally: for those who wonder why “my side” obsesses over Krugman so much, it’s because of stunts like this. He pulls this kind of thing a lot. He takes both sides of an issue, either one of which is defensible by itself, but then impugns the motives (“people who should know better”) of the people who happen to be on the other side, that day of the week.

Incidentally, if you want to see Keynesians take up these issues (responding directly to me, in part), here is “Lord Keynes” and here is Daniel Kuehn.

Lord Keynes Beautifully Illustrates Why We Get Nowhere in the Stimulus Debate

My son has off from school today and I have agreed to watch old episodes of X-Men with him in 9 minutes… (Hey, I make sacrifices for the next generation.) Therefore I have to be brief, and can’t paint the picture from scratch, but will instead just dive right into the weeds…

In a previous post I linked to Scott Sumner who busted Krugman’s analysis of Sweden. Reading Krugman, you would think that conservatives who were praising Sweden’s handling of budgetary affairs during the crisis were simply insane, and you also would think that Sweden had been spending more profligately than the U.S. (Krugman produced a chart showing government “consumption and investment” spending dropping a lot faster in the US than in Sweden.) Sumner mentioned that Sweden ran a 2% budget surplus in 2011, which shocked me; one wouldn’t have guessed that in a million years from Krugman’s discussion.

Anyway, in the comments here is what “Lord Keynes” had to say:

The fact that Sweden is running a budget surplus now is a demonstration that there stimulus worked: they passed a large stimulus package in 2008, which continued in 2009 and 2010:

http://news.alibaba.com/article/detail/europe/100028044-1-update%253A-sweden-adds-%25241-billion.html

http://www.dowjones.de/site/2009/04/sweden-earmarks-7-billion-for-2010-stimulus.html

http://www.economywatch.com/economic-stimulus-package/sweden.html

Australia is yet another country which went for a moderate stimulus in 2008, 2009 and 2010, never even had a recession because of its quick fiscal expansion, and with some minor cuts now has been able to run a surplus.

Now if you click his links, they don’t show the actual evidence that we’d need, to test just how big the stimulus was. (Click them to see what I mean.) When I read that, I thought to myself, “If I know Lord Keynes–and I think I do–if I bother to go dig up the actual statistics needed to assess his claim, I bet they will be the exact opposite of what he’s saying–that the US under any plausible metric ran a bigger Keynesian stimulus than Sweden.”

So I looked up the stats, and as Phil Hartman might say, “You are correct sir!”

First let’s consider the deficit as a % of GDP, which is how Keynesians typically evaluate stimulus in the 1930s. According to this site, here are the numbers for Sweden, where a + signs means a surplus. Also, I don’t know for sure if this is just central government or all government:

Swedish Gov’t Budget Surplus/Deficit as % of GDP (+ means surplus):
2007: +3.53%
2008: +2.20%
2009: -1.18%
2010: -1.17%
2011: +2.x% [Note this last figure comes not from the site–which had an estimate–but from the news story Sumner linked.]

In contrast, here’s the White House figures for the federal deficit for the U.S.:

US Federal Gov’t Budget Surplus/Deficit as % of GDP:
2007: -1.2%
2008: -3.2%
2009: -10.1%
2010: -9.0%
2011: -8.7%

I am having a hard time from this criterion, seeing how any Keynesian could possibly say Sweden bounced back quickly because of their smart and effective stimulus, as opposed to the inadequate and too-late U.S. response.

But maybe deficit spending isn’t the right criterion. Let’s look at government spending as a share of GDP. Here’s Sweden, and here I’m assuming “SE” in the table corresponds to Sweden:

Swedish Gov’t Spending as % of GDP
2007: 51.0%
2008: 51.7%
2009: 55.2%
2010: 53.0%

And the White House tables again for the US:

US Federal Gov’t Spending as % of GDP
2007: 19.7%
2008: 20.8%
2009: 25.2%
2010: 24.1%

And there you have it, kids. Even if we set aside the deficit (because an inadequate spending surge could lead to a collapsing economy and hence tax revenues), and focus exclusively on government spending, we see that whether in absolute dollars (obviously), whether in the change in percentage points of GDP, or whether in the percentage change in the percentage of GDP, the US government increased its spending more in 2008 and 2009, than the Swedish government did.

Since Sweden handled the crisis much better than the US did, I would say the case of Sweden is prima facie evidence for the Austrian / austerian camp. As always in these matters, these particular data don’t prove anything; maybe there are confounding factors.

But boy, doesn’t it sure seem like there are all these counterexamples piling up, that Krugman and friends have to constantly explain away? And wouldn’t it be nice if they would at least stop citing these counterexamples, as feathers in their cap? (I have a Mises.org coming out this week showing Krugman doing this yet again with his recent analysis of Fed history.)

The Ten Commandments

My idiosyncratic Bible study program–“Read at least one chapter a night, and keep going till I fall asleep”–has led me to Exodus. A few nights ago I hit the Ten Commandments.

Now growing up, I remember thinking that God had some weird priorities. I mean, everybody knows that the worst thing you can possibly do is murder somebody, right? And yet that silly deity had put that offense halfway down the list. You can sort of understand Him putting the stuff about God at the top–sort of for the sake of tidiness–but c’mon, putting respect for your parents above murder?! That is inconceivable.

Anyway, upon this last reading, the list made a lot more sense to me. Yes, it’s undeniable that my further progression (or retrogression, according to most of you who post in the comments on Sunday) into born-again Christianity is partly responsible. But I also think it’s my greater experience with humans, and understanding what motivates them. Take a look at this list (Ex 20:1-17):

20 And God spoke all these words, saying:
2 “I am the Lord your God, who brought you out of the land of Egypt, out of the house of bondage.
3 “You shall have no other gods before Me.
4 “You shall not make for yourself a carved image—any likeness of anything that is in heaven above, or that is in the earth beneath, or that is in the water under the earth; 5 you shall not bow down to them nor serve them. For I, the Lord your God, am a jealous God, visiting the iniquity of the fathers upon the children to the third and fourth generations of those who hate Me, 6 but showing mercy to thousands, to those who love Me and keep My commandments.
7 “You shall not take the name of the Lord your God in vain, for the Lord will not hold him guiltless who takes His name in vain.
8 “Remember the Sabbath day, to keep it holy. 9 Six days you shall labor and do all your work, 10 but the seventh day is the Sabbath of the Lord your God. In it you shall do no work: you, nor your son, nor your daughter, nor your male servant, nor your female servant, nor your cattle, nor your stranger who is within your gates. 11 For in six days the Lord made the heavens and the earth, the sea, and all that is in them, and rested the seventh day. Therefore the Lord blessed the Sabbath day and hallowed it.
12 “Honor your father and your mother, that your days may be long upon the land which the Lord your God is giving you.
13 “You shall not murder.
14 “You shall not commit adultery.
15 “You shall not steal.
16 “You shall not bear false witness against your neighbor.
17 “You shall not covet your neighbor’s house; you shall not covet your neighbor’s wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor’s.”

The numbering schemes are a little bit different, as Wikipedia the theologian explains, so I’m not going to refer to “#8” etc. But from murder on down, the list makes perfect sense, right? The only possible question would be over adultery, but I think a libertarian agnostic who flips out over this one, is actually being inconsistent. Especially back in those days, marriage was a serious contractual relationship. So if you slept with somebody else’s spouse, it was like you were bearing false witness and stealing all wrapped up into one. (And yes, at the time it was patriarchal and treated women like the property of their husbands, but even in a more liberated time like ours, I think there is a sense in which someone “cheating on his or her spouse” is breaking one of the most solemn contractual and societal pledges possible. It’s certainly a lot more serious than shoplifting.)

Like I said earlier, not only does the placement of adultery make sense to me now (whereas I probably would have thought it should be #9 when I was in 8th grade), but so do the others. I think the point of the ordering is to show what one’s one priorities in life should be.

The point isn’t to say, “Oh, a guy who murders his neighbors but calls his mom every Saturday is better than the guy who refrains from murder but tells his mom she turned him into a pansy.” No, every thing on that list is forbidden; you are a “bad guy” if you do any of that stuff.

But the point is (I think), someone who is raised in a culture that orders the list of offenses in that way, and genuinely believes it, is a lot more likely to end up being what we think of as a “good person” than if you changed the order.

People don’t wake up one day and say, “You know, it hasn’t been inculcated in me that it’s wrong to go kill someone in cold blood, so I think I’ll eat some Cheerios and go murder me somebody.” No, the person who ends up murdering does it for a variety of other reasons, and the person only ended up in those situations because he didn’t honor the Lord above all else, keep holy the Sabbath, respect his parents, etc. etc.

Thoughts and Links on the Austerity Debate

[UPDATE below.]

As usual, I have been saving links waiting to write a piece de resistance. Instead, I’ll give hors-d’ouevres….

==> In this post Scott Sumner riffs on a recent Krugman post. Did you have any idea that Sweden ran a budget surplus of 2% of GDP in 2011? Me neither. Reading Krugman certainly did give me any reason to suspect that. Krugman had produced a chart and implied that the United States was engaged in more austerity than Sweden. Go look at his post. He calls it “spending side austerity” presumably to cover his bases. But it’s not like he says, “Oh, admittedly, Sweden is running a budget surplus, but I’m saying that’s because of their loose monetary policy which has boosted revenues and allowed them to reduce transfer payments…” No, none of that. He just implies that conservatives are insane, puts up an irrelevant chart, and then gives a very misleading analysis of it.

==> Sumner’s fun with Krugman is in line with Russ Roberts’ sarcasm from a week ago (HT2 von Pepe). The big picture is that in order to make the European situation fit his rhetoric, Krugman has decided to reclassify the relevant item as being government spending on consumption and investment, as opposed to all government spending (including transfer payments). That’s the trick he pulled to try to paint Sweden as being more profligate and “Keynesian” in the slump than the US, even though Sweden is currently running a budget surplus (or at least did in 2011). And he earlier did it in order to impugn the chart that Veronique de Rugy had assembled. (And I use the verb “impugn” with conviction. Go read how Krugman bit her head off, for having the audacity to chart a bunch of government spending figures in a debate over government spending.) Here’s a good summary of Krugman’s new rhetorical trick, in his own words:

…some people who should know better are conceding the point that maybe there haven’t been big spending cuts. Yes, there have.

For the fact is that you can’t just look at spending levels to ask what is happening to spending programs. Here in the United States spending on unemployment insurance and food stamps has risen sharply, not because the welfare state has expanded, but because a lot more people are unemployed and poor. Similar effects are at work in European countries, which have stronger safety nets than we do. Also, some spending represents banking bailouts, not exactly what people have in mind when they talk about big government.

And here’s how Russ responded:

I get it. An increase in spending that doesn’t reflect a desire for bigger government but instead reflects automatic stabilizers, say–well, that’s not a spending increase. It’s the intention that counts when you evaluate the impact on aggregate demand.
…
Silly me. I didn’t realize that in the Keynesian model it isn’t government spending that affects aggregate demand, but only certain kinds of government spending. Krugman goes on to show that much of the increase in spending in Ireland is due to bank bailouts and increases in transfers because of the “dire state of the Irish economy.” But I thought those transfers were supposed to stimulate the economy. Joseph Stiglitz taught me that it doesn’t matter what government spends money on, it’s all stimulus. And when Krugman was touting a two trillion stimulus package, I don’t remember hearing the part about making sure it was pushed through with the right kind of spending and the right kinds of motives. Who knew that government spending only stimulates when it springs from a desire for bigger government?

==> Last point I want to make: After seeing the actual spending figures (that de Rugy had compiled), my confidence in my own position went down. In other words, the European governments had slowed or reduced their nominal spending more than I would have guessed.

The irony here is that I was only really familiar with the UK’s figures, and that was the one Krugman had been harping on (saying the UK’s double dip was the death blow to austerity). I saw that the UK spending at best had merely tapered off, and so I assumed that other states (except Greece and Ireland) had probably just cut the rate of growth. I was actually surprised by how many had lower total nominal spending levels in 2011 than in 2010.

So I think Krugman should have simply said, “Yes, this is too austerity, spending went down. Now are you conservatives trying to say, ‘Oh it wasn’t big enough’? Are you kidding me? You didn’t like it when I said the same thing about the Obama stimulus package, so don’t you dare try to pull that move on me, now.”

That would have been a decent move for him to make. Instead, he throws up this nonsense point about the composition of spending. That issue could conceivably be relevant when evaluating claims like “Obama is a Big Government Man who grew the welfare state,” but it’s hardly relevant to evaluating whether demand-side policies are good at restoring economic growth.

Just to warn you, kids, I have a double shot of Krugman critiques being published next week in different outlets. After that, I really think I have to stop jumping up and down every time Krugman says something ridiculous and incredibly misleading. The novelty is wearing off.

UPDATE: David R. Henderson has some good thoughts on all this, too. He points out that whenever the debate came up over extending unemployment benefits, Keynesians touted the benefits to stimulating demand.

Weissenberger and Murphy Solve the World’s Problems in 46 Minutes

Redmond and I talk about climate models and the euro. Never before have so few pontificated about so much for so long.