Paul Krugman has Left Camp Obama
Posted by Michael A. Kamperman on July 12, 2010
Paul Krugman hasn’t gone left, he hasn’t gone right, he’s gone real. Paul was a progressive liberal, is a progressive liberal, and will probably continue to be a progressive liberal. But he is also a Princeton Economics Professor and a Nobel Prize winner. He sees the economy is in the ditch, what he calls a third depression. He also sees the Whitehouse doesn’t have a coherent plan to lead us out. So he has decided to tell it like it is and not worry about who with whom he curries favor. First he distanced himself from the approved Whitehouse phrase “the steps we have taken have avoided another Great Depression.” Now he has called out the Federal Reserve led by his Princeton colleague Ben Bernanke to be much more aggressive. His basic argument is we must try something because what we are doing is not working. He is rallying around the Keynesian principle that when private sector demands slumps it is best to replace it with public sector demand. This is a 180 from the Hayek championed Austrian School of Economics’s view adopted by libertarians and unwitting Tea Partiers that public spending only crowds out the private sector and the best way for a government to instill confidence in the economy is to balance the budget. President Hoover tried this and it failed. President Roosevelt tried this in 1937 and it failed. With history as our guide why are we trying to emulate failed policies? Professor Krugman has decided that his standing at the Whitehouse, in the Princeton faculty lounge, and preserving his Nobel reputation by being aloof is not as important as his speaking the truth. More power to him.
John Maynard Keynes famously said “when the facts change sir I change my mind, what do you do?” Well the facts are the unemployment rate is 9.5%, but it would be close to 12% if the workforce remained constant with end of 2007 levels plus population growth. Currently the average person has been unemployed for 35 weeks, significantly eclipsing the post World War II era record of 21 weeks set in the early 1980′s. One in seven mortgages are delinquent (30 days or more past due) and one in four mortgages are underwater. State budgets have imploded. The number of people on SNAP (food stamps) has risen from 26 million in the summer of 2007 to over 40 million today.
Paul singled me and some others out when he said “As recently as two years ago, anyone predicting the current state of affairs (not only is unemployment disastrously high, but most forecasts say that it will stay very high for years) would have been dismissed as a crazy alarmist. Now the nightmare has become reality.” Guilty as charged. But the issue is not who was right and who was wrong, it’s where do we go from here? Krugman is right. We need more fiscal stimulus and we need more monetary stimulus. For a sick economy stimulus is medicine. Few in America believe a sick person shouldn’t have modern medicine. Sadly many believe a sick economy should have 100 year old medicine, namely Austrian Economics.
Badtux said,
It is notable that the Austerians always propose that others suffer for their reality-contradicting ideology, not themselves. Funny, that. I never hear an Austerian promising to be one of those who are eating catfood and dumpster scraps for dinner because the Austerians cut off unemployment benefits. I never hear an Austerian promising that he will move himself and his entire family out onto the streets to live because he gave up his job and was foreclosed upon so that some deserving unemployed person can have his job. Instead, I hear Austerians proposing austerity… for other people. Not for themselves. Funny, hmm?
And you are correct, insanity is doing what failed — twice — and expecting any better result. Sad to say, the Austerians are like the Christian Scientists there… they claim Hoover’s policies would have worked if only he’d thrown *FIFTY* percent of Americans out of work rather than only *FORTY* percent, just like the Christian Scientist says that prayer would have cured your cancer if you’d prayed TWENTY hours a day rather than only SIXTEEN hours a day. Both of these are faith-based positions with no (zero) actual data to support them, but neither the Austerian nor the Christian Scientist needs, or wants, facts — they have faith, faith I say, in their Lord and Savior Hayek and His holy Father, Mises, and facts? They don’t need no steenkin’ facts, indeed the Austerian will sneer at your data saying “you can’t measure economic data with statistics”, they don’t need facts, they have faith!
- Badtux the Snarky Penguin