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Political Cartoon questioning government deficit
Economists are expected to be able to predict the direction of the markets and offer guidance in how and why certain events are unfolding. Many are honest, and I have often linked to ones who appear to be consistent with their predictions and theories. However, Paul Krugman has become openly dishonest with his recent pronouncements.
The pronouncements surround the recent admission by the Obama administration that their predictions of a $7 trillion deficit for the period from 2010 to 2019 was over 25% under estimated and that they were going to increase their estimate to $9 trillion, which is something I reported in a previous article where I questioned if that estimate was high enough.
Krugman attempts to not only justify the high deficits, but allay any fears of their danger in an New York Times article titled: Till Debt Does Its Part.
Overall the article itself is filled with theory, which has largely been condemned by economists from coast to coast. Krugman defends the stimulus by saying:
Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.
This has not been supported by the markets. France, and Germany have both recovered faster than the US and actually grew their economies during the second quarter of this year. Neither nation engaged in any stimulus spending, so it would be hard to claim that deficits helped their economies, which are doing better than the US.
Krugman also tries to hide some of the dangers by claiming that credit is easy to find for the US as he claims:
this assumes that the U.S. government’s credit will remain good so that it’s able to borrow at relatively low interest rates. So far, that’s still true.
Just a week ago uber-investor Warren Buffet openly started worrying about the deficits and I noted in one article that the clarion call of bond investors who are losing faith in the credit of the US is growing rapidly. Krugman ignores this completely in order to justify his support for the deficits. I noted this in an article I published on August 24..
However, that alone would not have me claiming that Krugman is dishonest. The key here come from an interview that Paul Krugman gave to that the Australian Broadcast Corporation transcripted back on November 3, 2004. In that Krugman was panicked of the $400 billion deficits of the Bush Administration. He claimed then:
Well, basically we have a world-class budget deficit not just as in absolute terms of course - it's the biggest budget deficit in the history of the world - but it's a budget deficit that as a share of GDP is right up there.
It's comparable to the worst we've ever seen in this country.
It's biggest than Argentina in 2001.
If the deficits back then were the biggest since Argentina in 2001,and those deficits led to hyper inflation and a currency crisis, you'd expect him to be condemning the Obama deficits as they are much higher in absolute terms. Instead he attempted to blow off the higher deficits by claiming that now we need deficit spending.
He even went so far to claim that the small downturn in the economy back in 2004 could not be helped by deficit spending.
His charges that the Bush deficits went still further and claimed that the much smaller deficits back then would cause a crisis of confidence. The same type of crisis that Warren Buffett and others are worrying about now. But this time Paul is ignoring them to support the administration:
the only thing that sustains the US right now is the fact that people say, "Well America's a mature, advanced country and mature, advanced countries always, you know, get their financial house in order," but there's not a hint that that's on the political horizon, so I think we're looking for a collapse of confidence some time in the not-too-distant future.
I know that Krugman is a professor of economics and lauded by many for his opinions and pronouncements, but this time he can't have it both ways. Either the economy was perfectly safe back then and we should have never worried about the deficit, or Krugman has now become an openly biased economist willing to claim anything to support a political agenda.
With all the times I've pointed out that its hard enough to honestly predict the economy, adding in political bias is dishonesty in its highest form and I recommend that anyone reading Krugman in the future consider carefully his pattern of pandering to certain political groups rather than concentrating on the real impacts on the markets.
Comments
Mark -- you should know better. Inconsistency does not prove mendacity.
You do not know his motives. Only if you did know his motives could you have written this article and been so cocksure.
I would have thought you would have learned this in Berkeley when they taught you how to evaluate data and make critical judgments.
Anyhow -- thanks for pointing out his change of tone.
Marty Carbone at yahoo dot com
Marty
Marty, my article here merely touches the iceberg of Krugman's biased analysis. And there is far more data behind this showing that Krugman changed his position on deficits 100% the day that Obama took office.
I also noted in the article that Krugman explicitly denies the warning call of many investors about the stability of the US dolloar and used that claim of no lack of faith to support the theory that the deficits aren't dangerous.
I stand by my accusation of intellectual dishonesty on the part of Paul Krugman.
Right, Krugman is full of crap.
The largest stimulus package in postwar German history -- and the second such package since the start of the current financial crisis -- was passed on Friday by the German parliament's lower house, the Bundestag. The bill calls for €50 billion in public investments, tax breaks and even cash handouts to junk old cars. It now heads for a vote by the upper house of parliament in a week. As a result of the package, Germany will have to take a record of €36.8 billion in new loans for 2009.
French President Nicolas Sarkozy has unveiled a 26bn-euro ($33bn; £23bn) stimulus plan to help France fend off financial crisis.
The measures include a 1bn-euro loan for carmakers and 5bn euros of new public sector investments.
The plan amounts to 1.3% of France's gross domestic product and should boost its economic growth by 0.6% in 2009.
It will also increase the budget deficit to 3.9% of GDP from the previously forecast 3.1%
I think time changes, hence justification in 2004 are no longer valid today. While I enjoy reading this article - it does show us a different perspective, I am amazed by words like dishonest by comparing Paul Krugman's current remarks against his 2004 remarks because the world does not standstill.
I remember I enjoyed eating MacDonald years ago and told people so, and recently I found that it is not really healthy food and hence I changed my mind - not sure if I am dishonest?
I see things differently, and would contend that your column is misguided. You argue that Krugman is both wrong and dishonest. Well, perhaps he'll be proved wrong. But there's no evidence that he's dishonest. Rather, Krugman has been careful in explaining why he has taken his position, which I believe you state incorrectly. You state that he intends to "allay any fears" about the deficit. Wrong. Krugman plainly states that big deficits are "bad" (his word). However, he also argues that not running deficits in this difficult economic time would be even worse. He himself says he's worried about these debt levels. But if we're careful we can deal with them, just as other countries have dealth with comparably sized debt levels in the past.
Is Krugman's argument dishonest? - hardly.
Is it nuanced? - yes.
Is it prophetic? - well, we'll see. Krugman has been correct quite often.
Accusing a worthy adversary of dishonesty is a disgraceful way to argue.
Paul and others,
My argument against Krugman's honesty is based on his own words. In 2004 with a much lower deficit level in an interview Krugman was forecasting doom and gloom, comparing the Bush budgets to the ones in Argentina in 2001 that destroyed the Argentinian currency and caused a financial collapse.
But now that he has a president he likes in office, news that the deficits were underestimated by $2 trillion (5 times any one year of BBush deficits) is only a cause for minor concern? Sorry, you can't nuance that. If Bush's $400 billion deficit was too much, than Obama's $1.8 trillion (per year) deficits must be far worse.
And I pointed out that Krugman used a claim that the dollar is secure to bolster his claim when Warrn Buffett and others are already calling on the US to balance the budget before the dollar collapses.
Read the articles I linked. Its clear that Krugman biased his analysis based on his political views.
"With Obama all things are possible." (Quote lifted from someone else.) We can get all the money we need by hitting ourselves in the face with 2x4's until pots of gold shoot out of our "bottoms." There you go ... all the world's problems solved.
As pointed out earlier, Germany passed a 50B euro stimulus package in Feb 2009. France did a 26B package in Jan 2009. I just did a quick search to dig these up, each may have done more since.
Well, I guess you did prove your dishonesty.
I apologize, Mark. Americans watch "Reality TV", and Congress knows how much Americans watch TV, but anyone with common sense knows that "Reality TV" should be called "Anti-Reality TV."
The result is that our government treats "all" Americans as the intellectual equivalent of gerbils. Expect government officials to contradict themselves again, and again, again.
RJ, Where in my article do I talk about German and France and their stimulus packages? or the effects or lack thereof of those packages?
Its hard to be dishonest about something I did not talk about. My article covered one thing. The fact that Paul Krugman back in 2004 was claiming that the $400 billion deficits of Bush were going to destroy the US economy and neow he is claiming that Obama's $1.8 trillion a year deficits are not enough.
The policies of France and Germany have no bearing on this argument. Please keep to the topic in the article.
2004 was a long time ago, Greenspan was a god. Alan finely got honest and said his assumptions were wrong. New Chicago economics belief that markets are honest and infallible has also proved erroneous. This country grew the most in our heaviest taxed and most regulated time 50's & 60's. We innovated and built. By the late 60's we wanted a break and stopped building and innovating and rested on our laurels. Thirteen weeks vacation was the goal of steel workers. I thought it was a joke. Apparently we Americans continued to look for the easy way. Business moved out blaming unions, not taking responsibility for their actions of giving the contracts to its workers it could not afford. Not believing the American was smart enough to understand business, and the back biting & back stabbing began. Chicago economics theory the unemployment is caused by workers not wanting to work may not be to far from the truth. I'm 62, self employed, what can i do to help build and innovate.
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