Lies, damn lies, and Paul Krugman

Paul Krugman now says the problem with the stimulus is we had the wrong sort of stimulus:

So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

(Emphasis mine.)

In Krugman’s recollection, he warned us from the beginning. Fortunately, we have a better record than Krugman’s reported recollection. In February 2009 he was quite positive about the stimulus that he now says he always said was the wrong sort:

Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

Back then, aid to state governments (which he now says he warned against) was “among the most effective and most needed parts of the plan.” The only problem was that we didn’t send nearly enough of it.

It will be interesting to see how Krugman goes about squaring the circle. I anticipate endless hilarity along the lines of his efforts to justify his notorious divide-by-ten error.

(Via Kaus Files.)

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4 Responses to Lies, damn lies, and Paul Krugman

  1. Actually, I think he was warning that tax cuts are no replacement for a job creation program, twice actually. You don’t emphasize it, but he did, by saying it twice in one paragraph.

    The lede that you or MK omitted from his 2009 piece – which you conveniently linked to – is as follows:

    “The short answer: to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts.”

    Read it again. I think he’s being consistent here.

  2. I think you need to look at your so called “divide-by-10-error” error again, and actually do the math yourself, and not let someone at the National Standard do it for you. You might be surprised to find that you actually made a multiply by 10 error.

    I’ll help you out: ($750,000,000,000 in tax cuts over 10 years)/(1,400,000 jobs over 10 years) = Cost per job created.

    I get $535,714.28. We could divide the cost by 10 years to get the price/year. But we’d just have to go back and multiply it by 10 again to match it up to the 10-year cost. Either way, $535,714.28 is definitely larger than $400,000.

    YES, that’s right, $400,000. Krugman said the average wage in the US at the time was $40,000/year. I guess he COULD HAVE SAID $400,000/10 years, but I don’t know of many folks who talk about salary in 10-year-terms. Do you?

    Keep in mind that the 1.4 million jobs was an estimate. We know what really happened by the end of 2008.

    Now do it again, this time subtracting the jobs lost since the tax cut was put into place. You’ll get the cost per job destroyed. JUST LIKE KRUGMAN PREDICTED in his original blog complaining about the tax cut in the first place.

    You sure are begining to sound like a fan of this guy. If your blog is a satire, and you are speaking sarcastically, I humbly apologize. Your tone is far to subtle for me, sir.

  3. K. Crary says:

    Okay, I read it again. Here’s what I read in 2009:

    To appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts. . .

    Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments . . .

    And here’s what I read in 2011:

    So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had.

    In 2009 he was complaining that the centrists, in their foolish pursuit of tax cuts, cut back the “most effective and most needed parts of the plan” — the same parts that he now says “wasn’t the kind of job-creation program we could and should have had.” And it’s clear that he was not complaining about the size of the state-aid, but its very nature.

    Then, with magnificent chutzpah, he says that he was saying this all along:

    This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate.

    So no, not consistent.

  4. K. Crary says:

    Regarding the divide-by-ten, you’re just plain trying too hard. Here is what Krugman wrote:

    The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created? If it’s all about jobs, wouldn’t it be far cheaper just to have the government hire people?

    You can’t tell me that Krugman wasn’t trying to make a direct comparison of these two numbers, as if they were comparable.

    And Krugman didn’t try to make that case either. Rather than conceding he had phrased the comparison poorly, he wrote thousands of words to try to justify the comparison. Eventually he wrote an entire piece on the liquidity trap (ASIDE: the very idea that we had a liquidity trap in 2003 is absurd) to argue that the jobs created by the Bush tax cuts would go away after one year — which of course is the only way that his comparison makes sense.

    Now it is mathematically true that 50k is still greater than 40k, but I don’t concede that 50k is the right number. Donald Luskin, who highlighted the divide-by-ten error, explained here. The divide-by-ten error was merely the largest and most outrageous of Krugman’s errors.

    Moreover, the whole comparison is wrong, because the Bush tax cuts were not merely a job creation plan. When the Bush people touted the jobs created, it was wrong to take that as somehow a tacit concession that they had no other beneficial effect.

    Krugman is a smart guy, he knows this. But he’s not honest enough to make a serious comparison. As the New York Times ombudsman put it:

    Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.

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