Prof. Krugman reassures his followers that the economy may yet stall - how does he type with his fingers crossed?
I am especially amused by his big finish:
To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet, and still end a presidential term with fewer jobs than when you started. And despite yesterday's good news, that's a trick President Bush still seems likely to pull off.
The "jobs" question is worth pondering. Here is a Brad DeLong post, and a post by Steve Antler that picks up a comment made by Jim Glass, found courtesy of Steve Verdon, and providing an answer to the wish I made out loud in the comments here. We are quoting Prof. DeLong here, if the preceding was somehow unclear:
Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs or so. It would have been very hard for any set of economic policies to have sustainably kept the economy at the high-pressure state it was in in 2000.
Well, yes - the late 90's economy was a bubble; bubbles tend not to be sustainable; trying to get "back to the bubble" may not be realistic or desirable. As Steve Verdon and others explain, Paul Krugman made a similar point in the mid-90's when he argued that employment below 6% would end badly (although he was worried about inflation - oops!). Now, times have changed, and although the last period with employment below 6% appears after the fact to have been unsustainable, it has become Prof. Krugman's new baseline. Political expedience, or strict economic analysis? You decide.
But enough about jobs. I am tickled by the "biggest budget deficit in the history of the planet" notion. Imagine, if you will, that George Bush had announced yesterday that, under his stewardship, the US economy had grown more than in any previous quarter in history. Liar! Growth at 7.2% was good, but we have done better! In fact, we did better under (choke) Reagan.
And no one cares. Because the correct growth measure is as a percent of GDP. And if Bush said otherwise, we would all agree he was being duplicitous, or stupid.
Or maybe we wouldn't. But when Prof. Krugman describes the "biggest budget deficit in the history of the planet" he can only be speaking in nominal terms. Japan has had larger budget deficits as a percent of GDP - they are still on the planet, yes? And the inevitable growth of their economy is finally occurring, after a mere ten year lag.
And the US has had larger deficits on a percentage basis as well. All of which the Earnest Prof knows, but evidently forgets when he is excited. Or, as when contemplating the recent quarter's results, depressed. Being a Serious Economist is apparently a sometime thing when he is preparing polemics for the NY Times.
MORE: I cannot shake the feeling that Prof. Krugman excoriated someone for mixing nominal, real, and percentage comparisons. It might be lovely to find it.
UPDATE: Burn, baby, burn! It's a disco inferno!