P. Krugman - Keep Hope Alive!

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.

Well, who's a liar?  Sure, we did better under Reagan in percentage terms.  But in nominal, no adjustment for inflation or anything else terms, this is our biggest quarterly increase ever. 

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!

Comments

[Jon Henke]

Good points. Thanks for saving me the trouble...I'll just link to you, instead.

Krugman HAS GOT to know that the manufacturing slide in industrialized countries, plus the bubble, and resulting over-capacity, of the late 90s creates a unique job-problem for the economy.
And he HAS GOT to know that it had nothing to with the President.

Now, he can talk about the deficit all he likes, (although he assigns far too much blame to Bush, with regards to tax cuts) but pretending that Bush was responsible for the state of employment is just.....well, if some average joe blogger said it, I'd say he was deluded.

Since Krugman should know better, I'm gonna have to go with "intentionally misleading".

Presidents deserve neither as much credit as they get for the economy, nor as much blame.

[Jim Glass]

"To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet..."

Yes, yes, the US and Japan and lots of others.

But let's be fair to Professor K. He's writing *rhetorically* in an op-ed column just as all other opinion writers do -- you know, Bob Herbert, Molly Ivins, etc. He's not writing as any kind of rigorously thoughtful economic analyst in an op-ed column.

And there's nothing wrong with that.

Just remember it about all his columns.

Perosonally, my favorite rhetoric from his recent columns remains:

"the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

Not enough, *more* than enough.

Gosh, if Bush's dummy economic advisors had realized that in back 2000 they could have used it as justification for the tax cuts! "Hey, we have *more than enough* money to run SS and Medicare for the next 75 years..."

No wonder Hubbard and Lindsay are gone.

[ScrapOfCat]

"All of which the Earnest Prof knows, but evidently forgets when he is excited."

Perfect.

[TM]

Thanks very much. If I bitch about him twice a week, lightning will strike.

[Jon Henke]

"But let's be fair to Professor K. He's writing *rhetorically* in an op-ed column just as all other opinion writers do -- you know, Bob Herbert, Molly Ivins, etc. He's not writing as any kind of rigorously thoughtful economic analyst in an op-ed column."

- - -I think we are keeping that in mind, and we don't like it. Or respect it.

And that's fair.

Why would one hire a rigorously thoughtful economic analyst to write a column, if not for the aforementioned qualities?
And why do we rarely see anything but rhetoric?

[R Davis]

You're correct that it's not the "biggest budget deficit in the history of the planet". However, this whole focus on the deficit is misplaced. We should be focusing on the DEBT as a percentage of GDP, not the DEFICIT. It is the DEBT that we have to pay back or pay interest on forever. On this subject, see the article at the attached URL ( http://home.netcom.com/~rdavis2/luskin4.html ).