A question for leftist economist Paul Krugman of the New York Times: which of these things is not like the others?
From the first post on November 14, 2010, reading, “No, really – Nobody Cares About the Deficit,” to August 23, 2012, reading, “Nobody Cares About the Deficit,” to May 21, 2015, reading, “Nobody Cares About the Deficit,” Krugman seemed reasonably consistent.
But now . . .
On Monday, Krugman tweeted, “Deficits Matter Again.” He wrote in the linked article:
Not long ago prominent Republicans like Paul Ryan, the speaker of the House, liked to warn in apocalyptic terms about the dangers of budget deficits, declaring that a Greek-style crisis was just around the corner. But now, suddenly, those very same politicians are perfectly happy with the prospect of deficits swollen by tax cuts; the budget resolutionthey’re considering would, according to their own estimates, add $9 trillion in debt over the next decade. Hey, no problem.
This sudden turnaround comes as a huge shock to absolutely nobody — at least nobody with any sense. All that posturing about the deficit was obvious flimflam, whose purpose was to hobble a Democratic president, and it was completely predictable that the pretense of being fiscally responsible would be dropped as soon as the G.O.P. regained the White House.
What wasn’t quite so predictable, however, was that Republicans would stop pretending to care about deficits at almost precisely the moment that deficits were starting to matter again. Those apocalyptic warnings are still foolish: America, which borrows in its own currency and therefore can’t run out of cash, isn’t at all like Greece. But running big deficits is no longer harmless, let alone desirable.
But wait. Now deficits are no longer harmless or desirable?
Here’s how Krugman justifies his position; see if you can spot the giant flaw in his argument as he attempts to posit that his prior support for deficit spending made sense but doesn’t now :
In particular, deficit spending was essential to support the economy, and attempts to balance the budget would be destructive. This diagnosis — shared by most professional economists — didn’t come out of thin air; it was based on well-established macroeconomic principles. Furthermore, the predictions that came out of those principles held up very well. In the depressed economy that prevailed for years after the financial crisis, government borrowing didn’t drive up interest rates, money creation by the Fed didn’t cause inflation, and nations that tried to slash budget deficits experienced severe recessions.
But these predictions were always conditional, applying only to an economy far from full employment. That was the kind of economy President Obama inherited; but the Trump-Putin administration will, instead, come into power at a time when full employment has been more or less restored.
Of course you can see the hole in the argument: “full employment has been more or less restored.” Say what?
Krugman continues, “The low official unemployment rate is just one indicator. What I find more compelling are two facts: Wages are finally rising reasonably fast, showing that workers have bargaining power again, and the rate at which workers are quitting their jobs, an indication of how confident they are of finding new jobs, is back to pre-crisis levels.”
Has Krugman checked the labor force participation rate? It has been plunging consistently ever since Barack Obama took office, which means the share of American civilians over the age of 16 who are working or looking for a job has dropped dramatically. So Krugman can lie to himself about how much better the economy is since Obama took over, but the truth lies elsewhere.
The only reason Krugman opines that deficits matter again is so he can lambast the GOP to his heart’s content. They are certainly wrong for expanding the deficit, but just where was Krugman when Obama was in office?