Nicolas Chatfort calls foul on the absurd sense of moral superiority trumpeted by Paul Krugman when the man’s own pronouncements are riddled with falsehoods
In a recent New York Times column, Paul Krugman wrote about what he called the bad faith of the opponents of President Obama’s economic stimulus plan. Krugman is apparently labouring under the view that his side has a monopoly of virtue in the current debate and that the Obama plan can not possibly be attacked on the merits. It must be comforting to be allied with people of such beneficence and infallibility.
Perhaps Krugman, however, should examine the good faith of his own claims before casting aspersions against his opponents. At first glance his counter arguments appear cogent, but a closer look reveals that Krugman is a master of illusion, employing many tricks that would do any sideshow magician proud.
First, Krugman assails the criticism that the Obama plan will cost $275,000 per job created as being a bogus talking point. His reasoning is that this figure involves taking the multi-year cost of the program and divides it by the number of jobs created in just one year. Krugman claims that the true cost per job is closer to $100,000 – or even a net cost of only $60,000 if you take into account the higher taxes that would be generated from a stronger economy.
Let us examine this counter argument carefully as Krugman is employing some slight of hand here. He is pulling a switch by re-framing the costs from a total program basis to an annual basis. The critics of the plan never claimed that the $275,000 per job was an annual cost. By the way, the $275,000 per job estimate is generous as it cedes the point that the plan will create the 3 million new jobs claimed for it by President Obama. Not all economists believe that anywhere near this number of new jobs will be created under this plan. What about Krugman’s own estimate of $100,000 per job if you look at the program in a multi-year basis? He claims this cost from the extra millions of new jobs that would be created after the first year. As the cost of the program is $820 billion, this implies that he believes that the Obama plan will actually create over 8 million new jobs. If this is true, why is the White House claiming only 3 million new jobs from the plan? Making arguments based on the official claims of its government proponents, as the critics have done, are not deceitful as implied by Krugman. Well, not quite as deceitful as calculating costs based on an extra 5 million jobs that do not appear in the program.
As for Krugman’s claim that the net cost will be only $60,000 per job due to higher tax revenues, it is nice to see that he has suddenly become a convert to dynamic scoring. I am sure we will see him be generous enough to allow tax cut advocates use dynamic scoring in their arguments.
The next card trick the Krugman dazzles us with is his counter argument about the relative benefits of tax cuts versus government spending. He stacks the deck by presenting a horrifying vision of airlines falling out of the sky if the government does not provide the air traffic control system. An honest contrast would have been between a government system versus a privatized one, not versus no system at all, but then again it does not appear the Krugman is really interested in having an honest debate.
Krugman claims that no one really believes that lower taxes are a better stimulus than government spending. He somehow must have missed the statement that the Cato Institute placed in major US newspapers, including the one for which he writes, that was signed by hundreds of economists, including Nobel laureates, taking just such a position.
His own argument in favour of government spending delivering “more bang for the buck” because a large share of any tax cut would be saved is also suspect. If the current economic problem was caused by a shift in preferences away from consumption and toward savings, then would not a large share of any income increase that is derived from new government spending also likely be diverted to savings?
One of the errors of the advocates of a Keynesian solution that increases demand is that they fail to recognize that it was an unsustainable level of demand the helped to get us into the current mess. We were consuming more than we were producing, relying on foreign lenders to make up the difference. A shift from consumption to savings is necessary for the long-term health of the US economy. Increased growth can be encouraged by taking permanent measures to increase the returns on production, but fiscal measures that try to artificially boost demand will only delay, and likely worsen, the correction in the structure of the economy that needs to take place.
Finally, Krugman ignores one of the most obvious criticisms of the Obama plan because he apparently does not have a convenient hat trick with which to dismiss it, that is the question of timing. According to the CBO’s cost estimate, only 20 percent of the program will be spent this year and somewhat more than half in the first two years. If this massive stimulus program does not generate self-sustaining economic growth within two years, the clearly it will have to have been judged as a failure. Can spending that will not even take place until three or more years from now, when they may not be needed, really be considered as a stimulus to our current problems? A more likely explanation is that the Democrats in Congress had their own bad faith justifications for this spending. Krugman’s warning against fraudulent arguments is perhaps the only point in his column with which I am in accord.