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On true ‘Bad Faith Economists’

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.

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19 comments to On true ‘Bad Faith Economists’

  • Laird

    Suppose you were Paul Krugman and suppose you were an idiot. But I repeat myself. (Apologies to Mark Twain.)

    Anyone with a soupçon of economic intelligence understands that what is needed for the long-term health of the economy is a shift from consumption toward saving, and the return of over-heated real estate prices to more rational levels. We need to take our medicine now, not another receive dose of “hair of the dog”, which of course is the patent medicine being peddled by the Democrats. These people are truly bereft of any ideas; their reflexive response to any problem is more spending (by government, by consumers, it doesn’t matter as long as the cash is flowing). I believe that these people are truly incapable of comprehending that overspending is the cause of our current economic condition. It’s pathological.

    One more observation: I find it interesting that in almost every case where the Left wants some new law or program their mantra is that it’s “for the children.” However, when it comes to their own immediate desires (think of unfunded and unsustainable Social Security, or the expanded Medicare drug program, or this proposed economic stimulus plan), it’s “screw the children, we want ours now!” Because it’s our children and grandchildren who are going to have to pay for all this. What a nice legacy. I’m glad I won’t be around to read how future historians judge my generation.

  • Sam Duncan

    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.

    The current debate? This is always the standpoint of the “left”.

  • Kim du Toit

    The New York Times is to truth what child molestation is to parenting.

    And that goes for Krugman as well. You’re almost always better off taking the reflexively-opposite position to his.

  • jt007

    Krugman suffers from the same condition that all modern liberal ideologues suffer from. He is a malignant narcissist. He and his reputation are his paramount concerns. He believes himself to be superior and his political orientation (i.e. liberal Democrat) is the manifestation of that superiority. He also cannot tolerate anyone disagreeing with him because he lacks the ability to empathize with others and, therefore, cannot accept or understand opinions that differ from his own. I know this point has been made before about liberals, but it is true. Political ideology and political parties are merely the manifestation of individual psychology on a macro level. Ideological liberals are motivated by their own egos. They cannot bear anyone disagreeing with them because they cannot even conceive of the possibility that they and their belief system may be wrong. When you challenge a liberal’s belief, the liberal sees it as a challenge to their superiority.

    If anyone has any doubt as to the application of this analysis to Krugman, take a look at this pre-nobel Prize interview that he did with Howard Kurtz of the Wahington Post. Krugman admitted that he was pissed off that he wasn’t getting the respect he felt that he so richly deserved(Link).

    Furthermore, Krugman suffers from delusions of grandeur. In Rolling Stone Magazine, Krugman stated that he wanted to be(Link) like the super intelligent social scientists in Isaac Asimov’s Foundation series of stories who had the ability to manipulate the masses inorder to save mankind.

    Krugman suffers from serious psychological disfunction. No matter how brilliant he may be in regard to economics and trade theory, his policy pronouncements should always be considered with the proverbial grain of salt. His punditry is born out of of his personal psychology to a much greater degree than his economic knowledge.

  • jt007

    Krugman suffers from the same condition that all modern liberal ideologues suffer from. He is a malignant narcissist. He and his reputation are his paramount concerns. He believes himself to be superior and his political orientation (i.e. liberal Democrat) is the manifestation of that superiority. He also cannot tolerate anyone disagreeing with him because he lacks the ability to empathize with others and, therefore, cannot accept or understand opinions that differ from his own. I know this point has been made before about liberals, but it is true. Political ideology and political parties are merely the manifestation of individual psychology on a macro level. Ideological liberals are motivated by their own egos. They cannot bear anyone disagreeing with them because they cannot even conceive of the possibility that they and their belief system may be wrong. When you challenge a liberal’s belief, the liberal sees it as a challenge to their superiority.

    If anyone has any doubt as to the application of this analysis to Krugman, take a look at this pre-nobel Prize interview that he did with Howard Kurtz of the Wahington Post. Krugman admitted that he was pissed off that he wasn’t getting the respect he felt that he so richly deserved(Link).

    Furthermore, Krugman suffers from delusions of grandeur. In Rolling Stone Magazine, Krugman stated that he wanted to be(Link) like the super intelligent social scientists in Isaac Asimov’s Foundation series of stories who had the ability to manipulate the masses inorder to save mankind.

    Krugman suffers from serious psychological disfunction. No matter how brilliant he may be in regard to economics and trade theory, his policy pronouncements should always be considered with the proverbial grain of salt. His punditry is born out of of his personal psychology to a much greater degree than his economic knowledge.

  • Letalis Maximus, Esq.

    If God did not want us to be sheared, he would not have made us sheep.

  • Gapeseed

    Amen to all, including to some very insightful comments.

  • Seerak

    Nearly all modern economic theory is constructed for the sole purpose of rationalizing government intervention in the economy and/or to obscure the real costs of such.

    It should therefore be no wonder that it makes such poor predictions; it was not meant for that. It is meant to obscure the past, not to enlighten the way forward.

    So it goes well past Krugman; the questioning of good faith needs to be extended to the economic profession as a whole…. for mistakes of this size are not made innocently.

  • happyfeet

    Socialism is stupid. This country used to be cool.

  • Ah, Krugman fans, eh? Here’s a piece you’ll like:

    Krugman vs. Olbermann: When frauds collide

  • Pink Pig

    I’m not an economist, so I’m on unfamiliar ground when it comes to spinning the truth.

    I worked for a government contractor in the 70s, and at the time the average cost of a job was supposed to be $100K per annum to the government (that was the basis of my company’s annual fee, anyway). Of that, I never saw more than $17K, and I have no idea where the rest went. I’ve been a self-employed consultant for the last 30 years, and I’m pretty sure that the cost to my customers has never exceeded my fee (maybe a small percentage above that for overhead).

    If indeed it will cost the government $275K for each job created, and if these are the sort of average jobs that pay $40K-$50K per year, then the government must be paying at least five years worth of a worker’s salary in order to create the job in the first place. When do we start seeing the benefits of that?

    Where is this money coming from, if not the same people that it is supposed to benefit in the first place?

  • Bob

    Why does anyone take the time to refute Krugman in any meaningful way? He is a man in love with the sound his own bigoted voice who happens to be a PhD economist. So what? Don’t feed the animals.

  • Third-rate-economist-in-flyover-country

    I am an economist and I can assure everyone that economists get far, far slipplier when the question becomes political.

    Paul Krugman and Brad DeLong—who are both very talented economists—are forever accusing their opponents of bad faith and wicked intentions.

    Krugman and DeLong never think that their opponents are mistaken or incorrect. They think that their opponents are always corrupt, stupid, bought off by monied interests. Their opponents must be evil, not just wrong.

    Makes it rather unproductive to argue with them.

  • jt007 and Third-rate-economist-in-flyover-country take the cake.

    However, Laird said: “We need to take our medicine now, not another receive dose of “hair of the dog”, which of course is the patent medicine being peddled by the Democrats.”

    Laird, and the Republicans are different… how, again? They voted for the first package, and now their big gripe is the second one does not do enough for the homeowners. Those would be the same homeowners who bought $500,000 houses while working custodial jobs, and now claim the evil banks deceived them – so let’s have the prudent folk pay through the nose and all other orifices for their stupidity/greed.

    If they want to compete with the Democrats over who is the more skilled populist (and they will lose), to quote “Heathers”, “Now there’s a school that self-destructed, not because society didn’t care, but because the school was society.”

  • Johnathan Pearce

    Plamus, I think you will find that Laird is as scathing about the GOP as he is about the Dems on the issue of spending.

    It is a shame about Krugman. He has written some good stuff on trade but in recent years he is little better than a hack writer for the Dems. One thing I admired about the late M. Friedman was that he never toed the party line and preferred to take positions that might upset the conventional Right – he opposed the Iraq war, campaigned for the end of the draft, the War on Drugs, etc. I miss his wisdom.

  • Laird

    Plamus, I wrote more than once to my congressman and both of my senators expressing my strong opposition to both of these “Grandchildren’s Indebtedness” bills; don’t lay that on me. The Democrats are the ones pushing this latest incarnation, which is why I named them here, but Bush et al were responsible for the first. A pox on both their houses!

  • Paul Marks

    The absurdities and LIES of Paul Krugman have been exposed by Ludwig Von Mises Institute writers for years – go on their blog and search for his name.

    As for the latest government spending binge (including the “tax cuts” for people who do not pay taxes), it will COST jobs.

    “What is seen” will be outweighted (over time) by “that which is not seen” – a classic Frederick Bastiat situation.

  • Chris

    Political ideology and political parties are merely the manifestation of individual psychology on a macro level. Ideological liberals are motivated by their own egos. They cannot bear anyone disagreeing with them because they cannot even conceive of the possibility that they and their belief system may be wrong. When you challenge a liberal’s belief, the liberal sees it as a challenge to their superiority.

    I happened upon this comment when looking for some information about malignant narcissism and it is quite prescient. A major trait of malignant narcissists is projection. Here the author of this comment projects his own feelings of superiority onto an entire group of people, namely Liberals. Projecting his superiority onto Liberals allows him to debase a whole group of people without making a single rational argument against the ideas of the group or individuals belonging to the group. He just claims the entire group is defected and discards them entirely. It’s the first step in rationalizing a lack of empathy.

    Projection is only one of many necessary traits required to be classified as a malignant narcissist so I will not make the extraordinary claim that the author of the comment is such a disturbed person but I will call out his argument as being particularly ironic. The author of this post should probably take a step back and contemplate if the traits he attributes to all Liberals are really traits of the entire group or his own character projected on a group. After all it is quite a stunning claim to make that all Liberals are ego driven with the implication that they are all malignant narcissists.

  • Ideological liberals are motivated by their own egos.

    Folks need to stop using the term ‘liberal’ like that and assuming people will get what they mean. It only always means ‘left wing statist’ in the USA. In other places it has other very different (i.e. closer to the original) meanings.