It's Hard Out Here for a Laureate

Nobel Laureate and NY Times blogger Paul Krugman, that is.

First, Scott Sumner at The Money Illusion argues that the tax reductions and move toward deregulation of the Reagan/Thatcher era were successful, and that Krugman's argument to the contrary is wrong:

Krugman makes the basic mistake of just looking at time series evidence, and only two data points: US growth before and after 1980. Growth has been slower, but that’s true almost everywhere. What is important is that the neoliberal reforms in America have helped arrest our relative decline.

Then Tyler Cowen at Marginal Revolution weighs in on the tort vs. regulation debate and points out that the current disaster in the Gulf of Mexico provides a case of regulatory failure that doesn't seem to register in Krugman's analysis (italics in original):

There is in fact an agency regulating off-shore drilling and in the case under question it totally failed. How can Lake Erie, an orthogonally related success, be cited but this very directly relevant failure not be mentioned?

Now, it's important to point out that both of these critiques are by professional economists and are arguments about the merits, rather than just some guy with a free blog picking on Krugman for the partisan nature of his analyses. Krugman is still the most popular and influential writer on economic matters in the public sphere, so don't' feel too bad for him.

Besides, DeLong has his back (Saltwaters Unite!) accusing Sumner of not being able to read!

Who knew the dismal science could generate such feisty blogging?

Krugman's Consistency Deficit

In the comments to my Greece post, J. Strupp and I had a little back and forth about economist Paul Krugman's attitude toward deficits. I want to assure Strupp that while unfounded assertions make up a large percentage of discourse on the internet, I try really hard not to traffic in them.

I accused Krugman of not having a problem with deficits, as long as they are being run by Democrats. My accusation was based on an article from Econ Journal Watch that I had recently read. From the abstract:

Economists affiliated or aligned with one of the parties may be suspected of changing their positions on budgets deficits to serve their favored party or win favor with its constituency. This paper investigates selected economists, to see whether their tune changes when the party holding the White House changes. Six economists are found to change their tune—Paul Krugman in a significant way...

And from the paper:

Upon the 2006 Democratic victory in Congress, Krugman reverted to favoring deficits. In a column entitled “Democrats and the Deficit” he wrote:

One of the biggest questions is whether the party should return to Rubinomics—the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit. The answer, I believe, is no...And the lesson of the last six years is that the Democrats shouldn’t spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending. (Krugman 2006)

So deficits are OK, as longs as they are for what Krugman perceives as the "good things". I think we really ought to expect more from someone who is cited with such authority on these matters.

Paul Krugman wrong on option for deficit reduction

Economist and New York Times blogger Paul Krugman does his readers a disservice in the course of a recent post meant to dampen fears over high debt levels:

Many independent sources are moderately more pessimistic; they think that on current policies we’d be looking at a deficit of 5-6 percent of GDP. So that makes it more like a 3 or 4 percent of GDP adjustment.

That’s not, in economic terms, a huge number. We could raise taxes that much and still be one of the lowest-tax nations in the advanced world. Or we could save a significant share of that total by not being totally prepared for the day when Soviet tanks sweep across the North German plain. [EA]

The idea that if we faced a fiscal armageddon we could solve our problem by reducing spending on the implements of actual armageddon is an appealing one. One that I ascribed to not that long ago. Too bad it's not true.

While it is true that we still spend a tremendous amount of money on defense compared to other countries, we aren't spending the way we did when those Soviet tanks that Krugman conjures up were an actual threat. According to the Congressional Budget Office the federal budget for defense was 8.1% of GDP in 1970. In 2007 it was 3.9%. They estimate that in 2020 it will be 3.6%.

The notion that we are spending 3 or 4% of GDP on defense against a Soviet threat that no longer exists is simply wrong. If we reduced defense spending by 3 or 4% of GDP in 2020 we would spend nothing on defense. While I'm willing to concede our current level of spending on defense is too high, I'm sure the optimal level is not zero.

Is it too much to ask that one of the world's premier newspapers and its Nobel Prize winning economist blogger level with their readers about the fiscal choices facing the nation?