Paul Krugman and the NYT: Snake-Oil Salesmen Par Excellence
by Jacob G. Hornberger
One of the fascinating things about progressives is how they sometimes create their own realities, no matter how false, and then convince themselves and others that such is the actual state of affairs. No better example of this phenomenon can be found than in a recent article by Paul Krugman, the longtime liberal columnist for the New York Times.
This is what Krugman asserts: That the reason the United States has been suffering economic recession is because after the economic crisis in 2008, people starting obsessing on deficit spending. But for that “austerity,” he asserts, economic conditions today would be hunky dory.
In 2010, more or less suddenly, the policy elite on both sides of the Atlantic decided to stop worrying about unemployment and start worrying about budget deficits instead….
Some of us tried in vain to point out that deficit fetishism was both wrongheaded and destructive, that there was no good evidence that government debt was a problem for major economies, while there was plenty of evidence that cutting spending in depressed economy would deepen the depression.
And we were vindicated by events … the austerity policies that were put into place in 2010 and after had exactly the depressing effects economics predicted; the confidence fairy never did put in an appearance.
….there’s growing evidence that we critics actually underestimated just how destructive the turn to austerity would be. Specifically, it now looks as if austerity policies didn’t just impose short-term losses of jobs and output, but they also crippled long-run growth.
What could he possibly be talking about? Is it possible that Krugman is living in an alternative universe, one in which up is down and down is up?
Take a look at these figures, which I took from a page entitled “A History of Surpluses and Deficits in the United States” on a website named davemanuel.com. The page cites Whitehouse.gov for the information and I presume the figures are accurate.
2008 $459 Billion Deficit
2009 $1413 Billion Deficit
2010 $1294 Billion Deficit
2011 $1299 Billion Deficit
2012 $1100 Billion Deficit
2013 $680 Billion Deficit
2014 $492 Billion Deficit
Do you see any “austerity” in those figures? Do you see any elimination of deficit spending in any of those years? Do you see even one year in which tax revenues equal expenditures?
How Krugman can call this “austerity” is beyond me.
Or is it possible that he’s saying that when some people simply talk about the deficit and about the ever-growing amount of federal debt, that constitutes “austerity” even if government spending and borrowing are breaking all records? If so, that makes his article even more bizarre.
It’s true that we libertarians have been warning about the adverse consequences of out-of-control federal spending and debt not just since 2008 but for decades. For example, in 2011, a year when the debt ceiling was reached, the government was running a deficit of $1.299 trillion. That means that if the debt ceiling hadn’t been raised, the government would have had to slash $1.299 trillion dollars in federal expenditures. Undoubtedly, that would have entailed lots of layoffs and the drastic reduction or even abolition of many welfare-warfare state programs, agencies, and departments. If that had happened, I can understand why Krugman would call that “austerity.”
But that’s not what happened. Instead, the debt ceiling was lifted, thereby permitting spending and borrowing to go on unabated. Do you think that the Krugmans of the world called for slashing of expenditures in anticipation of the new debt ceiling? Not a chance! They said the exact opposite: We can’t cut spending and borrowing now because that would make the recession worse.
And so they just continued to spend and borrow, as the above figures reflect. That’s why, in just two years—2013, the new debt ceiling was reached again. Once again, the charade played out the same way as before. Libertarians said: Don’t lift the ceiling; instead slash spending. The Krugmans of the world said: That would be terrible; lift the ceiling and keep on spending and borrowing.
And that’s the thing: Each time the debt ceiling is reached, the Krugmans of the world say: If you fail to lift the debt ceiling, the sky will fall in. But as soon as the debt ceiling is raised, these people never say: We need to slash spending before we reach the next debt ceiling. On the contrary, they always say: We can’t slash spending now because that would make thing worse. And so, like the Energizer Bunny, the out-of-control spending and borrowing just keep going and going and going.
If deficit spending is the key to economic prosperity, as Krugman asserts, why is America mired in a never-ending series of booms and busts, bursting bubbles, recessions, and never-ending monetary debasement? Look at those figures again: If Krugman is right about how deficit spending brings economic prosperity, America should be experiencing solid economic prosperity.
In fact, take a look at the following figures, which represents deficit spending in the five years prior to 2008:
2003 $377 Billion Deficit
2004 $413 Billion Deficit
2005 $318 Billion Deficit
2006 $248 Billion Deficit
2007 $161 Billion Deficit
If deficit spending is the key to economic prosperity, as Krugman asserts, how come there was that big bubble that burst in 2008, bringing on another long recession? Alas, Krugman doesn’t explain that one.
If it was possible for a government to spend and borrow people into prosperity, every nation on earth would have a booming economy, one with soaring standards of living. After all, what government doesn’t like to spend and borrow? But as we libertarians have been warning for decades, this is a fool’s direction. There is no way that a government can spend and borrow people into prosperity. What it does instead is impoverish people with such policies.
The only way that people can raise their standard of living is through economic liberty and free markets, which include the accumulation of capital in the private sector and the freedom to trade with others around the world. Obviously any nation whose government lacks the authority to take people’s money from them (e.g., no income tax or IRS) or interfere with their ability to trade with others (e.g., no more embargoes or sanctions) or plunder them with debased currency (e.g., no more Federal Reserve or legal-tender laws), will be one where people are experiencing skyrocketing standards of living.
So, what do you think is going on here, assuming that Krugman really does have a grip on reality? I think that deep down he knows that we libertarians are right — that out of control spending and debt don’t bring prosperity, they bring crises and impoverishment. I think he is setting the stage for blaming the impending economic, financial, and monetary crisis on “austerity” rather than acknowledge that it is a direct consequence of economic statism.
Americans would be wise to reject the economic prescriptions of Paul Krugman and the New York Times. They are akin to the snake-oil salesmen of old.