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Jerry Shenk


Why Do People Listen to Paul Krugman?

by Jerry Shenk
 

The American Enterprise Institute's Arthur Brooks often speaks about the difficulties and uncertainties of economic forecasting and the ways in which even known current and historical data are variously interpreted, used and misused by followers of competing economic methods.

In speeches, Brooks has highlighted those difficulties by joking, "[Economists] tell lies for a living."

But, when applied to some of his contemporaries, Brooks' statement is no joke.

A significant number of modern economists, led by the New York Times' Paul Krugman -- the left's favorite Keynesian -- have become little more than big-government shills.

A Nobel laureate for trade theory, Krugman has transformed himself into a political operative with a byline.

In his book, "Peddling Prosperity," Krugman wrote "Someone once said about partisan analysts that they use economic data the way a drunkard uses a lamppost: for support rather than illumination."

Spot on, but, intending only to disparage economists with whom he disagrees, Krugman inadvertently revealed his own lack of self-awareness and a sense irony.

Krugman and other big-government Keynesians share a bad habit of misusing, ignoring or obscuring facts to promote their preferred policies, while insulting rivals, speaking down to and lecturing the rest of us.

Krugman's archive of highly partisan tendentiousness is extensive, and includes: "Republicans are radicals;" House Republicans are "blackmailers"; global warming skeptics should be "punished in the afterlife," deficit spending doesn't matter, and government austerity is bad
Krugman often makes such biased, sometimes ugly allegations and proclamations, expecting that similarly-prejudiced, undiscerning and less-credentialed readers will accept them as authoritative.

But, now, because President Barack Obama has contradicted one of his pet hypotheses, Krugman faces having to reconcile irreconcilable narratives.
In his recent State of the Union speech, Obama boasted "...[A]fter a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999."

But, less than two years ago, Krugman and fellow big-government economists made dire predictions about the effects of the modest spending cuts dictated by the 2013 budget sequester.

In a column entitled "Sequester of Fools," Krugman insisted that sequester would cost 700,000 jobs.

Upping Krugman's ante, more than 300 liberal academics and economists - including former Clinton cabinet appointee Robert Reich -- signed an open letter protesting that sequester would destroy one million jobs and a nascent economic recovery.

Had Krugman and his colleagues been right, America would be in recession today.

Obama himself proposed the sequester in the (well-founded) belief that Congressional Republicans had no stomach for austerity, but Republicans called his bluff.

Accordingly, by the third quarter, 2014, federal spending dropped from about 24 percent to below 20 percent of Gross Domestic Product.
America's debt is still growing, but, with sequester, budget deficits declined. Nevertheless, the economy has grown more robustly, and unemployment is officially-reported at 5.6 percent.

Ignoring that the government's "austere" deficit-spending policies increased America's national debt by $7.5 trillion in only six years, and disregarding the president's rosy economic report, Krugman recently wrote that austerity - and sequester - held back the US economy, a claim that cannot be squared with spending and jobs data, with Obama's statement or with Krugman's own previously-published material.

Keynesian theories were debunked in the 1920s when austerity reversed the Depression of 1920, in the 1930s when Keynesian-inspired spending policies deepened and prolonged the Great Depression, in the 1940s when Keynesian alarm over deep post-war budget cuts proved overblown, in the 1990s when Keynesians opposed spending drawdowns after the Iron Curtain fell, and again in 2009 when a massive Keynesian stimulus did nothing for the American economy beyond increasing deficits and the national debt by more than $1 trillion.

The University of Chicago's Richard Thaler is credited with saying, "When an economist says the evidence is 'mixed,' he means that theory says one thing and data says the opposite."

Because data seldom confirm their policy preferences, Keynesians always go with their theories.

Winston Churchill quipped: "If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions."

To rationalize his own discredited prognostications, undoubtedly, Paul Krugman would dutifully parrot Keynes' opinions - before adding several of his own.


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