Friday

Is Paul Krugman schizophrenic?

Can anyone tell me how Paul Krugman has a shread of credibility left.

In 2003 he was railing against the "huge deficits that George W. Bush was running up and predicting doom and gloom. Now he is trying to figure out what why there is som much hype about budget deficits.  Keeping in mind that budget deficits under Bush were around 3% of GDP and under Obama they are around 11%. This guy is suffering from a split personality. Take a look at the differening opinions he offers which are apparantly based more on politics than fact.

The excerpts below are from an article written 02-05-10:

Fiscal Scare Tactics

These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.


Yet they aren’t facts. Many economists take a much calmer view of budget deficits than anything you’ll see on TV. Nor do investors seem unduly concerned: U.S. government bonds continue to find ready buyers, even at historically low interest rates. The long-run budget outlook is problematic, but short-term deficits aren’t — and even the long-term outlook is much less frightening than the public is being led to believe.


So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.


And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.


The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.


Why, then, all the hysteria? The answer is politics.
The excerpts below are from an article in 2003:

A Fiscal Train Wreck

With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.


From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. Either way, the tide of red ink will keep on rising.


Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.


And that's way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account — as the C.B.O. cannot — the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it's clear that the 10-year deficit will be at least $3 trillion.


So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.


That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 — make that 3, O.K., maybe 4 — percent of G.D.P. But that misses the point. "Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen." So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.

Why all the hysteria Paul? You answered it best...Politics maybe? Maybe he should change his name to Drugman because he's been smoking the good stuff just lately.

2 comments:

  1. Krug Man - Nobel for Economics? From the same prize jury that gave little Bammy his Peace Nobel, no doubt.

    Flowerplough

    ReplyDelete
  2. The hand them out like candy. It's amazing. The only requirement for receiving a Nobel Prize is being a leftist whack job.

    ReplyDelete

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