Mickey Kaus notes that in Paul Krugman we have two economists for the price of one. In 2009 he said:
Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high.
whereas now he’s saying:
So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had
You may observe that the latter is what I’ve been saying for quite some time. Something else is also worth mentioning: in some instances state and local governments strategized their projects, deferring already approved projects in anticipation of the 2009 stimulus package. In other cases state and local borrowing was replaced by federal borrowing. You don’t get additional stimulus by moving money from one balance sheet to another.
Key word “additional,” yes.
A stimulus is supposed to be additional spending over a conceptualized norm. Krugman can’t have it both ways by saying tax cuts are poor stimulus because the recipients historically don’t turn around and spend more money, they save, and not make the same observation about local and state government. Transfers to state and local government didn’t just fail to increase spending, it was often worse, in that it helped them reduce spending. It would be like giving everbody a $500 tax break, and then everybody in the country decided to work $500 less.
I’m sorry, but your attempt to make those points look bad just reinforces them, PD.
Yes, it is a reasonable argument that money not spent is not good stimulus.
It is also a reasonable argument that diverting stimulus money reduces stimulus.
(I find it bizarre that some people think diverted money should still act like stimulus. Is it a spooky property of the money? Should it know that it is still stimulus, when it pays an existing salary instead?)
(You give a friend money to buy a bottle of wine. Rather than spend it all on wine, he sees a movie first, and buys a bottle with the change.
You say “this is terrible wine!”
He says “hey, you paid for it.”
Kaus is saying the problem is “wine buying” and not “movie going.”)
(or put differently, he wants to judge the quality of the wine relative to the money you sent, not the money spent.)
This isn’t new, I recall catching Krugman in a very similar about face awhile ago. I’m pretty sure the post is on OTB somewhere in the archive.
I don’t think you understood PD’s comment. Here let us use numbers.
Absent stimulus:
State spending is $100 ($50 from taxes, $50 from borrowing).
With the stimulus
State spending is $100 ($50 from taxes, $50 from stimulus transfers).
In other words, the spending if the same and you get no “bump” and hence no job creation. Krugman 2009 was wrong. Flat out wrong.
Well, wasn’t that hard.
Krugman vs. Krugman
First up Paul Krugman,
Second up rebutting the above, Paul Krugman,
Granted in the second quote Krugman is looking at both Medicare and Social Security, but if you exempt Social Security, which is out of fiscal balance, it makes bringing Medicare into fiscal balance all that much more difficult.
How on earth can you convince yourself that Krugman 2008 wanted no net stimulus?
No, you know he wanted ab.out $2T real, net, stimulus.
John,
I think you need to work on reading comprehension, nowhere did I say he wanted no stimulus. Dave does not say it. Nobody is saying it, but you. You have misapprehended people’s comments.
Krugman never was the most honest person, nor as bright as given credit for. In sum, not an inspiring read, ever.
I think I’m looking at the even-bigger picture, Steve.
It’s an attempt to distract from the forest, with focus on rather unimportant and badly drawn trees.
Even worse, if we know that Krugman’s big picture message was that we needed $2T of real stimulus, and the “gotchas” turn a blind eye to that, then it really is distortion.
And sadly it’s a common (if unethical) rhetorical technique. If you can’t attack someone on their main message, concentrate on the fringes “and prove them wrong.”
Also, I don’t get the supposed contradiction..
You can certainly be for shoring up state and local governments with the stimulus, and at the same time say that those moneys should not be counted as economic stimulus.
You’ve got to twist yourself in loops to say no, state and local governments should have been able to contract, and separately stimulus monies should have been better. That’s back to spooky money.
We all know the stimulus bill in a political sense is not 1:1 stimulus money in an economic sense. But you want to play a blind eye to that when decoding Krugman, to score stupid political points.
John,
Word of advice, stop. Making up positions for others does you no credit.
The problem, as I try to remind myself, of discussing Keynesian stimulus with john personna is that he doesn’t believe in it. I am willing to believe in it, but do not believe this package was structured well to work — one of it’s chief defenders apparently agrees. The feds attempted to circumvent the problem of state/local reductions on most of the projections, creating more paperwork delays which reduce the effectiveness of the stimulus, but I also know that in my state the government was working overtime to circumvent these policies before Obama even took the oath of office.
(Sidenote: One of the reasons I think Governors make better Presidents; they understand how regulated entities will seek to circumvent and redirect federal mandates to their own ends, just like business)
On a more constructive note, Kaus had an interesting idea about creating an independent body, like the Fed Reserve, empowered to raise or lower the employer’s contribution to FICA to help offset rising unemployment. I don’t know that I’m 100% behind it, but it would appear to address a problem in a directed, timely fashion.
(It’s too late now)
Oh come on Steve, it’s obvious what the conservative memestorm is supposed to do.
PD I don’t recall doubting abstract Keynesian Stimulus, though usually I take the more simple view that spending buys something, does not buy nothing.
(There is way too much cognitive dissonance in all these arguments, given that Krugman wanted a bigger stimulus, he got a smaller and different one than he asked for, some of it was diverted to replace local funds, and yet … because he sometimes “defended” the process, he owns it all exactly as played out.
As if Krugman is the secret puppetmaster, and should be judged on those terms.)
Hmmm, JP never said he wasn’t a Keynesian. Let’s see … searching … searching …
[Sigh] searching for John Personna comments on Keynsian stimulus is like searching for healthcare posts at the Glittering Eye — I think even Dave gives up at some point. Perhaps if insomnia strikes tonight.
BTW, I probably would not have given Krugman his $2T, but the thing that makes me better than these nuts is that I don’t blame Krugman for a “half-Krugman” plan.
I’d save that for a “full-Krugman” that failed.
It’s really weird (and weak) this idea that you can ignore Krugman and blame him too.
I probably wouldn’t identify myself as a Keynesian, though I think the spending can work in some circumstances.
I’m not Austrian either, but find some truth in their narrative.
IOW, I stand aloof from the schools of economic theory 😉
Look John that is just stupid, even for you. You want me to believe that Dave Schuler is a conservative? Really?
The two quotes by Krugman are not consistent, he has changed his tune. Some made these observations early on when discussing the issue of the stimulus.
Now you have to come up with some sort of “might have been, but really wasn’t” scenario to try and defend Krugman. Such a scenario is irrelevant because, as I noted, it might have been, but wasn’t–i.e. it doesn’t exist. Getting caught up in a debate about alternate realities is not something I want to to engage in. Oh, and here is a hint, in 2009 Krugman wasn’t talking about his ideal stimulus plan, but the spending plan under consideration. He lamented the reduction in transfers to State and local governments because those kinds of transfers would be most likely to create jobs. This was not the case, as Krugman himself notes, but pretends to have known it all along.
Now, feel free to go a little bonkers and post 5 replies.
Can’t we all just get along??
(snicker)
Maybe Dave fell for something, I don’t know.
I do know that those quotes make sense as answers to two separate questions:
1. Should the “stimulus bill” replenish falling state revenues.
2> Is replenishing state revenues “economic stimulus” relative to the original baseline?
It is the same question: unemployment. In 2009 Krugman argued that transfers to States would reduce unemployment. 2011 he argues the exact opposite. It would be nice if he said, “While I originally thought such transfers would help…..” But he doesn’t.
And no, he can’t argue, “Transfers to State and local governments would reduce unemployment if they were larger.” He can’t argue that because he is talking about stimulus bills that were actually being debated. None of which approached $2 trillion, IIRC.
At best he could argue, “Without these transfers it would have been worse.” Empirically though I find that kind of argument weak. Pointing to data we could have seen but didn’t is rather irrational, IMO.
So no, Dave fell for nothing. But nice of you to imply he is gullible.
Oh, and for the record, you know I’m not a conservative either John, so this whole: conservative memestorm is rather silly.