Chronicle of the Conspiracy
Friday, August 01, 2003
This time it starts as a little chastisement of the financial media for using hyperbolic adjectives in describing recent upbeat economic statistics -- "rocketing" GDP growth and "soaring" durable goods orders. Fair enough. I chastise the financial media for that kind of silliness all the time. Of course from Krugman, criticizing anyone else for hyperbole is like the ace of spades calling the kettle black. And hyperbole isn't what's on Krugman's mind, anyway.
What is? Andrew Sullivan tweaked Krugman here, and again here (the second time including a goofy economic statistics error -- that's what Andrew gets for taking New York Times economic reporting uncritically, for once) -- and I eviscerated him here -- for his persistent, partisan pessimism in the face of all kinds of evidence of economic recovery. In short -- we caught the great economist practicing bad economics (for the sake of bad politics).
Brad DeLong posted a hapless defense, but I can easily imagine Krugman's groans when he saw that. The fact is Krugman simply can't honestly ignore the signs of economic recovery all around him. He can't deny the facts -- so he lashes out at the financial media for using hyperbole in describing the signs of recovery that he himself had mistakenly refused to acknowledge.
Then there's the repositioning. In his posting today Krugman admits, "Growth has definitely picked up..." though of course he goes on to qualify that. But he can't escape that fact that just Monday he said, "There is very little evidence in the data for a strong recovery ready to break out," and accused Alan Greenspan of a "destructive outbreak of optimism."
Hell, even the congenitally gloomy Louis Uchitelle said in the congenitally gloomy Times this morning that "the United States economy threw off its sluggish growth in the second quarter...The spring upturn has nearly every forecaster, even the pessimists among them, signing on to the proposition that the national economy is finally breaking out of the weak, jobless recovery that has lasted for 18 months. A surge in growth is expected for the rest of the year."
So when Paul Krugman pettishly asks in his posting today, "Is there a memo I didn't get?" The answer is, simply... yes.
Posted by Donald L. Luskin at 4:31 PM | link
CAROLINE BAUM, BLOOMBERG COLUMNIST: As a journalist in somewhat good standing, let me offer some thoughts on this subject. I have no idea how anyone can write commentary/editorials without a thorough understanding of the subject matter. Degrees aren't the best barometer of understanding. Most Wall Street economists don't know the difference between a shift in the demand curve and a movement along the curve, which is something a self-trained/street-taught columnist like myself understands cold and thinks is the most basic tenet of all economics.
As to whether the New York Times reinforces its liberal bias with untrained editorial writers, I'm not sure it's as devious as that. Much of media reporting is devoted to government and government policies. Government is their life blood. Therefore, the bigger the better. If government were smaller, they might actually have to go out and find a story instead of cultivating their inside sources, writing exactly what the government wants them to write so they will be graced with a leak on the next big story. That is my theory on the liberal bias in the media, for what it's worth.
JOHN SEATER, NORTH CAROLINA STATE UNIVERSITY: Well, if my original remarks are going to cause such a stir, I suppose I should say a few words more. I was and still am puzzled by the fact that a prominent newspaper such as the New York Times has an editorial board comprising only people with no expertise in the fields they pontificate about. More important, I was and still am puzzled by the fact that anybody takes the editorials of such a newspaper seriously.
I was not talking about reporters, only editorial writers. I think a little formal training or work experience in substantive fields would be a good thing for reporters, too, so they would understand better the answers they receive when they ask questions and so they would know better the right questions to ask in the first place. However, that is another issue. I was talking only about editorialists. Bruce Bartlett characterizes the situation correctly when he distinguishes between reporting and editorializing. The latter is an attempt to analyze, draw policy conclusions, and persuade the reader about a point of view. I think it very unlikely that an editorial writer who lacks both formal training and relevant work experience, as do the Times writers, can analyze economic policies in either positive terms (how the policy works and the effects it will have) or normative terms (whether the policy is socially beneficial).
My question "What is Savitz's problem?" was not a blow-off but rather was instigated by the both the tone and substance of Mr. Savitz's original response. He clearly was angry, and I did not understand why. What was the problem? I now think he misinterpreted my comments as applying to all journalists, which they did not. However, to clarify matters, I am indeed generally suspicious of editorial writers, almost none of whom seem to have any training, either academic or on-the-job, in the fields they write about. I disagree with Mr. Savitz about the need for substantive training and/or experience. Mr. Savitz caricatures my view as saying that a Ph. D. is required to write editorials. That isn't my view. My view is simply that an editorial writer worth reading will have training and/or work experience in the area he writes about. I want my auto mechanic to have been trained in auto mechanics, either in school or on the job. Is it too much to expect my editorial writer to have received similar training in the relevant field? On "technical" issues, such as economics or finance or global warming, the writer definitely does need some training, however acquired. Otherwise, he often -- indeed, usually -- will produce articles that are misinformed, misleading, and plain wrong. (Just think what an untrained auto mechanic would do to your car!) A good editorial writer will understand the issues, will be aware of what the average reader knows and doesn't know, and will interpret events to help the average reader understand them. He cannot do that day after day without substantive training and experience. Exhibit A is the writing of the New York Times editorial board.
Expertise is no guarantee that the writing will be good, of course; see Paul Krugman's popular work of recent years. Professor Krugman is simply dishonest, often misstating the current state of economic knowledge and professional opinion. His writing is so bad I have stopped reading it. Much of what he says is willfully inaccurate, and I consequently learn nothing from it. I am not stimulated in any way, except for becoming irritated by his professional dishonesty. However, the fact that Professor Krugman writes bad editorials about economics does not prove that economics training is unnecessary for writing good editorials about economics, only that it is insufficient.
BRUCE BARTLETT, NATIONAL CENTER FOR POLICY ANALYSIS: It's worth remembering that Paul Krugman is not a member of the Times editorial board. Also, his columns on pure economics are usually not that bad. Where he goes off the handle is when he writes about foreign policy, politics and other issues that he knows nothing about. Therefore, I would say that Krugman proves my point.
ERIC SAVITZ, BARRON'S: Let's start with an area where I think we can agree, which is that reporting and editorial writing for the most part are two separate disciplines -- but they overlap. Good editorial writers should also be good reporters; they should work the phones, talk to people and find things out, as opposed to sitting in a thinking chair and simply spouting opinions. And on the other hand, the fact that news writing increasingly contains elements of opinion is a reflection of the need for print publications to adapt to a world in which the Internet delivers news developments in a flash, leaving the rest of us to focus on analysis and enterprise. But that's another thread entirely...
And let me make one more distinction, which is between columnists and editorial writers. At least with Krugman if you disagree with his analysis, you can go after him personally; his name is always signed. I wonder if some of this would actually be addressed by a little more personal accountability -- let the editorial writers sign their editorials. While the idea of unsigned editorials I suppose is to make them the voice of the publication, they lead to a certain avoidance of responsibility, I think, which would be helped if they were credited to the person who actually wrote them, which would let the reader judge whether to take them seriously or not.
Though I have not written many editorials, I did write a few while I was an editor at the Industry Standard. And they always had my name attached to them. I might also point out that all the editorials in Barron's, written primarily by our fine editorial page editor Tom Donlan, have bylines. Almost every publication bylines all their editorial content, other than The Economist. I'm not sure why they don't.
Oh, and one more thing: Can we agree that the same question applies to the edit pages of the Wall Street Journal and the New York Times equally? I know this is a forum with a particular leaning on that score, but you can't single out the Times editorial writers as uninformed without asking about the credentials of the editorial boards at other publications.
Finally, let me ask this question: Congress, which is filled with lawyers, makes the laws. The AMA is run by doctors. Major league baseball is run by one of its owners. Alan Greenspan knows a thing or two about economics. Do you like the results from those institutions? On the other hand, Bill Gates doesn't have a degree in software engineering, but he built himself a pretty nice little software company. Michael Dell dropped out of the University of Texas, but seemed to figure out the computer industry. The writer Michael Lewis, a former bond trader, just wrote a book that has completely shaken up the baseball world. And he did it with good reporting.
SEATER: OK, here are a few reactions. Savitz and I may disagree on some aspects of this issue, but I think we agree on much more.
(1) I totally agree that we should apply the same standards to the Wall Street Journal as the New York Times. I know for certain that whoever on the Journal board writes those editorials complaining about the Phillips curve, the natural rate of unemployment, and NAIRU doesn't understand any of those things.
(2) Congress is filled with lawyers, but lawyers have no special qualifications for writing law. They are trained to use (or maybe abuse) the law that other people write. Similarly, race car drivers are trained to drive cars, not to design them. I think Congress would be a much better place if it had very few lawyers and lots of plumbers, carpenters, stock brokers, personnel managers, and so on. A few historians, political scientists, philosophers, priests, and even economists would add useful perspectives that would improve the legislative process. That's not the way it is, and maybe that is part of the reason we get so much bad law.
It is an interesting question why Congress is so heavily dominated by lawyers. I have asked lawyers, who say it is an old question but don't have a good answer. My instinct is what you would expect from an economist: lawyers have the most to gain from controlling the legislative process, so they naturally gravitate to it. I haven't thought that opinion through and have no evidence to support it, but it is my initial hypothesis. Anyway, I don't think training in law has much to do with ability to make good law, anymore than training in journalism has much to do with writing good editorials. Lawyers can be good legislators, just as journalists can write good editorials, but it's not legal or journalistic training that makes them that way.
(3) As for the AMA, it seems to represent the interests of its members pretty well, which is all it is supposed to do. Its president would have the experience and training to write an informed (though not necessarily unbiased) editorial about regulation of the medical industry. I am not a baseball fan and pay no attention to the sport; so I can make no informed comment on it. (The game bores me, but I doubt that is because the sport is run by the owner of one of the teams.) Greenspan has done a very good job over his tenure as Fed chairman, following Paul Volcker's lead and continuing to squeeze inflation out of the economy. William Miller, who was a businessman appointed to the chairmanship by President Carter, made a mess of things in the one year he had the job. In any case, Greenspan certainly has the credentials to write an informed editorial about the economy. Bill Gates and Michael Dell succeeded precisely because they knew already knew a lot about computers when they left college. Neither one just dropped out of college and then decided on a lark that hey, you know what, I think I'd like to become a computer magnate. They left college to spend more time doing what they already knew how to do. Given the experience they subsequently acquired, they undoubtedly now could write informed editorials about the computer industry. I don't know who Michael Lewis is or what his book is about.
(4) I don't see the relevance of all this to my original point. The New York Times editorial board comprises people who have no training or experience in the fields they write about. I expect them to write ignorant editorials, and they regularly validate my expectation. My presumption is that a major reason they write such bad editorials is that they have virtually no understanding of the issues they write about.
Posted by Donald L. Luskin at 12:22 AM | link
Thursday, July 31, 2003
GDP UP, JOBLESS CLAIMS DOWN Sorry, Paul Krugman and Brad DeLong -- and sorry, partisan leftists everywhere who cynically hope the economy will crater before the 2004 elections. But it looks like Alan Greenspan's "destructive optimism" is paying off.
an old friend writes,
UNDERCOVER AMONG THE TAX-AND-SPENDERS Our friend David Hogberg reports on his San Francisco boondoggle with the National Conference of State Legislatures.
IT'S WORKING A report from the US Treasury on the huge extent to which President Bush's new lower tax rate on dividend income has already transformed corporate pay-out behavior. It's another one for the notebook of that experimental laboratory in economics known as the real world -- except academic economists wouldn't be interested in anything like that.
Posted by Donald L. Luskin at 9:01 AM | link
Wednesday, July 30, 2003
Today the Times announced Keller will appoint a "public editor" to "serve as a representative for readers." They've often said they'd never never appoint an "ombudsman" like the Washington Post. And, indeed, they have not appointed an ombudsman. They've appointed a "public editor."
And today's report of the Times' "Siegal Committee" -- appointed to look into the causes and aftermath of the Jayson Blair scandal -- denied that Blair was a product of the Times' affirmative action program. Keller said, "That charge, they make clear, is wrong." Yet a comment by the committee's outside members noted that Blair's rapid advancement "has all the earmarks of a social promotion." Indeed, it was not affirmative action. It was "social promotion."
Must they use euphemisms for euphemisms? After all the Times has been through, wouldn't it just be easier to be honest?
Posted by Donald L. Luskin at 11:18 PM | link
Posted by Donald L. Luskin at 4:27 PM | link
Never mind that Krugman took two words out of what DeLay really said, without an ellipsis -- that kind of slop is S.O.P. at the "newspaper of record" nowadays. What counts is that what DeLay said was actually pretty funny. It reminds me of that scene in Duck Soup where Groucho Marx is proposing marriage to Margaret Dumont -- "I can see you in the kitchen bending over a hot stove, and I can't see the stove." But Krugman's not in any mood to laugh at gags about America's only senator who's visible from space.
No, everything is going wrong at once for America's most dangerous liberal pundit. The economy is recovering, despite Krugman's warnings of a "fiscal train wreck," and we're steadily winning the war on terrorism despite the mud Krugman keeps throwing at our Commander-in-Chief. Why, oh why won't the world listen? There can only be one explanation... Krugman complains that DeLay has "contempt for the public" -- but in the very next sentence, he turns around and admits: "...it's possible that he's right."
According to Krugman, people are much more sensible in Britain. He can't figure out why President Bush remains so popular, while in Britain the media-driven scandal over "sexed-up" intelligence about weapons of mass destruction has triggered a "catastrophic loss of public trust" in Prime Minister Tony Blair. Krugman says, "For the first time since Mr. Blair took office in 1997, the hapless Tories are leading in the polls."
Not so fast... it's not "the first time." James Sherk, senior fellow for economics at the Evangel Society, pointed out to me this archive of British polls stretching back over a decade, showing that the Tories had as much as a 8 percentage point lead over Labour in the autumn of 2000. And not only is it not "the first time," it's pretty close to just not. According to a column Sunday in London's Guardian, "Opinion polls still put Labour either just behind, just ahead or neck-and-neck with the Tories. Every government since 1945 has experienced much worse slides. If Tony Blair is in difficulties, his predecessors would have embraced his difficulties with joy."
Krugman attributes Blair's troubles (such as they are) to:
Andrew Sullivan -- who has taken the lead this year in exposing the BBC's egregiously biased reporting of the Iraq war, and has followed the David Kelly story intensely -- was stunned yesterday by Krugman's version of events. Sullivan wrote on his Daily Dish blog, "But this is Krugman of course. Did we expect a fair account?" Nope... so let's fact-check it.
Is it true that "someone in the Blair government leaked Dr. Kelly's name...apparently provoking his suicide"? According to a July 23 story by Warren Hoge in Krugman's own newspaper, the New York Times, "Prime Minister Tony Blair has denied that he approved making public the name of a weapons inspector, David Kelly." Yes, this only "shifted the focus to two of the prime minister's most trusted aides." But that hardly means he was "thrown to the wolves, "provoking his suicide." According to a Times story filed on July 18, the day of Kelly's death, by Hoge and Judith Miller, Kelly was dealt with fairly, and knew what he was getting into:
The July 18 Times story also notes,
Is it true that "officials questioned whether the BBC had accurately reported what Dr. Kelly said"? Yeah -- and then some: Kelly himself questioned it! According to another Times story by Hoge, filed on July 19, Kelly told the Defence Ministry "he could deny that he had made the claim at the center of the report...."
Incidentally, the same July 19 Times includes one of those "phantom corrections" that the Times is becoming famous for. The following paragraph about the pre-suicide "e-mail message to a reporter" showed up, inserted smack in the middle of the story, entirely out of context with anything else. See the little nugget of information that was added this time through -- I'll mark it in boldface, just in case you might miss it. You think the constables might be interested in this?
What about Krugman's claim that "The broadcaster apparently has evidence, including a tape, that Dr. Kelly made the key allegations it reported"? At first, according to the July 18 story, the BBC wouldn't even say whether or not Kelly was their source. <Update [7/30/2003]... Sylvain Galineau, who blogs at ChicagoBoyz, pointed out a story in The Economist revealing that the BBC had actually denied to the Defence Ministry that Kelly was the source before his name was publicly revealed.> Then, according to yet another Times story by Hoge, this one filed on July 20, "The BBC said today that Dr. David Kelly, the British weapons expert who committed suicide last week, was the source..." The tape would surface three days later.
I'll get to the matter of the BBC's tape in a moment. But first, the July 20 story contains yet another "phantom correction" about the pre-suicide email, slipping in another bit of critical yet previously omitted information -- again, marked in boldface:
Let's review the bidding: not only did the July 18 story fail to mention that the reporter getting the email was a Times reporter -- also, the July 19 story correcting that oversight failed to mention that the reporter was Judith Miller: the very author of the July 18 story! And yes, it's that Judith Miller, the Times' controversial WMD expert, the one charged with "compromised reporting" in the media brouhaha about Saddam's aluminum tubes and those biological weapons trailers. In a July 21 story, a feature on Kelly's life and times written under Miller's sole byline, the pre-suicide email to her is mysteriously anonymized again, reduced to a mere sentence fragment, and hidden in the very last line of the story:
We'll leave the matter of Miller's peculiar disclosures about the pre-suicide emails to Scotland Yard. Now, back to that exonerating tape Krugman claims the BBC has... the July 23 Times story says,
And that's where the Times leaves it, and so does Krugman. But according to a July 24 story in the British newspaper The Independent -- yes, the same very left-leaning Independent that is currently the home of rabid anti-war Mid-East correspondent Robert Fisk:
Okay, so much for the tape. Time for Plan B at the BBC. Now, according to The Independent, the BBC is saying instead, "The contemporaneous notes are good and we believe that we have found some quite strong circumstantial, corroborative evidence." Let me guess... a blue dress, perhaps?
And how about Krugman's claim that "the BBC seems largely in the clear, while the government looks like a villain"? Tom Maguire takes care of that one on his Just One Minute blog. He did an online survey of British newspapers, and finds no shortage of opinion -- even from the left -- that the BBC is anything but "in the clear."
That said, a poll released Monday by the Weber Shandwick public relations firm "showed 54% of respondents saying they trust the BBC more than the government over claims about Iraq and weapons of mass destruction (WMD). Only a fifth (21%) said they had greater faith in the government." I'm surprised that Krugman didn't cite this. But if he had, I'm sure he would have left out the fact that the same poll shows
And despite the BBC's dominance in Britain, only 44% of respondents "said they trusted the BBC most."
It's not like Krugman to miss that poll. He must be slipping. But it's just like him to miss another poll released Monday, this one from the Democratic Leadership Council. Based on the results of their poll of likely voters, the DLC admitted that the "Party is currently in its weakest position since the dawn of the New Deal." The DLC elaborates,
If that's true, then Paul Krugman may just turn out to be George Bush's secret weapon in 2004.
Posted by Donald L. Luskin at 2:54 AM | link
Tuesday, July 29, 2003ENRON ENDGAME Robert Musil has the axe on the Citigroup and Morgan settlements in the Enron case -- read his two devastating posts, here and here, showing that the regulators, the prosecutors and the media pretty much came up dry on this one (again), yet are trying to put the best face on things. Musil says,
"Simply put: settlements like these that do not require the defendants to admit any wrongdoing whatsoever are not meaningful no matter what the defeated regulator says. These are settlements by regulators who have nothing, nothing at all, and know it."
Posted by Donald L. Luskin at 8:40 PM | link
LOWERING THE BOOM ON GLOOM Mickey Kaus shows us how it's done... Here's a majestic reaming of the New York Times' pessimistic (and sloppy, and inaccurate) front page reporting on the economy.
Posted by Donald L. Luskin at 10:46 AM | link
Monday, July 28, 2003
Thanks to Dave Hogberg for the link.
Posted by Donald L. Luskin at 11:46 PM | link
Now, the responses. John Seater responds to Eric Savitz:
Eric responds to my challenge, and answers John's question:
Bruce Bartlett weighs in:
Well, Bruce... what about Paul Krugman? He has a Ph.D. in economics, but that certainly hasn't made him conservative. Bruce continues:
Good point, Bruce. And scary. If editorializing requires a higher bar, and if editorializing is infecting straight news more and more, then the inescapable conclusion is that straight news is not only become more biased but also of lower quality.
Reader Anthony Smith gets the last word (for now) with an Occam's Razor argument:
Posted by Donald L. Luskin at 11:28 PM | link
KRUGMAN BACKS THE BEEB I can't wait to hear what Andrew Sullivan has to say about today's defense of "the ever-skeptical BBC" by Paul Krugman.
Posted by Donald L. Luskin at 11:20 PM | link
TEMPORARY TAX CUTS A dispatch from our friend Bruce Bartlett:
"Kevin Drum at Calpundit, a left wing web site, makes an important admission: 'If it were only tax cuts at stake here, I wouldn't be that worried. Tax cuts can always be repealed if things get out of hand.'
Posted by Donald L. Luskin at 10:17 PM | link
Great one, Bill. I wish I'd thought of that -- but I didn't!
And while we're on the subject... Don't miss this letter from a former Princeton student, blowing the whistle on Krugman's "obscure professorly ethics." By the way, we're hearing that Krugman isn't schedule to teach this semester. I guess he's just too busy. As he's now boasting on his web site, "...my new book, The Great Unraveling, will be published on Sept. 15. I will be doing a number of promotional appearances around the country in Sept. and October; please contact Monteiro and Company for information."
Posted by Donald L. Luskin at 9:32 PM | link
ANOTHER SIGN OF RECOVERY Is the venture capital drought finally over? At $4 billion new investments in the last quarter, it's the largest bump in 3 years. Funny what a little tax-cutting will do, isn't it?
Posted by Donald L. Luskin at 10:37 AM | link
Sullivan was linking to the news Friday that durable goods orders registered the biggest increase since the beginning of the year and new-home sales climbed to the highest level on record. If Sullivan had wanted to lay it on thick, he could have just as easily have linked to Thursday's news that new jobless claims fell below the key 400,000 mark last week for the first time since early February. Or he could have linked to the announcement two weeks ago that the National Bureau of Economic Research has set an official end-date for the recession -- or I should say, the beginning-date of the present recovery -- at November 2001.
There's no shortage of good economic news nowadays. Except in the mind of Paul Krugman, where hopelessness springs eternal. In his New York Times column Friday the Princeton economics professor closes his eyes to economic reality and cries, "There is very little evidence in the data for a strong recovery ready to break out."
Remember, America is becoming a "banana republic" and is in a "fiscal train wreck." Why? Because of President Bush's tax cuts, of course. But in Friday's column it's not Bush who gets bashed -- it's the Federal Reserve chair Alan Greenspan, because he went along with the tax cuts (barely, as I recall). Greenspan has often been a foil for Krugman's rants. This time Krugman begins by tut-tutting, "I used to be a great admirer of Mr. Greenspan. But something has gone very wrong with the maestro." Just when was it that Krugman admired Greenspan? Was it in February 2003 when he expressed his admiration by calling Greenspan a "partisan hack"? It wasn't in February 2001 when he accused Greenspan of a "profile in cowardice." Maybe it was in August 2000 when he called him an "unelected monetary technocrat..."
Krugman says of Greenspan in Friday's column,
"Destructive"? Krugman thinks that Greenspan's July 15 congressional testimony crashed the bond market by being too upbeat on the economy. Then how come long-term Treasury yields have been rising steadily since their lows on June 13, over a month before Greenspan spoke? That's easy: rising yields are yet another sign of economic recovery.
"Sudden?" That's an odd way to put it, since Krugman begins his column by claiming that Greenspan's reflects the same view he took in his prior year's testimony. Here's Krugman's version of Greenspan's "sudden" optimism from over a year ago:
Let's fact-check this quote (Lord knows, the Times still won't, even after all it's been through). Here's what Greenspan really "declared." I've set in boldface the few words that Krugman pulled out of context for his column, without so much as an ellipsis to tell readers that words -- lots of important words, as it turns out -- have been eliminated.
I don't think anyone who read what Greenspan really said would have found much excessive optimism in it. Yet for all this caution (which Krugman calls optimism), the NBER now tells us the recession ended long before Greenspan even spoke. Yet Krugman says in the Friday column, "Needless to say, 'healthy growth' failed to materialize. Undaunted, he said pretty much the same thing last week."
Who else has said "pretty much the same thing"? Robert Musil points out on his Man Without Qualities blog that Krugman himself has. Here's what Krugman said in a December 2002 interview with the German magazine Der Spiegel:
Krugman almost never makes optimistic economic forecasts. But I can think of one other time he did -- and it, too, was by way of arguing with Alan Greenspan. It was in back on January 28, 2001, right after President Bush had taken office, and Greenspan was speaking favorably about the new president's proposed tax cuts. Grasping the straw that that "Mr. Greenspan explicitly rejected the administration's argument that we must immediately cut taxes to prevent a recession," Krugman said, "new evidence suggests that manufacturing, which suffered a nasty downturn in the last few months, has already started to rebound."
Rebound? Not. According to the NBER, the last recession began in March 2001, little more than a month after Krugman had pointed to that "new evidence" of a "rebound."
But no matter -- because for Krugman, none of this really has anything to do with economic forecasting. It's all about the tax cuts to which he is permanently opposed in good times and bad. Back in 2001 Krugman was bullish on America just when we were slipping into recession because tax cuts were being talked about as recession-fighters. Now he's bearish just when recovery is becoming obvious, because he wants to portray the tax cuts as having failed to promote that recovery.
So now, with recovery beginning to blossom all around us, Krugman can do nothing but pretend -- and say "the budget is in a mess, and Mr. Greenspan is one of the main culprits." Why? Because back in 2001,
"Largely fantasy"? That's quite an admission. Reader Paul Banks pointed out in an email, "Wasn't the main rallying point for Democratic pundits everywhere that Clintonian economic policy created real surpluses that Bush ruined?" Yep. That's precisely what the Democratic National Committee still claims (I guess they haven't read Krugman's column).
Strip away all the rhetorical styling about who was optimistic when, and why -- and Krugman's column boils down to one big lie: that today's budget deficits are a product of Bush's tax cuts. That's a lie, because Bush's tax cuts have barely had time to take effect, as Krugman well knows. In fact, he used that very fact as an argument against the 2001 tax cut:
According to an analysis last week from the Congressional Joint Economic Committee, only 18% of change in the 2003 deficit -- versus what had been originally forecasted in 2001 -- is attributable to the 2001 and 2003 tax cuts.
The majority of the greater-than-forecasted deficit is the result of lower-than-forecasted tax revenues, which have been caused by a weaker-than-forecasted economy. Forecast errors happen -- you remember... "already started to rebound." And the next biggest reason is increased spending. And we all know Krugman's views on spending -- he loves it.
With a budget this sensitive to economic changes, and with the economy turning for the better, Bush is likely to get a double-win going into the 2004 election: the return of good times, and lower-than-forecasted deficits. It won't be an "it's the economy, stupid" election as Krugman wants. It'll be, "it's the economy -- brilliant!" And no lie Krugman can invent is going to change that.
Posted by Donald L. Luskin at 3:33 AM | link