Tuesday, April 26, 2011

Too Clever By Half

Paul Krugman is exasperating. He’s good enough at boiling complicated macro-economic problems down to their essentials to give even people with my uncertain grasp of economics a momentary pang of comprehension. Yet the illusion of understanding I experience after putting down one of his columns is always accompanied by the sneaking suspicion that I’m being invited to miss the forest for the trees.

This take down of John Taylor is vintage Krugman. Taylor, along with countless other highly credentialed economists, has opined that there’s been a massive expansion of the federal government during the Obama presidency that’s threatening to bankrupt the nation. Krugman concedes that the ratio of federal spending to GDP has increased materially over the last couple of years, but insists that the increase isn’t attributable to anything Obama has done. About half of it is explained not by any rise in the ratio's numerator, but by the fact that the recession made GDP, the denominator, smaller. Most of the other half is attributable to automatic stabilizers and the pre-programmed spending on means-tested entitlements like Medicaid that kicked in, just as they were designed to, during a severe recession.

So Krugman assures us that we can relax.  Obama isn’t the closet Bolshevik that Taylor’s portraying: “What we’re seeing isn’t some drastic expansion of Big Government,” he assures us, “we’re seeing the government we already had, responding to a terrible economic slump.”

Then, just to put his distinctive stamp on things, Krugman insinuates that the anxiety felt by people across the political spectrum about the fiscal sustainability of the modern welfare state is just an artifact of a willful disinformation campaign on the part of people like Taylor, who should, and undoubtedly do, know better: “Taylor, who is a very good economist, has to know this. He shouldn’t be spreading disinformation.”

Feel better?  Let’s stipulate that everything Krugman says—even the aspersion on Taylor’s character—is true. Now explain to me why I should be reassured to hear that unsustainable deficits that are going to require us to undergo some painful combination of spending cuts and tax increases haven't been generated by Obama’s imprudent expansion of the welfare state, but by the standard operation of the welfare state already in place under difficult, but entirely foreseeable economic conditions?  (We shouldn't have any doubts that these difficult conditions were foreseeable, by the way, given the fact that Krugman has spent the last few years congratulating himself for having foreseen them.)

Isn't that a little like telling a passenger on an ocean-going vessel that he can rest easy because the captain hasn't run the ship aground, and forgetting to mention that it's sinking anyway because it was unseaworthy to begin with?

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