If the first rule of good writing is “show, don’t tell,” then it seems that Paul Krugman is ready to teach a master’s class in the subject.
Krugman’s latest column–entitled –is written as a response to Marco Rubio’s response to the State of the Union address. Krugman accuses Rubio of an endorsement of “zombie” economic ideas:
In case you’re wondering, a zombie idea is a proposition that has been thoroughly refuted by analysis and evidence, and should be dead — but won’t stay dead because it serves a political purpose, appeals to prejudices, or both. The classic zombie idea in U.S. political discourse is the notion that tax cuts for the wealthy pay for themselves, but there are many more. And, as I said, when it comes to economics it appears that Mr. Rubio’s mind is zombie-infested.
Now, I haven’t watched Rubio’s response and, to be honest, I probably won’t. I don’t think I need to, though, to point out that Krugman himself engages in the same “zombie” style thinking of which he accuses Rubio.
(I covered many of these points in a recent blog post , but they’re worth reiterating here).
The first interesting claim Krugman makes is that the Great Recession should serve as an obvious and thorough refutation of everything that free market advocates believe:
The financial crisis of 2008 and its painful aftermath, which we’re still dealing with, were a huge slap in the face for free-market fundamentalists.
I’ve made this point before, but it’s difficult to see how a crisis in one of the single most highly regulated sectors of the economy could serve as a “huge slap in the face” to anyone advocating the exact opposite of the system that was in place at the time. And, in fact, if anyone should be feeling the sting of a slap to the face, it’s probably people like Krugman himself, who was identifying a housing bubble as a plausible solution to recession as early as 2002:
To fight this recession, the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of PIMCO put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
(A frequent argument against the use of this quote is that Krugman was making a “joke,” or that he was just “theorizing.” The problem with these rebuttals is that they stop too short in their analysis. The only possible way to read the piece as a “joke” or “theorizing” is to take the point of view that economic recovery, in Krugman’s perspective, is itself an undesirable end [and thus the butt of a joke] or secondary concern. At no point does he even suggest that inflating a housing bubble would be undesirable; he merely doubts Alan Greenspan’s ability to pull it off.)
There’s really no legitimate defense for this comment but, if it’s that contentious, then we can leave it out of our analysis entirely, and point instead toward a host of other similar comments from Krugman, compiled by Mark Thornton. Either Krugman did hold a faulty idea on economic stimulus via expansion of the housing sector, or he told a lot of jokes in the early 2000′s. I don’t have the space to list them all here, but one or two should suffice to make my point:
During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn’t you lower interest rates?
I think frankly it’s got to be — business investment is not going to be the driving force in this recovery. It has to come from things like housing…
But you look at the things that could drive a recovery, business investment, nothing happening. Housing, long-term rates haven’t fallen enough to produce a boom there.
Low interest rates, which promote spending on housing and other durable goods, are the main answer.
A joke, indeed. Again, if anyone was slapped in the face by the bursting of the housing bubble, it must have been people like Paul Krugman.
Krugman then bravely takes on the relatively economically illiterate Republican Party, as the supposed exemplar of free market economics, to argue that in no way could the state have been even partially to blame for the Great Recession.
Every piece of this revisionist history has been refuted in detail. No, the government didn’t force banks to lend to Those People; no, Fannie Mae and Freddie Mac didn’t cause the housing bubble (they were doing relatively little lending during the peak bubble years); no, government-sponsored lenders weren’t responsible for the surge in risky mortgages (private mortgage issuers accounted for the vast majority of the riskiest loans).
Now, I understand that Krugman is primarily a columnist at this point, and so maybe isn’t afforded the opportunity to get into the finer points of economic analysis in a New York Times column. This, however, comes dangerously close to masquerading as that. It’s hard, after all, to posit that you are totally and completely disproving free market economics in two sentences, especially when you are avoiding the major arguments of serious market economists. Fannie and Freddie are child’s play; Krugman should instead try engaging the Austrian theory of the business cycle, even if he doesn’t fully understand it.
But Krugman’s not finished yet. He then argues that free market advocates can really suck on response to the crisis as yet another indicator of their follies.
What about responding to the crisis? Four years ago, right-wing economic analysts insisted that deficit spending would destroy jobs, because government borrowing would divert funds that would otherwise have gone into business investment, and also insisted that this borrowing would send interest rates soaring…
…Sure enough, interest rates, far from soaring, are at historic lows…
this sleight-of-hand proves nothing. To claim low interest rates as a defense for the stability of government spending, when they government itself is directly responsible for those artificially low rates , borders almost on disingenuous. (For some evidence of just how responsible the government is for the low rates that Krugman puts on display as evidence of its stability, see here, here, here, and here ). Furthermore, just a moment’s thought on this reveals how wrong Krugman is. If the Fed is taking this action specifically in order to keep interest rates low , then doesn’t it follow from that that Fed officials–and proponents like Krugman–believe that interest rates would rise without such action by the Fed?
That’s all for now, but, given the tear he’s been on lately, I somehow think it won’t be long before Krugman puts out something else worthy of note here.