Paul Krugman’s latest opinion piece in The New York Times is one big non-sequitur. Consider the steps of his argument:
1. Unemployment is expected by various forecasters to remain high.
2. Recessions initiated by financial crises are followed by more extended periods of low output and high unemployment than garden-variety recessions.
3. Unemployment is bad – it causes real human suffering.
4. More government spending will alleviate both unemployment and reduced output.
5. Larger deficits are not such a big problem because the costs will be more than offset by the benefits in greater income.
A little bit of evidence is provided for the first three. But the fourth is just an assertion. Will greater stimulus spending shorten the length and lessen the severity of the recession? (Of course, the fifth is dependent on the fourth.) None of the hand-wringing about the badness of the recession and its human costs is relevant to the argument if the remedy is either ineffective or counterproductive.
Scientifically, this is an important question. But in the world of economic journalism it does not seem to matter.
If his advice is accepted, and things get better, he will say “I told you so.”
If his advice is accepted, but things do not get better he will say, “It was not enough stimulus” or “Things were worse than we had expected.”
If his advice is not accepted, and things get worse, he will say “I told you so.”
If his advice is not accepted, and things get better, he will say “That would not have happened without the previous stimulus – we were just lucky this time.”
It used to be said that you could teach a parrot economics. All you have to do is teach him to say “supply and demand.” But the pop Keynesians have improved matters. Now you just have to teach him to say “stimulus.”