Krugman: We’re in a depression, you know

posted at 4:16 pm on May 1, 2012 by Ed Morrissey

I’m pretty sure this isn’t helpful for the Obama re-election campaign message.  His ads talk about the Great Recession, and how his audacious leadership has led us out of it into … oh, I guess we can call it the Great Stagnation.  Paul Krugman’s declaration of a depression interferes with that message just a tad, no?

A few points of fact to check on Krugman’s employment claims, before people assume he’s wrong.  He is actually correct on the stats for public and private sector employment, but only to the limited context and meaning he uses.  From the BLS, here is the chart for private-sector employment over the last 10 years:

And here is the same chart for government employment:

The missing context of private-sector employment is population growth.  The better way to view whether we’ve returned to the level of employment at the start of Obama’s term is to look at the participation rate in the labor force, and that shows something significantly different:

Of course, this doesn’t break out private vs public employment, but the difference in public employment in that time is about 500,000 jobs.  That would account for 0.32% in the participation rate.  Adding them back in would move the participation rate from 63.8% (nearly a 30-year low) to 64.1%, still significantly below the 65.8% when Obama took office, or the 65.7% when the recovery started.

As far as this causing a depression at the moment, that’s as silly as Krugman claiming that the US has made any kind of “misguided budget cuts.”  What budget cuts?  We cut the rate of increase in the budget, but we’re still above $3.7 trillion annually, which is a third more than in FY2007, with four straight trillion-dollar-plus deficits.  We aren’t even in a recession, let alone a depression, at least not as economists (such as Krugman) define the terms.  We would have to have two sequential quarters of negative growth to be in a recession.  We’ve had several quarters of stagnation during the recovery, but none yet of negative growth.  Nor would the cause of negative growth be a reduction in government workers, which as the chart shows, peaked during the early days of the Obama term without prompting any real growth, either.

However, maybe we shouldn’t point out these facts.  If the Left wants to argue that Obama has led us into a depression, far be it from me to dissuade them.


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the left is in favor of the D narrative. Bush=Hoover O=FDR. Simple.

Borosage and many others see Depressions as not all together bad…lots of room for Change and Transformation

r keller on May 1, 2012 at 7:10 PM

Geez, is Obama’s shrink ever gonna be p1$$ed at Krugman.

HeatSeeker2011 on May 1, 2012 at 7:12 PM

The better way to view whether we’ve returned to the level of employment at the start of Obama’s term is to look at the participation rate in the labor force, and that shows something significantly different:

This is, in my opinion, a number that should be far more discussed in economic debates than the unemployment rate. It is far more honest.

MadisonConservative on May 1, 2012 at 7:12 PM

He should go back to building toys for Santa……What an idiot.

Rohall1215 on May 1, 2012 at 7:12 PM

It is far more honest.

MadisonConservative on May 1, 2012 at 7:12 PM

And the end of Obama’s trek towards a 2nd term and thus the media will never ever go with it.

CW on May 1, 2012 at 7:22 PM

You may not agree with Krugman’s politics, but his economics are sound.

Bayam – your comments are rich. His economics according to socialist economists (Keynesian) may seem sound, but the history of this logic is evident over the decades. It has not worked. Reagan’s economic examples worked well, even to the point where GHW Bush reaped benefits and even Clinton was able to bask in its glory even though he despised it.

There we go again, injecting ideology into economics. Reagan orchestrated some of the biggest tax hikes in this nation’s history, once it became clear that his tax cuts had led to ballooning budget deficits.

You do know that they raised taxes, right?

Right?

That’s correct, the UK broke one of the main principles of Kenysian economic theory by raising taxes during a recession. So perhaps you favored that tax increase.

bayam on May 1, 2012 at 7:47 PM

Also, the reason public employees like teachers are losing their jobs is because their unions refuse to make concessions that would allow more people to keep their jobs, but at lower rates of pay or health/pension contributions. Krugman thinks we should hire them all back at top dollar?

It’s hardball, and the unions seem to be throwing it at their own heads.

PattyJ on May 1, 2012 at 7:52 PM

You may not agree with Krugman’s politics, but his economics are sound.

bayam on May 1, 2012 at 4:41 PM

I’m sure he’s very knowledgeable about economics, but he’s shown himself over and over again to be an untrustworthy hack, and a nasty one at that. I don’t care how expertise someone has- if I can’t trust him, he’s not a legitimate source of information to me.

NukeRidingCowboy on May 1, 2012 at 8:29 PM

Reagan orchestrated some of the biggest tax hikes in this nation’s history, once it became clear that his tax cuts had led to ballooning budget deficits.

bayam on May 1, 2012 at 7:47 PM

Sorry, you seem to have your facts wrong!

Tip O’Neill, Speaker of the House, orchestrated one of the biggest bait-and-switch deals perpetrated on the American taxpayer of all time. He promised Reagan dollar-for-dollar spending cuts if Reagan would give in to the tax hikes.

Funny, NO spending cuts EVER materialized!

I’m sure you remember that, you just temporarily forgot, right?

belad on May 1, 2012 at 8:53 PM

It is a bit misleading to say that the markets are eagerly lending money to the government, since most government debt is being funded either directly, or indirectly, by zero interest rate money from the Fed.

JamesB on May 1, 2012 at 8:53 PM

Krugman: We’re in a depression, you know

Really? I thought we were getting back on line with the Obama full steam ahead, uh, narrative. How does this fit with the new “Forward!” slogan of candidate Obama? Should we be worried? Are the aliens at our doorstep?

minnesoter on May 1, 2012 at 8:57 PM

Krugman is the jester of the Keynesian Court. He lives and breathes in an echo chamber at the NYT. To him it doesn’t matter how many times the Keynesian ploy has failed, its because they didn’t throw enough OPM at it. He’s sure it will work if they get enough gubmint money spread around to the sheeples, who will spend it on more frivolous toys.

He is correct, in a way. Every time I try to read his blather, I go into a depression because I know the sheeples just suck up lies and misdirection.

belad on May 1, 2012 at 9:20 PM

You may not agree with Krugman’s politics, but his economics are sound.

bayam on May 1, 2012 at 4:41

An excerpt from Donald Luskin’s book, I Am John Galt:

“Most critiques of Krugman as a public intellectual begin with what is apparently an obligatory disclaimer, usually in the very first sentence — something to the effect that Krugman is a very accomplished and well-respected economist. Then comes the “But…” and the critique proceeds in earnest, often scathingly.

But why concede this honor to Krugman? So what if he won the Nobel Prize? The real test of Krugman’s mettle as an economist is the accuracy of his economic forecasting. The fact is that, with about three decades of evidence now in, Krugman’s track record, to use a technical term favored by economists, sucks.

He’s not always candid about this. But once, under the pressure of a televised debate with conservative talk-show host Bill O’Reilly, Krugman blurted out an understated if truthful self-evaluation: “Compare me . . . compare me, uh, with anyone else, and I think you’ll see that my forecasting record is not great.”

The most egregious example of “not great” is Krugman’s utterly incorrect 1982 prediction that inflation would soar. He made this prediction from no less lofty a perch than the White House, as staff member of the Council of Economic Advisers in the first Reagan administration. In a memo titled “The Inflation Time Bomb” Krugman wrote with co-author Lawrence Summers, “We believe that it is reasonable to expect a significant reacceleration of inflation . . . at least 5 percentage points to future increases in consumer prices. . . . This estimate is conservative.”

It also turned out to be hilariously, side-splittingly, knee-slappingly, rolling-on-the-floor wrong. Except for a tiny uptick the very next month, inflation didn’t rise; it fell. Four years later, it had fallen to 1.18 percent, a rate so low as to border on deflation.

In one of his Times’ column, he wrote that the Dow Jones Industrial Average was overvalued, saying, “Let the blue chips fall where they may.” As for the Nasdaq — which at that point had almost doubled over the prior year, and more than tripled over the prior three years — Krugman said soothingly, “I’m not sure that the current value of the Nasdaq is justified, but I’m not sure that it isn’t.”

We all know what happened. As of this writing, the Dow is about 20 percent higher than when Krugman wrote those words — and that’s not including a decade of dividends. The Nasdaq is about 42 percent lower. It hit bottom in October 2002, a 75.7 percent loss from where Krugman said not to worry about it. After something of a recovery, stocks fell again. They hit a real bottom — about a week after Krugman wrote a Times column asking the rhetorical question, “Is there any relief in sight?” His wrong answer: “No.”

Perfect bookends: He missed the top, and then three years later, he missed the bottom. But then he outdid himself. In June 2003, with the Nasdaq up 20 percent since Krugman’s “No,” did he recognize his error and reverse course? Again, no. Krugman wrote that “the current surge in stocks looks like another bubble.” From there the Nasdaq was to rally another 75 percent.”

http://www.nationalreview.com/articles/269428/paul-krugman-prophet-socialism-donald-luskin?pg=1

If you name a subject, I probably can give you Janus Krugman’s quotes…on both sides. “Unions do not cause higher unemployment” v. “Unions do cause unemployment.” “The Bush administration was responsible for “The Great Recession” v. “The fact is, all these promises are silly: Administrations don’t cause recession and recoveries–if anyone is in charge of the business cycle, it’s the nonpartisan technocrats at the Federal Reserve.”

Resist We Much on May 1, 2012 at 9:26 PM

Henry Hazlitt is rolling over in his grave due to this boob holding the job he once had.
http://en.wikipedia.org/wiki/Henry_Hazlitt

rhit87 on May 1, 2012 at 9:28 PM

belad on May 1, 2012 at 8:53 PM

How bad is Krugman and his ilk?

Our country ducked a bullet and OBL got one.

Take heart, Bayam, our beloved POTUS was smart enough to follow the right’s foreign policy thrust. Well, with the exception of stuff he and morons like Krugman and managed to do when they got in their little comfort zones. You know, the apology tour, insulting allies, mismanaging the Arab spring and the rest. When Defense was on an issue when he took over, results were better.

Your POTUS is now basking in the glow of OBL’s undoing with even a one hour special on MSNBC or NBC tomorrow.

If only President Bush had left behind helpers in the military of Krugman’s ideology and quality, and the Democrat controlled Congress had run it as it did the economy, Al Q would be well on is way to becoming a nuclear power. Remember Speaker Pelosi making a trip on her own to make nice with the Syrian maximum leader?

But back to the negotiations…

IlikedAUH2O on May 1, 2012 at 10:40 PM

Krugman claims our biggest problem is the loss of government jobs?!?
The total decline of government jobs is only 600,000 jobs (excluding census jobs).
And this is our biggest problem?
We could add back all 600,000 jobs and still be millions of jobs in the hole.

topdog on May 1, 2012 at 10:53 PM

Hey Paul – there are only three ways for the government to acquire money to spend: 1) take it from the “subjects” under threat of imprisonment; 2) borrow it (we’re 16 trillion in debt already and rising fast); or 3) print it (we’ve recently printed a trillion and massive inflation is just around the corner) Which should we try now? We’re broke and this fool wants to dig deeper.

MDLibertyLover on May 2, 2012 at 9:59 AM

If the Left wants to argue that Obama has led us into a depression, far be it from me to dissuade them.

So if Krugman thinks we’re in a depression, we’ve been in a depression for the last 3 years. The last President who failed to lead the country out of a depression in 3 years was Herbert Hoover. The Big O would just luuuuuv to be compared with him, right?

I could just picture the bumper sticker: OBAMA = HOOVER, with Obama’s logo in all three O’s.

Steve Z on May 2, 2012 at 9:59 AM

I think what Krugman meant was that he’s suffering from depression because his advice is being ignored by both parties.

Nomas on May 2, 2012 at 6:31 PM

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