Monday, March 9, 2009

Another word on Paul Krugman

Earlier I wrote a post and was kinda hard on Paul Krugman, saying his columns and blog posts are at heart political rather than scholarly exercises. I hold to that.

But I'll say, I do admire Mr. Krugman's ability to make forceful arguments extrapolating from data. Even when I disagree with him, and even if his arguments often appear to have mainly political ends, I must say he is as good as there is at articulating economic data in an interesting, useful, accessible way.

An example, from his column of today:

President Obama’s plan to stimulate the economy was “massive,” “giant,” “enormous.” So the American people were told, especially by TV news, during the run-up to the stimulus vote. Watching the news, you might have thought that the only question was whether the plan was too big, too ambitious.

Yet many economists, myself included, actually argued that the plan was too small and too cautious. The latest data confirm those worries — and suggest that the Obama administration’s economic policies are already falling behind the curve.

To see how bad the numbers are, consider this: The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.

On one hand this argument is weak -- even in its entirety, it falls short of adequately acknowledging the political and cultural realities of the moment. It wasn't easy for Obama to get the stimulus he did. There are a lot of powerful headwinds against massive government spending of the sort that Obama just pushed through. More money for national defense? Easy. Demand-side redistribution of wealth through institutions of health, energy, and education? Not so easy.

But on the other hand, Mr. Krugman has a point -- as large as the stimulus was it might not fully meet the challenge of the contraction, at least not as soon as we might like. And he finds a perfect data-point to show it: The 8.1 percent unemployment that was supposed by the Obama administration to be the year's average is going to be passed by the end of March. This fact helps make the argument for much, much more stimulus somewhat compelling.

Obama and Krugman are interesting rivals. They seem to have an on-going debate that I will try to document.

No comments: