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Economic Uranium
Krugman has finally found a topic he is truly qualified to write about.


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Donald L. Luskin

Paul Krugman and I took very different vacations over the July 4 holiday, and our choices might tell you something about how different we are. I played cowboy at a ranch in Colorado. Rumor has it that Krugman went bicycling in France. Different fantasies for different folks.

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But we were able to make a deal: As long as Krugman wouldn’t write any New York Times columns, I wouldn’t write anything for National Review Online exposing his outright lies, factual distortions, misquotations, unsourced assertions, unproven claims, rhetorical trickery, liberal bias, and Democratic partisanship.

But now America’s most dangerous liberal pundit is back. So the Krugman Truth Squad is back, too. (By the way, my warmest thanks to the many readers who sent me encouraging e-mails while I was gone.)

In each of his two columns last week, Krugman flogged the “Bush lied” theme currently popular among Democratic presidential candidates. Tuesday’s column was a barrage of classic Krugman innuendo about the “16 words” in the State of the Union address that discussed Iraq’s pursuit of African uranium. I’m not going to give this Krugman column the usual acid bath. NRO columnist Clifford May has already dealt brilliantly with the uranium issue, here and here. And if you want more, three Krugman Truth Squad members have weighed in very effectively, too: check out Robert Musil on the Man Without Qualities blog; Matthew Hoy on the Hoystory.com blog; and new Squad member Thomas Bevan on the RealClearPolitics blog.

I’m going to focus on Krugman’s Friday column, in which he extended the “Bush lied” theme to include “Bush lied about economics.” With this subject — lying about economics — Krugman has finally found something he is truly qualified to write about.

Krugman claimed that Bush lied about burgeoning federal budget deficits in order to ram through his tax cuts, just as he supposedly lied about weapons of mass destruction to push through the war against Iraq. The very first line of Krugman’s column confidently took it as a given — beyond any need for discussion or proof — that Bush lied about Iraq.

Here’s another sentence in George Bush’s State of the Union address that wasn’t true: “We will not deny, we will not ignore, we will not pass along our problems to other Congresses, to other presidents and other generations.”

If this is another untrue sentence, what was the first one? If it’s the famous 16 words about African uranium — “The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa” — then Krugman has started his very own column with a sentence that is untrue (perhaps I should say another sentence that is untrue). Regardless of what criticisms one may have about the intelligence concerning African uranium, Bush’s statement itself was indisputably true.

But for Krugman, Bush is a liar even if what he says is true. And having thus falsely impugned the president’s character in the column’s first paragraph, Krugman went on to make a very serious accusation: He charged that Bush’s budget projections were the result of a conspiracy of deliberate fraud. Krugman repeated this four times in the column:

• … the administration’s claims to fiscal responsibility have rested on thoroughly cooked books.

• … budget analysts were pressured to high-ball estimates of future revenues and low-ball estimates of future expenditures.

• … the administration got us here with cooked numbers.

• … his administration continues to fudge the numbers …

Yet for the apparent gravity of this accusation, as I pointed out on my blog, The Conspiracy to Keep You Poor and Stupid, Krugman did not offer even the slightest shred of evidence. No details on how numbers were “cooked” or “fudged,” no testimony from analysts who were “pressured.” No smoking-gun e-mail. Nothing. Just baseless accusations by a Princeton economics professor writing in the pages of the “newspaper of record.” By the time a week is out, these charges will be repeated elsewhere, as facts, with the New York Times cited as their authoritative source.

The closest thing to evidence came when Krugman pointed out that the administration’s budget projections have not been perfectly accurate. But has any president’s budget projections ever been perfectly accurate? As Krugman Truth Squad member David Hogberg put it on his Cornfield Commentary blog,

Krugman should know his recent budget history well enough to know that you shouldn’t put too much stock in budget projections: they are the economic equivalent of reading tea leaves. Back in 1997 the Office of Management and Budget projected a budget deficit of $121 billion for 1998 … Recall that 1998 was the year the deficit turned to [a] surplus [of $69 billion].

Krugman not only accused Bush of lying about the deficit — he claimed, as he has done in many previous columns, that the deficit is leading toward a fiscal catastrophe. He wrote, “Right now the U.S. government is running deficits bigger, as a share of G.D.P., than those that plunged Argentina into crisis.”

New Krugman Truth Squad member James Clarke pointed out on his Right On Everything blog that Argentina’s financial crisis was not caused by its deficits, but by the effect of its rigid currency-exchange-rate mechanism on its central bank’s ability to regulate its money supply: its “peg to the US dollar may have been faulty.”

Incredibly, Krugman — whose claim to fame as an economist is in the area of international trade — has agreed with this position. Both in an article posted on his personal website and in his column in the Times covering the Argentine crisis, he blamed the exchange-rate mechanism and never even mentioned deficits once. Yet now, it’s deficits that “plunged Argentina into crisis.”

Even the most casual scan of the history of federal budget surpluses and deficits reveals that over the last quarter century, big deficits (as a fraction of GDP) have occurred in recession years like the present ones, as a result of falling tax receipts. Many economists would argue that the willingness to tolerate deficits in recessions is one key to getting out of those recessions. But David Hogberg noted that this causes problems for Krugman’s anti-Bush arguments:

Krugman finds himself in a bit of a pickle. Some readers might recall that he is a Keynesian (or is it neo-Keynesian?) … Krugman believes that government spending can get us out of a recession by boosting consumption. Thus, why is it such a bad thing to run a deficit if it means that government is spending more?

Neo-Keynesian? Or just a traditional tax-and-spend liberal? You make the call.

But I can’t think of a single instance in which Krugman has objected to government spending. In fact, he has protested that Bush isn’t spending enough on homeland security; he has endorsed Richard Gephardt’s proposal to provide tax credits to extend medical insurance to the uninsured; he has blasted the GOP for wanting to cut spending on social programs; he has excoriated Tom DeLay for blocking refundable child credits for people who pay no taxes; and he has urged the extension of unemployment benefits to aid-strapped states.

So deficit spending is great when Krugman wants it, or when Keynes prescribes it — yet when Bush does it, Krugman dismisses it as a mere excuse, as “the last defense of the budget deficit.” But does Krugman admit it will help the economy? In his latest column, his answer was a “yes, but.”

Yes, deficit spending stimulates demand — but tax cuts for the rich, which have dominated the administration’s economic program, generate very little employment bang for the deficit buck.

Krugman ignored the fact that Bush’s tax cuts were for all Americans who pay income taxes, not just the rich. Be that as it may, he never explained why Keynes’s deficit prescription will normally work, but will not work now in the presence of tax cuts for the rich. Does Keynes’s theory hold that such tax cuts somehow suppress the demand that deficit spending stimulates? And if tax cuts for the rich don’t generate much employment, would more be generated by his own prescribed tax cuts (Krugman’s would be “temporary, and go largely to low- and middle-income families”)?

Krugman started by accusing Bush of uttering “another sentence … that wasn’t true.” I had to look long and hard, but I finally found a sentence once uttered by Krugman that was true. It’s from his 1994 book, Peddling Prosperity, in which he discussed the Reagan-era deficits, which were far larger than today’s as a percentage of GDP. Krugman wrote that “the deficit is not nearly the monster that some people imagine.”

Now who’s cooking the numbers around here?



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