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Was Paul Krugman ‘Right’ on Austerity?



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If you want to see groupthink at its finest, go ahead and Google “Paul Krugman was right.”

Here are some of the headlines: 

Business Insider: “The Economic Argument Is Over — Paul Krugman Has Won

PolicyMic: “Paul Krugman Proven Right on Stimulus Bill and Anti-Austerity Theories

Salon: “Paul Krugman’s Right: Austerity Kills

The best, though, came from the eminent Princeton professor himself. In a post titled, “Knaves, Fools, and Me (Meta),” he magnanimously offered this concession:

One criticism I face fairly often is the assertion that I must be dishonest — I must be cherry-picking my evidence, or something — because the way I describe it, I’m always right while the people who disagree with me are always wrong. And not just wrong, they’re often knaves or fools. How likely is that? 

But may I suggest, respectfully, that there’s another possibility? Maybe I actually am right, and maybe the other side actually does contain a remarkable number of knaves and fools.

Now, I’d like to juxtapose Paul Krugman’s certainty with two recent articles from the the Washington Post’s Wonkblog

1) “The economy is holding up surprisingly well in a year of austerity,” by Neil Irwin and Ylan Q. Mui. 

A U.S. economy that was supposed to be barely hanging on is starting to look surprisingly robust.

Housing prices rose faster over the past year than they have in the past seven, according to data out Tuesday. Consumer confidence hit its highest level in five years. The stock market rallied another 0.6 percent as measured by the Standard & Poor’s 500, leaving it just short of an all-time high reached last week. And the national retail price of gasoline fell for six days straight through Monday and is down 16 cents a gallon since late February.

It adds up to this reality: In a year when tax increases and spending cuts by the federal government were expected to bleed life out of the economy, the strengthening housing and financial markets are proving to be more powerful than acts of Congress.

2) “Why hasn’t austerity been more of a drag on the U.S. economy?,” by Neil Irwin.

This is the U.S. economy in a nutshell, as revealed in Tuesday’s news ticker: Housing prices rose  faster over the past year than they have in the past seven. Consumer confidence hit its highest level in five years. The stock market rallied another 0.9 percent to hover near an all-time high, as measured by the Standard & Poor’s 500. And the national retail price of gasoline has fallen for six days straight and is down 16 cents a gallon since late February, providing nice relief to drivers.

Which all raises an obvious question: Whatever happened to the austerity economy? . . . 

Meanwhile, the direct evidence that tighter fiscal policy is damaging growth is scarce, so far at least; study the internal details of major economic reports, and even if you squint you don’t see a lot of concrete evidence of the squeeze.

Paul Krugman’s right? Austerity kills?

Apparently, the economy hasn’t heard the news.



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