Tyler Cowen points out the strange position Paul Krugman find himself in: Having advocated stimulus spending during all of the Obama years, he now has to confront the possibility that Donald Trump will actually provide it (via tax cuts, infrastructure spending, and, I’d add, maybe defense spending too). He has so fervently boosted the idea that, for now, he can’t quite bring himself to say he opposes it.
Here’s his assessment of Trump’s fiscal plans last week:
True, handing out windfalls to rich people and companies that will probably sit on a lot of the money is a bad, low-bang-for-the-buck way to boost the economy, and I have my doubts about whether the promised surge in infrastructure spending will really happen. But an accidental, badly designed stimulus would still, in the short run, be better than no stimulus at all.
He sort of deserves credit for sticking with the idea that brute-force stimulus is a good idea, when, say, Janet Yellen, has now made it clear it is not:
— Ben Leubsdorf (@BenLeubsdorf) November 17, 2016
But in the same column, Krugman suggests Trump’s plans will end up being a problem:
[I]n the longer run Trumpism will be a very bad thing for the economy, in a couple of ways. For one thing, even if we don’t face a recession right now, stuff happens, and a lot depends on the effectiveness of the policy response. Yet we’re about to see a major degradation in both the quality and the independence of public servants. If we face a new economic crisis — perhaps as a result of the dismantling of financial reform — it’s hard to think of people less prepared to deal with it.
This cheap shot at the Trump administration’s talent feels random, except that Krugman clearly wants to say something about how Trump’s plans will go wrong in the long run, but the obvious such criticisms are out. In trying to knock down Republican Trump opponents like Mitt Romney, Krugman has repeatedly said (rightly, in my view) that trade restrictions are unlikely to cause major slumps for the U.S. Meanwhile, his candidate, Hillary, supported at least some dose of short-term stimulus and had absolutely no plans for how to rein in long-term deficits.
In reality, the problem with the idea of careless stimulus today (which is not at all necessarily what Trump’s proposing) is that, as Yellen said, we don’t need careless stimulus. The federal government should invest in the things it needs to invest in, reform our tax code, and figure out how to bring its liabilities and revenues closer into balance.
But saying that would be a rather abrupt about-face for Krugman, who has spent so many column inches in the Obama years rabidly advocating stimulus, parroting the liberal “debt is just not a problem right now” refrain, and scorning Republicans and centrists for taking long-term deficits seriously.
A dose of humility and nuance over the past eight years might have left him a bit more room to recalibrate — as I suspect he will do eventually.