Voodoo economics, then and now

Here’s me, back about 13 months ago:

I’d also love to know what Keynesians think of the Dems having a socialist as their lead member on the Senate Budget Committee, who then appoints a MMTer to be chief economist.  And Krugman says the GOP relies on voodoo economics!

Of course my liberals readers have been outraged at my Sanders bashing. But now we have this:

Paul Krugman is now accusing Bernie Sanders of “deep voodoo” economics.

That’s a particularly damning insult among liberals, who pride themselves on being on the side of reason, evidence, and general wonkishness. Krugman’s dis came on the heels of an open letter released today by four big-wig liberal economists—all of whom either served in the Obama or Clinton administrations—claiming that “no credible economic research” shows that Sanders’s spending-heavy economic plan will result in the big gains outlined in a paper endorsed by his policy director.

The paper, conducted by economist Gerald Friedman, predicts GDP growth of over 5 percent and an unemployment rate of under 4 percent in a Sanders administration. As Krugman notes, liberals have laughed at Jeb Bush for claiming he could produce 4 percent growth.

So Europeans work far fewer hours each year than Americans, because of their high-tax welfare state.  As a result per capita GDP in Europe is far lower than in America.  But somehow if we adopt their economic system our per capita GDP, already far higher than almost any other developed country, will start zooming ahead at 5.3%/year.  And I thought Trump was a clown.

Kudos to Krugman, for pointing this out.

(Just to be clear, I still greatly prefer Sanders to Trump—that’s how much I loath Trump.)

Update:  This good article on Sanders and Denmark quotes Lars Christensen.


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51 Responses to “Voodoo economics, then and now”

  1. Gravatar of jknarr jknarr
    17. February 2016 at 15:34

    Wait. I’m confused. I thought that Krugman was all for double-barreled fiscal stimulus, because the US is in a liquidity trap.

    Why try to discredit Bernie’s much-needed fiscal stimulus plan with such divisive rhetoric? It’s clearly not a perfect plan, but I though Bernie would have been the one he was waiting for.

    I’m certain that Krugman is not just a partisan Clinton supporter. That would mean that he subordinates his economic analysis for political ends. Who would believe him if he did that?

  2. Gravatar of Jhow Jhow
    17. February 2016 at 16:10

    Everyone I know who hate USA are hoping for Sanders.

  3. Gravatar of Christian List Christian List
    17. February 2016 at 16:12

    I think Krugman is a partisan Clinton/Obama supporter to a large extent. He always sounded like an extreme Keynesian but now since his advocated policies could become reality he becomes cold feet, because deep down he suspects that this kind of policy would fail miserably. And then there would be nobody to blame anymore.

  4. Gravatar of Christian List Christian List
    17. February 2016 at 16:12

    *gets cold feet* (Edit)

  5. Gravatar of E. Harding E. Harding
    17. February 2016 at 16:16

    “(Just to be clear, I still greatly prefer Sanders to Trump—that’s how much I loath Trump.)”

    -What in him, and, for some bizarre reason, only him, makes you tick?

    I give no kudos to Krugman on this one; it indicates deep intellectual inconsistency and a propensity to sell out.

  6. Gravatar of Alexander Hamilton Alexander Hamilton
    17. February 2016 at 16:29

    Bernies plan isn’t fiscal stimulus. Fiscal stimulus is an increase in the deficit. This is a permanent increase in the size of government by share of GDP at a time when unemployment is 4.9%. He says this will pretty much pay for itself because growth will miraculously accelerate to 5% (Based on the many european countries with government as 50% of GDP that regularly fire along at growth rates like this…). This is like getting something for nothing which is the definition of voodoo economics. That’s why even Democrats are laughing at it.

  7. Gravatar of E. Harding E. Harding
    17. February 2016 at 16:51

    “(Just to be clear, I still greatly prefer Sanders to Trump—that’s how much I loath Trump.)”

    -I should have said (and now do say) “politics is not about policy”.

  8. Gravatar of ssumner ssumner
    17. February 2016 at 16:56

    Alexander, Yes, this is not fiscal stimulus, it’s permanent.

  9. Gravatar of Gordon Gordon
    17. February 2016 at 17:06

    Lars Christensen chimed in on Bernie today:

    http://marketmonetarist.com/2016/02/17/bernie-sanders-denmark-and-me/

    I doubt if voters will be swayed by what economists say. The vast majority of people have no understanding of economics. And they are not even aware that they lack understanding because they think it comes down to what they perceive and common sense. So when it comes to economics, people have “flat Earth” views and Bernie’s economic policy appeals to the economic flat Earthers.

  10. Gravatar of Ray Lopez Ray Lopez
    17. February 2016 at 18:08

    Sumner: “(Just to be clear, I still greatly prefer Sanders to Trump—that’s how much I loath Trump.)” – interesting, Sumner prefers socialism to a candidate who’s for closed borders, when evidence shows trade is only about 15% of GDP for the USA (and Japan for that matter), i.e., not that much. Both the USA and JP are already closed, and due to recession most Mexicans are not coming here anyway (BTW I am for totally open borders world wide).

  11. Gravatar of E. Harding E. Harding
    17. February 2016 at 18:25

    “Alexander, Yes, this is not fiscal stimulus, it’s permanent.”

    -Sure, but Krugman thinks we need fiscal stimulus now. Do you really think he cares about permanency? I just think he’s a 1%er being a 1%er, trampling on his fellow progressives to reinforce the candidacy of Hillary Clinton (as though it wasn’t already strong enough).

    Ray supports more bad ideas; what else is new?

  12. Gravatar of Major.Freedom Major.Freedom
    17. February 2016 at 18:26

    Ray, you make my posts seem sane in comparison.

  13. Gravatar of Ray Lopez Ray Lopez
    17. February 2016 at 18:45

    @MF – lol, Sumner will chuckle at that, as it confirms his priors. You would be more effective if you dropped your Austrian thinking, which is unscientific (thought experiments do not work with non-linear systems, as they are not deterministic, only boundary analysis and statistical methods work, and by that measure MM is a failure).

  14. Gravatar of Alexander Hamilton Alexander Hamilton
    17. February 2016 at 19:02

    @E. Harding I don’t really see a contradiction in Krugmans position. He wants fiscal stimulus now. Yes if we’re being cynical(or honest?) this is because he wants the deficit to later be closed by tax increases leading to a permanent increase in the size of government. He seems to have more of a problem with the idea that we can have something for nothing by appealing to unrealistic growth rates. Something he excoriated conservatives for with respect to the laffer curve. So for a change I think he’s actually being consistent.

  15. Gravatar of Cliff Cliff
    17. February 2016 at 19:25

    “trade is only about 15% of GDP for the USA (and Japan for that matter), i.e., not that much”

    Hahahaha

  16. Gravatar of Shmebulock, Crusher of Pussy Shmebulock, Crusher of Pussy
    17. February 2016 at 19:30

    @Ray Lopez

    Just you wait: Scott will eventually hop on the ban cash bandwagon, despite what he says now. Like Cowen (who’s far more intelligent), Scott cares about his reputation among the reputable people above all.

  17. Gravatar of TravisV TravisV
    17. February 2016 at 20:30

    Dear commenters,

    Re: David Glasner’s new post, does anyone remember whether Frances Coppola believes that aggressive QE can increase inflation expectations and employment?

    I suspect Coppola might believe in a variant of MMT. I know she used to work with John Aziz.

  18. Gravatar of TravisV TravisV
    17. February 2016 at 20:51

    Bullard! Booyah!!!

    http://www.reuters.com/article/us-usa-fed-bullard-idUSKCN0VR025

    https://www.stlouisfed.org/~/media/Files/PDFs/Bullard/remarks/Bullard-CFA-StLouis-17Feb2016.pdf

  19. Gravatar of E. Harding E. Harding
    17. February 2016 at 20:52

    “He seems to have more of a problem with the idea that we can have something for nothing by appealing to unrealistic growth rates.”

    http://instituteforenergyresearch.org/analysis/krugman-adopts-climate-alarmism-thats-juuuuust-right/

    And, arguably, his stance on Greece.

  20. Gravatar of Scott Freelander Scott Freelander
    17. February 2016 at 21:16

    I wonder how many economists realize that the average person, who had little respect for them in the first place, have less than perhaps ever in our lifetimes due to what they perceive as the failure of their profession with respect to policy in recent years. This is not just scientific failure, but I guess that the majority of people don’t even think economists offer objective analyses.

    Of course, as Scott and others have often pointed out, this view is wrong, at least as far as intro textbooks are concerned, but honest people have to admit that a majority of famous economists have been guilty of not only making ridiculous public statements, but are even at times intellectually incoherent. This is true of the hard money, deficit terrorists on the right and the crude Keynesians and MMT’ers on the left. This includes many Nobel winners.

    And we see the policy actions of many central banks around the world and institutions like the IMF. It’s been mostly folly.

  21. Gravatar of Scott Freelander Scott Freelander
    17. February 2016 at 21:22

    The point of the above is that voters on both the right and the left now not only distrust the competence of economists and politicians, but also the motives, such that letters like that mentioned in this post might actually help Sanders, just as criticism of Trump seems to help him.

  22. Gravatar of Postkey Postkey
    18. February 2016 at 01:54

    “Ray, you make my posts seem sane in comparison.”

    So you need Ray to make your ‘insane posts’, ‘seem sane’?

  23. Gravatar of Anand Anand
    18. February 2016 at 06:24

    I liked the CNN piece, but since I have already read Scott’s article (http://econfaculty.gmu.edu/pboettke/workshop/Fall2009/Sumner.pdf) long back called “Is there nothing wrong in Denmark”, I didn’t learn much from it.

    Perhaps it is worth pointing out that the report discussed by Krugman is by a person (Gerald Friedman) who is not part of the Sanders team, though they are on good terms.

    Sanders has been pretty clear that it is not a fiscal stimulus. It would increase the size of government.

    My own feeling about Krugman is that the things he talks about (the agenda, if you will) are the ones which are usually in the mainstream of the Democratic party. He has of course his own take on all the issues, which often align with the Clintonite wing, but sometimes doesn’t.

  24. Gravatar of Anand Anand
    18. February 2016 at 06:51

    My kingdom for an “edit” function for comments.

    Wrong = rotten.

  25. Gravatar of ssumner ssumner
    18. February 2016 at 07:13

    E. Harding, I don’t think Krugman believes we need fiscal stimulus now.

    Crusher, You said:

    “Just you wait: Scott will eventually hop on the ban cash bandwagon, despite what he says now. Like Cowen (who’s far more intelligent), Scott cares about his reputation among the reputable people above all.”

    I see we have another moronic commenter joining the fray. Good luck, perhaps you won’t make a complete fool of yourself as often as Ray has.

    Your comment is nonsense, except the part about Cowen being much smarter, which is true (for all of us here.) There’s no one in the world more pro-cash than me, and I’m 60 years old. Good luck seeing your prediction come true. And as for caring about my reputation, you are obviously new here.

    Travis, David’s post is excellent, and Bullard’s my hero again.

    Scott, I think most economists know that the public pays no attention to our views.

    Anand, Of course Krugman’s right about Sanders’ idea being nutty, but he also may be worried that Sanders would lose the general election. In contrast, Hillary is likely to win.

  26. Gravatar of TravisV TravisV
    18. February 2016 at 08:25

    So far this morning, none of the blogs I read have written about Bullard yet, how can this be????

  27. Gravatar of ssumner ssumner
    18. February 2016 at 09:01

    Travis, Look again!

  28. Gravatar of Ray Lopez Ray Lopez
    18. February 2016 at 09:32

    @Chrusher (stupid nym btw) – “Just you wait: Scott will eventually hop on the ban cash bandwagon, despite what he says now” – yes, he might. Sumner’s a professional economist, and pro e-cons follow fashion. Sumner apes his idol Friedman, with ad hominem attacks who also was into the same (as was economist Murray Rothbard). These guys attack first and ask questions later (witness Sumner’s next post on Bullard, who he attacked three years ago but now, apparently because Bullard said something that Sumner construes as favorable to his cause, is rehabilitated).

  29. Gravatar of ssumner ssumner
    18. February 2016 at 09:44

    Ray, Nice try, but I’ve said lots of favorable stuff about Bullard over the years.
    You are really shooting blanks today, as usual.

  30. Gravatar of E. Harding E. Harding
    18. February 2016 at 09:46

    “E. Harding, I don’t think Krugman believes we need fiscal stimulus now.”

    -He totally thinks it’s advisable. I’ll find the links later.

    “Your comment is nonsense, except the part about Cowen being much smarter, which is true (for all of us here.)”

    -No, he’s not. This is a myth he has constructed around himself. He’s just well-read and good at chess, and I don’t even think he reads as much as he attempts to make us presume he does. What evidence exists that Cowen is smarter than 125 IQ? Again, I have a Marginal Counterrevolution. I write way more substantive content at my two active blogs than Cowen does at his one. Tabarrok shows more intelligence than Cowen, if only at writing semi-intellectual clickbait (objective description, not meant to be derogatory, BTW).

    In my humble opinion, Krugman and Sumner are way smarter than Cowen.

  31. Gravatar of Michael Rulle Michael Rulle
    18. February 2016 at 10:34

    As loathsome as Trump is as a candidate it is difficult to believe a Sanders administration would not also have a left controlled Congress. Would you really prefer a clean sweep of moronic socialism than a likely more balanced Federal Government with at least the house in control of GOP? Remember, bad is better than worse.

    If you say yes, I do not believe you.

  32. Gravatar of ssumner ssumner
    18. February 2016 at 12:07

    Harding, I’m begin to see why you like Trump—he’s the anti-Cowen.

    Michael, You said:

    “If you say yes, I do not believe you.”

    Then why ask?

  33. Gravatar of E. Harding E. Harding
    18. February 2016 at 13:35

    “One of my long-running gripes about much discussion of current economic issues is about what I consider the long-run dodge. By this I mean the attempt to change the subject away from unemployment and inadequate demand toward supposedly more fundamental issues of education and structural reform. Such efforts to change the subject seem to me to be both wrong and, to some extent, cowardly.”

    “But if you have a persistent problem of inadequate demand — which is the secular stagnation argument — then find things that will boost demand.”

    -Krugman, December 28, 2015

    http://krugman.blogs.nytimes.com/2015/12/28/destructive-long-termism/

    So, yes, Krugman does favor fiscal stimulus now.

  34. Gravatar of E. Harding E. Harding
    18. February 2016 at 13:39

    @ ssumner

    -I like Ron Paul 100x more than Trump, though, except for the tight money stance. Trump is bad on civil liberties, the welfare state, international economic relations, ethanol subsidies, etc.

  35. Gravatar of ssumner ssumner
    18. February 2016 at 19:46

    Harding, Nice try, but he only favors fiscal stimulus at the zero bound, otherwise he prefers monetary stimulus, and has said so 100 times. Now maybe he’s recently repudiated everything he’s been saying for the past decade, but I’d like proof.

  36. Gravatar of Steve Steve
    18. February 2016 at 19:52

    I love Bernie, because he exposes the hypocrisy of Establishment Democrats like Krugman.

    Here’s Krugman’s objection to BernieCare:
    – “like it or not, incumbent players have a lot of power”
    AND
    “you’d still have to protect the interests of workers with better-than-average coverage”

    In other words, Krugman doesn’t like BernieCare, because he would lose his Cadillac University health plan, and, gasp!, have to wait in line behind brown people to see the doctor.

    http://www.nytimes.com/2016/01/18/opinion/health-reform-realities.html

  37. Gravatar of Kevin Erdmann Kevin Erdmann
    18. February 2016 at 20:15

    E. Harding, as much as I like both Pauls, I saw an infomercial the other night from Ron Paul on some newsletter or something he was hawking on gold-buggery that was just downright embarrassing from top to bottom.

  38. Gravatar of Michael Rulle Michael Rulle
    19. February 2016 at 05:25

    touche

    At least you did not lie by saying yes. :-)

  39. Gravatar of david david
    19. February 2016 at 09:17

    To all the Krugman critics, Krugman seems to think we’re pretty close to full employment, and when unemployment was much higher he wanted bigger fiscal stimulus in 2009 to get full employment more quickly, but we’re basically there now so no need for fiscal stimulus. he cautions the fed against tightening since full employment is not a precise concept. From over a year ago:

    “Today’s employment report continued the pattern we’ve been seeing for a while. Unemployment is falling, and is now very close to previous estimates of the NAIRU, the unemployment rate at which inflation begins accelerating. But inflation isn’t accelerating; in particular, there is still no hint of wage pressure in the data. So what should the Fed do?

    The NAIRU is, I’d still argue, a useful concept, mainly because it’s a caution against expecting too much from monetary policy in the long run. Much as I want full employment, there is some lower bound on the unemployment rate, a rate that you just can’t achieve on a sustained basis with demand-side policies.

    Maybe full employment really is 5.3 percent unemployment, and by the time that’s clear the inflation rate will have ticked up a bit above the Fed’s target. But that would not be a large cost, whereas sliding back into the liquidity trap would be very, very costly. So please, Janet, Stan, and company, think it possible that you may be mistaken.
    http://krugman.blogs.nytimes.com/2015/03/06/the-nairu-straitjacket-and-cromwells-rule/

    last autumn:

    “What’s driving this ever-falling estimate of the NAIRU? The failure of inflation to materialize. And look, it’s better to see the FOMC update in the light of evidence than not. But the truth is that we really don’t know how low unemployment can go, which means that the unemployment rate is not a good reason to tighten. Wait until you see the whites of inflation’s eyes!”

    http://krugman.blogs.nytimes.com/2015/09/18/the-receding-nairu/

    critiquing the sanders claims:
    “It’s possible that we can get unemployment down under 4 percent, but that’s way below any estimates I’ve seen of the level of unemployment consistent with moderate inflation.”
    http://krugman.blogs.nytimes.com/2016/02/17/what-has-the-wonks-worried/

  40. Gravatar of mpowell mpowell
    19. February 2016 at 12:14

    The thing is as crazy as Sanders’ policy proposals are, I think he’s a conventional politician. And so I doubt his governance would be significantly to the left of Clinton due to limitations imposed by Congress. I don’t see any reason to assume a Sanders run for office will do anything to bring a more leftwing Congress compared to a Clinton run. And I don’t think Sanders is going to do anything an ordinary politician wouldn’t try to increase the power of his office.

    Now Trump, on the other hand, the policy proposals are not the biggest problem. Do you really want the shadiest of all real estate moguls in the WH? I think the president could become pretty powerful if you had a guy who didn’t think anything of breaking all the rules. That’s the fear with Trump.

  41. Gravatar of E. Harding E. Harding
    19. February 2016 at 15:29

    @ssumner

    “Nice try, but he only favors fiscal stimulus at the zero bound, otherwise he prefers monetary stimulus, and has said so 100 times.”

    -Obviously Krugman supports monetary stimulus before fiscal. But doesn’t he routinely express skepticism of QE and monetary policy at the ZLB? And we’re very close to the ZLB. So hypothetical half-point rate cut yesterday probably won’t cut it for Krugman.

    @Kevin

    -Yes, the tight money and the medical quackery are embarrassing. And I like Trump more than Rand, because Rand is a compromiser, not someone who exudes strength.

  42. Gravatar of Scott Sumner Scott Sumner
    19. February 2016 at 19:03

    mpowell, I’m stunned that people don’t instantly see what a phony demagogue Trump is. Trump even has contempt for the people who support him. The only thing that matters to Trump is Trump.

  43. Gravatar of E. Harding E. Harding
    19. February 2016 at 20:30

    @ssumner
    One bit of Trump’s demagogic phoniness is worth a thousand tons of establishment authenticity. Rubio, Kaisich, Bush are nuts who may well destroy the world. Cruz does not know what he is talking about and is dangerously volatile and dishonest. Carson just looks like the classic stereotype of the ignorant Black man and has zero charisma. Of the GOP candidates, only Trump is remotely acceptable to the sane and moral thinking man.

    On the Democratic side, Clinton is competent but knowingly evil, while Sanders is incompetent with an unknown capacity for evil. It’s a toss-up, but I’ll take Sanders over Clinton, and, indeed, over the entirety of the GOP field excepting Trump and Cruz.

  44. Gravatar of ssumner ssumner
    20. February 2016 at 06:23

    Trump just recommended boycotting Apple because they oppose the oncoming surveilence state. Charming guy.

  45. Gravatar of Gary Anderson Gary Anderson
    20. February 2016 at 09:21

    How can you do hot potato without banning cash, Scott? You are just a two bit immoral economist like all the others. And to think I had more hopes for you.

  46. Gravatar of E. Harding E. Harding
    20. February 2016 at 09:33

    I know. In some ways, a Trump presidency would be a good thing regarding this topic, since it would Make Surveillance a Partisan Issue Again. Trust in the guy with the backdoor would be severely weakened. I seriously doubt a Clinton presidency would be much different from a Trump one in regards to the practice of the already-here surveillance state. I do not doubt a Clinton presidency would be much different from a Trump one in regards to media coverage of that practice.

    And I haven’t seen much evidence you oppose the already-here surveillance state in your actions, Scott. Still no HTTPS on the website?

  47. Gravatar of E. Harding E. Harding
    20. February 2016 at 09:38

    The above was a reply to Scott, not Gary.

  48. Gravatar of ssumner ssumner
    20. February 2016 at 15:48

    E. Harding, You say:

    “In some ways, a Trump presidency would be a good thing regarding this topic, since it would Make Surveillance a Partisan Issue Again.”

    Let no one deny that Harding is good at finding silver linings.

  49. Gravatar of Shmebulock, Crusher of Pussy Shmebulock, Crusher of Pussy
    20. February 2016 at 16:07

    @Gary Anderson

    You’re right, you can’t. Which is exactly why Scott will eventually do an about-face and support a cash ban. Then he’ll try to lie about his reversal, but he’s too dumb to get away with it.

  50. Gravatar of Gary Anderson Gary Anderson
    21. February 2016 at 09:04

    You cannot entrust morality to an economist, Shmebulock. Thanks for seeing my concern.

  51. Gravatar of ssumner ssumner
    22. February 2016 at 15:02

    So crusher found Gary. Cute.

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