United Liberty

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Writing for the New York Times, Paul Krugman has a new column promoting more government spending and additional government regulation. That’s a dog-bites-man revelation and hardly noteworthy, of course, but in this case he takes a swipe at the Cato Institute.

The financial crisis of 2008 and its painful aftermath…were a huge slap in the face for free-market fundamentalists. …analysts at right-wing think tanks like…the Cato Institute…insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.

Upon reading this, my first reaction was a perverse form of admiration. After all, Krugman explicitly advocated for a housing bubble back in 2002, so it takes a lot of chutzpah to attack other people for the consequences of that bubble.

But let’s set that aside and examine the accusation that folks at Cato had a Pollyanna view of monetary and regulatory policy. In other words, did Cato think that “deregulated markets were doing just fine”?

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Just like in the United States, politicians in the United Kingdom use the deceptive practice of “baseline budgeting” as part of fiscal policy.

This means the politicians can increase spending, but simultaneously claim they are cutting spending because the budget could have expanded at an even faster pace.

Sort of like saying your diet is successful because you’re only gaining two pounds a week rather than five pounds.

Anyhow, some people get deluded by this chicanery. Paul Krugman, for instance, complained in 2011 that “the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback.”

It’s official: the New York Times’ resident Nobel Prize Laureate/Loony is delusional. He wrote on his blog Monday about “how right he was”:

We’re coming up on the second anniversary of my piece “Myths of Austerity“, in which I tried to knock down the simply insane conventional wisdom then gelling among Very Serious People. Intellectually it was, I think I can say without false modesty, a huge win; I (and those of like mind) have been right about everything.

But I had no success in deflecting the terrible wrong turn in policy. Moreover, as far as I can tell none of the people responsible for that wrong turn has paid any price, not even in reputation; they’re still regarded as Very Serious, treated with great deference. And the political tendency behind that terrible economic analysis has at least a 50% chance of triumphing in America.

Oh well.

“Oh well” is right.

His first problem is that he says he has “been right about everything.” When one looks at the stimulus programs that have been enacted since this recession began, and the high unemployment that has persisted, the evidence is blatantly clear: Krugman is an idiot.

His second problem is his statement that “I had no success in deflecting the terrible wrong turn in policy.” Um, lest I am living on a different worldline than Krugman, the man’s main policy prescription has been stimulus, and we’ve had a lot of it:

No, seriously, that is what this man has become. He recently blogged a chart on his blog (inappropriately—or maybe entirely appropriately—named “Conscience of a Liberal,”) showing first quarter growth for five countries:

He then goes, “Wait, what? Japan as star performer? What’s that about? Actually, no mystery.”

He links to a Bloomberg article, and excerpts:

Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand.

So he then argues that the tsunami reconstruction has led to great economic growth, while so-called “austerity” (which isn’t actually austerity at all, if Krugman had bothered to pay attention) has doomed Italy.

It makes perfect sense! Absolutely! Let’s hit Japan with another tsunami that will kill over 15,000 people, injure 27,000 citizens, and make 3,155 go missing! If only the 2011 tsunami had destroyed even more than that paltry 130,000 buildings—if only it had actually caused Fukushima to go critical and explode—it would have created so much potential for rebuilding! It would have shot the Japanese GDP right over the moon!

The bruhaha over Rick Perry’s comments that Social Security is a Ponzi scheme have taken a backseat to the remembrance of 9/11 and the Redskins’ first win in about 90 years, but let’s fan the flames a bit. Thanks to the erudite Don Boudreaux over at Cafe Hayek, it has come to my attention that a highly visible economist at one of the nation’s largest papers agrees with Gov. Perry’s assertion:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

And yes, you’ve probably guessed it: it’s Paul Krugman. And yes, you’ve probably guessed it, but the above emphasis is mine.

The essay was written in the December 1996/January 1997 edition of the Boston Review, as a response to Richard Freeman’s suggestions on fixing inequality. I profess to not having read Freeman’s work entirely, though mostly it was more of the same “we need to take the wealth from the top 20% and give it to the bottom 20%” nonsense.

Left-wing discontent with Obama is probably not as high as moderate, right-wing, or libertarian discontent with the man, but it’s getting there. In fact, some, including Matt Stoller of the Roosevelt Institute, are speculating about possibly taking Obama off the top of the Democratic ticket in 2012.

Not that it will ever happen, but hey, I only read Salon for entertainment anyways:

Democrats may soon have to confront an uncomfortable truth, and ask whether Obama is a suitable choice at the top of the ticket in 2012. They may then have to ask themselves if there’s any way they can push him off the top of the ticket.

That these questions have not yet been asked in any serious way shows how weak the Democratic Party is as a political organization. Yet this political weakness is not inevitable, it can be changed through courage and collective action by a few party insiders smart and principled enough to understand the value of a public debate, and by activists who are courageous enough to face the real legacy of the Obama years.

Obama has ruined the Democratic Party. The 2010 wipeout was an electoral catastrophe so bad you’d have to go back to 1894 to find comparable losses. From 2008 to 2010, according to Gallup, the fastest growing demographic party label was former Democrat. Obama took over the party in 2008 with 36 percent of Americans considering themselves Democrats. Within just two years, that number had dropped to 31 percent, which tied a 22-year low.