Paul Krugman: Bad Faith Economics

How to identify “fundamentally fraudulent antistimulus arguments”:

Bad Faith Economics, by Paul Krugman, Commentary, NY Times: As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending.

Some of these arguments are obvious cheap shots. John Boehner … has already made headlines with one such shot:… he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”

But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible… So as a public service, let me try to debunk some of the major antistimulus arguments… Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.

First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years… and dividing it by the jobs created in just one of those years. … The true cost per job of the Obama plan will probably be closer to … $60,000…

Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all,… surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that … public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved.

This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.

Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions.

It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. … But … we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.

That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. …

These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically, conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick.

But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did — and he should disregard the huffing and puffing of those who lost.

One Response to "Paul Krugman: Bad Faith Economics"

  1. Copito   January 30, 2009 at 10:12 am

    The velocity of economic theory is an ideological constant, not a scientific one. Just as the velocity of money is an economic constant, not a technical one.What Mr Krugman calls ‘Bad Faith’ economics is just another part of the massive propaganda effort to give a ‘scientific’ basis to free-market capitalism. The GOP senators *have* to keep churning out the same old supposedly conservative justifications, small state, tax cuts, no socialism, etc. because it is only if that discourse is somehow accepted as objective analysis and ‘how America became great’ that they, their behaviour and their scandalous privileges are justifiable.However, in nailing their colours to the mast against the fiscal stimulus, the GOP now has a vested interest in ensuring that it fails. Because if it fails (and you’d better pray to whatever God you believe in that it doesn’t) then the GOP continues to have some justification for existing. Whereas, if the stimulus works the GOP becomes not only the party on whose watch the house fell in, it becomes the party whose economic beliefs were rubbished by the recovery and which, even while the US recovered, tried to make sure it didn’t just to avoid having to admit that it was wrong. Talk about a trifecta; more a trifucked, if you ask me.