Keynesians Wrong About Stimulus, Coming AND Going
In a previous post here at Mises CA I chronicled the hole Krugman keeps digging for himself regarding the botched warnings over the so-called “sequester” in 2013. Specifically, Krugman’s latest excuse is to say that when he argued back in 2013 that the sequester was a “fiscal doomsday machine” and “one of the worst policy ideas in our nation’s history,” he actually didn’t look carefully at the numbers. In retrospect, Krugman is now claiming, the Keynesian model wouldn’t have predicted a big impact from the budget sequester, because it was small potatoes compared to the overall size of the economy.
Besides the implicit admission that Krugman is throwing out such serious accusations (“fiscal doomsday machine” etc.) without checking the numbers, is the simple fact that Krugman is wrong. Back in 2013 there were plenty of Keynesian analysts who were very well-versed with the numbers, and were confident that the sequester would slow U.S. economic growth.
A great example of this is a March 1, 2013 post from Jared Bernstein. Here’s an excerpt:
Economists, including myself, agree on guesstimates about the magnitude of the sequester’s impact–it’s expected to suck about half-a-point off of growth this year and cost 500,000-1 million jobs. That’s not recessionary but it means more slogging along of the type I bemoaned yesterday.
So how come on Larry Kudlow’s show last night it was one against four (about five minutes in) on this widely accepted point re the sequester’s impact on growth?…[U]nless you’ve got a good reason to think otherwise–and I heard nothing approach reason in the segment–you’ve got to go with the arithmetic, which in this case means subtraction of an estimated $66 billion in (calendar year!) 2013 outlays.
…Clearly, the Kudlow-crew refuses to accept this math…But here’s my question: under what micro-economics do such multipliers not exist?
…click on the above link to read the rest of the article…
