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Krugman Failure

Paul Revere
March 6, 2012, 6:58pm

In his column on March 2, Paul Krugman compared the rhetoric of the four major GOP candidates for President with estimates from the Committee for a Responsible Federal Budget. Krugman hammers the three candidates getting most of the press—Romney, Gingrich and Santorum—especially hard, while dismissing Ron Paul's proposed budget and tax changes in the following way:

Ron Paul would do better, roughly matching Mr. Obama. But if you look at the details, it turns out that Mr. Paul is assuming trillions of dollars in unspecified and implausible spending cuts. So, in the end, he's really a spendthrift, too.

One can dispute Krugman's assessment of Paul's proposed budget, as one writer does here, by pointing out that Rep. Paul's proposed budget would balance by 2015 and add 95 percent less to the national debt than the President's proposed budget would add. However, since this is a policy blog, instead of a political blog, I'd like instead to focus on Krugman's failure to dismiss the President's budget in the same way he does Paul's, since it is also full of "implausible" assumptions:

An example is that the President's FY 2013 budget assumes 3 percent "Real GDP" growth for 2013 and "around 4 percent annually" in 2014. This projection is far greater than the non-partisan Congressional Budget Office's (CBO) expectations, which as of January 31, 2012 were that: "real GDP [will grow] by 2.0 percent this year and 1.1 percent next year [2013]."

The wish-based estimation by the President is consistent with the inaccurate projections in the President's FY 2012 budget, which said 2011 would have economic growth of 3.1 percent and 2012 would grow at 4 percent. The CBO, which said in 2011 that growth in 2011 would be 2.7 percent and 2012 will be 3.1 percent, was far closer to the actual GDP growth of 1.7 percent in 2011, as currently calculated by the Bureau of Economic Analysis.

Since the President's proposal was intended as an election budget instead of a true starting point on the upcoming budget debates of FY 2013, I think it's safe to assume CBO is going to continue being more accurate when it comes to economic growth expectations than the White House.

The Krugman Failure here is that nowhere in his column did Krugman note that, with actual economic growth expected to be far lower than the President's projections, the amount of debt garnered between now and 2022 is almost certain to be larger than estimated by the White House.

As a regular critic of Krugman, I suppose I can't expect him to see things as I do. However, it would be nice if he would be at least semi-consistent and call things equally across the board. 

Editor's Note: The writer is the pseudonym of a congressional staffer who has contributed to a number of publications with ideas regarding public policy. His work reflects his own views and not necessarily those of his employer. Contact: Anthony Randazzo, director of economic research, at anthony.randazzo@reason.org



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