Monday, October 13, 2008

For those who figured Krugman couldn't irk conservatives any further

In a development likely to prove that living well is the best revenge, economist and pundit Paul Krugman received this year's Nobel Prize in economics.

Krugman received the award for his now-standard work on international trade policy begun in the 1970s, although many of the people this award will irritate most know him as a forceful and unrelenting critic--the word "shrill" has occasionally crossed their lips--of the Bush administration's policies on the economy and the Iraq war, especially since Krugman joined the Op-Ed page of the NYTimes in early 2000.

The award is unrelated to his current work as political critic, or to his talent for bringing high-level economic ideas into accessible prose. But the decision of the Nobel Committee to give the 2008 award to a neo-Keynesian like Krugman, at the very moment when the economic theories of Milt Friedman so beloved by the Republican party are deeply implicated in the current global economic meltdown, isn't going to go unnoticed.

But let me not accuse Messrs. Cheney and Bush of inconsistency. I don't really believe that they are vulgar Keynesians. They may advocate tax cuts when the economy is down, alleging that this will perk it up; but they also advocate tax cuts during booms. So they are perfectly consistent: they always want to cut taxes. Only the sales pitch changes with the state of the economy.

And that is the more serious bad news in Mr. Cheney's remarks: They suggest that the administration-in-waiting is not at all chastened by the questionable nature of its victory.

Many have argued that Mr. Bush, having lost the popular vote and won Florida (if he has) in a way that leaves his legitimacy in doubt, will try to calm the nation with centrist policies. Among other things, it is often assumed that those huge tax breaks for the rich that were the centerpiece of Mr. Bush's campaign are now on hold. Indeed, The Economist, which endorsed Mr. Bush and continues to cling to the belief that he is more moderate than his party, has even suggested — in what strikes me as delusional thinking — that he might keep the austerity-minded Lawrence Summers on as Treasury secretary. But now Mr. Cheney has signaled that he and Mr. Bush are as inclined as ever to push for big, irresponsible tax cuts.

And they may get them. Congress always has a hard time resisting calls to give away the store. It will be especially hard to maintain discipline after new budget projections are released next month. Because these projections will assume a higher rate of growth, and will not yet have factored in the revenue effects of slumping stock prices and the growth effects of declining technology investment, they will create a false sense that there is plenty of money to give away. Add a specious recession-fighting rationale and the temptation may be irresistible.

Some people have taken comfort from the fact that Mr. Bush will be a president without a mandate. But a president doesn't need a mandate to do a lot of economic damage.

Paul Krugman, NYTimes, 12/6/2000

Note the date. He was on the right story from before the beginning.

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