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Paul "Orwell" Krugman Touts Job Growth in the Obama Recovery

Tyler Durden's picture




 

Submitted by Robert Murphy via Mises Canada,

For years, Paul Krugman has been warning that the inadequate fiscal stimulus package of early 2009, coupled with the disastrous spending cuts of the “sequester” package, were leading to a “postmodern recovery” and “jobless trap” for the millions of Americans locked out of employment due to coldhearted Republicans. Even though GDP growth had officially returned by the summer of 2009, Krugman told us, we could expect a terrible plight for America’s workers, all because the people in charge were more concerned with fiscal prudence than American families.

Well, now that we’ve had a few quarters of decent GDP growth and private sector job creation–at least according to the official statistics–Krugman has had to alter his narrative. Now, you see, Obama’s recovery has actually been impressive–much better than the recovery under George W. Bush from the dot-com recession. Does this prove that Krugman was wrong about the need for big deficits? Of course not. No, it just shows that the right-wing critics of ObamaCare and other regulations were wrong for thinking these regulations would hurt hiring.

A recent example of this newfound perspective is a December 28 Krugman post entitled, “The Obama Bounce”:

Dean Baker is, of course, right: this is not a boom, and comparisons to the 1990s are insane. Still, growth has clearly picked up, and the public seems to be noticing. So what can we say about the Obama non-boom?

 

I’d argue that much of what we’re seeing reflects the tapering off of austerity. The US has never had a proclaimed austerity plan, UK style, but we’ve had a lot of the thing itself, especially from cutbacks in state and local spending. Spending hasn’t rebounded yet, but at least it has stopped shrinking:

 

[Krugman then inserts a FRED graph showing the year/year level change in real government consumption and investment spending.–RPM]

 

And it’s important to realize that, despite all the rhetoric about how Obamacare/antibusiness rhetoric/Kenyan Islamic atheism is destroying business, the private sector has actually been relatively strong under Obama. Here’s employment:

 

[Krugman then inserts a FRED graph showing the levels of Total nonfarm employment minus total government employment.–RPM]

 

Since Obama took office, we’ve gained 6.7 million private-sector jobs, compared with just 3.1 million at the same point under Bush. But under Bush we’d added 1.2 million public sector jobs, while under Obama we’ve cut 600,000. The point is that relatively good private sector performance has been masked by public-sector cutbacks; this is the opposite of what you usually hear, but that’s no surprise.

First of all, let’s remind ourselves of just how awful Krugman said the U.S. austerity (under the sequester) was going to be. In a Feb. 2013 op ed Krugman called the sequester “one of the worst policy ideas in our nation’s history.” He then went on to quantify its impact:

The good news is that compared with our last two self-inflicted crises, the sequester is relatively small potatoes. A failure to raise the debt ceiling would have threatened chaos in world financial markets; failure to reach a deal on the so-called fiscal cliff would have led to so much sudden austerity that we might well have plunged back into recession. The sequester, by contrast, will probably cost “only” around 700,000 jobs.

So in case you think I’m being unfair by putting “Orwell” in the title of this blog post, now you know.

But let’s move on to the empirical content of Krugman’s latest post. The great thing about him using FRED charts is that I can use Krugman’s own arguments against him. For starters, in the following chart, I’ve merely taken Krugman’s separate graphs and combined them into one:

Chg in Fed Expend vs Level of Employment

 

To repeat, the above chart are the exact same data series (and choice of units) that Krugman used, but I’ve put them on the same graph so we can line them up chronologically.

Krugman’s wants to use these data to argue that the recent growth in private-sector employment (the red line above) can be attributed to the end of U.S. “austerity.” Specifically, the blue line recently rose back up above the black horizontal line, showing that finally U.S. government consumption and investment expenditures have stopped falling. (The units of the blue line are “change from year ago,” in absolute terms, not percentages.)

OK, but let’s step back and look at the very same graph starting in 2010. That’s when the red line bottomed out and started rising, meaning that total private sector employment began recovering. Do you see any major disruption in that upward growth in the red line? I sure don’t.

Indeed, if you had no prior economic theory, and just wanted to see if there were some relationship between the red and blue lines, you would look at the above graph and think that large increases in government spending destroyed private sector jobs.

Let’s make things easier to see by changing the units on the job line. Instead of showing levels of private sector employment (which Krugman had displayed), let’s make it changes in the level of private sector employment over the prior 12 months:

Chg in Gov Spending vs Chg in Private Employment

Just to review: The blue line in the above chart (left axis) shows the yearly change in government consumption and investment expenditures (which doesn’t include transfer payments). So up through early 2010, this number was positive, meaning that the level of government expenditures was higher compared to a year prior. But once the blue line dips below the black line, it means that year/year government spending is down. In mid-2011, the blue line turns around. This doesn’t show a year/year increase in government spending, but rather shows that the downward spiral was halted. Only recently, as the blue line pokes above the black line, has the year/year change in government spending been positive.

In contrast, the red line (right axis) shows the year/year change in total (nonfarm) private sector employment. (Specifically, it’s the change in total nonfarm employment minus the change in government employment.) The private sector was shedding jobs on net–looking at yearly changes–up through mid-2010, at which point the 12-month changes become positive. (Be careful: Note that FRED didn’t make the 0-line the same on the left and right axis, so the dark black line isn’t special if you’re looking at the red line.)

Now the way Krugman is handling the above data is to focus on the red line’s uptick from early 2014 to the present. You see how the red line reduced the space between it and the “2,740” line in the upper-right portion of my chart? Because that slight uptick in the red line coincides with the increase in the blue line, Krugman concludes that the end of U.S. austerity is responsible for the good labor market news.

But hold on a second. Step back and look at the entire chart. There was a bigger uptick in the red line (i.e. private sector employment) in 2013, precisely when the blue line bounced down again because of the sequester package. Remember, in early 2013 Krugman was calling that impending drop in the blue line one of “the worst policy ideas in our nation’s history” and said it would cost 700,000 jobs. Even if you think he meant “relative to the counterfactual baseline,” do you see any kind of 700,000 job change in 2013? No. If anything–to repeat myself–the red line drifted up a bit higher for most of 2013 than it had been during 2012.

Then, the red line drifted down again as the blue line shot up again in late 2013. Furthermore, the highest plateau of the red line–showing the largest year/year change in private-sector employment–occurred in early 2012, when government spending was still falling (i.e. the blue line was below the black line) and even its acceleration had stalled (the blue line itself was flat in early 2012, after having risen sharply in the second half of 2011).

To be clear, I am not saying we should get cross-eyed studying these types of charts. If you have a strongly held economic theory, you can always concoct a story ex post to “explain” the data.

Rather, what I’m saying is that on the very terms Krugman himself chose to show the virtues of government spending, I can make a much more compelling argument that cutting government spending won’t hurt private sector hiring, and if anything will stimulate it.

 

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Wed, 12/31/2014 - 20:35 | 5610892 gwar5
gwar5's picture

Krugman's Nobel Prize had to be affirmative action for retards.

Wed, 12/31/2014 - 20:52 | 5610942 KnuckleDragger-X
KnuckleDragger-X's picture

Krugman: Once upon a time in a land far far away....

Wed, 12/31/2014 - 21:29 | 5611023 Harbanger
Harbanger's picture

He's not longing for the past, he's thinking, somewhere over the rainbow..

Wed, 12/31/2014 - 21:03 | 5610967 Ironmaan
Ironmaan's picture

Same retards gave Obama a peace prize.

Wed, 12/31/2014 - 21:14 | 5610994 Moe Hamhead
Moe Hamhead's picture

He got fries with it!

Wed, 12/31/2014 - 21:32 | 5611033 SAT 800
SAT 800's picture

Krugman can kiss my ass; Thank God I'm not innocent of all economic facts, so as to actually pay any attention to this .gov drone.

Thu, 01/01/2015 - 00:47 | 5611434 Greenskeeper_Carl
Greenskeeper_Carl's picture

Hahaha I think we have a late entry for top 10 comments of the year

Thu, 01/01/2015 - 01:50 | 5611525 tplink
tplink's picture

my best friend's half-sister makes $77 every hour on the computer . She has been laid off for 5 months but last month her pay check was $14292 just working on the computer for a few hours. read... www.works3.com

Wed, 12/31/2014 - 20:40 | 5610895 Future Jim
Future Jim's picture

there has been no recovery. In fact, it is worse than no recovery because although the number of new jobs is just keeping up with new population growth, thus locking us into the lower labor participation rate since it bottomed out in 2009, the ratio of good jobs to bad jobs has gotten worse, so that is not only not a recovery but is a net loss.

When I prove this to die hard progressives, they then say that Obama knows what to do but that Republicans are holding him back. They also say that a dollar spent by government helps the economy more than a dollar spent by the private sector.

Wed, 12/31/2014 - 20:44 | 5610922 Future Jim
Future Jim's picture

Krugman is an American Progressive.

 


American Progressive Manifesto

It is self-evident that government has the power (or should have the power) to implement any good idea, and that when we are all on the same page, everyone benefits, but now, let’s think for ourselves, and explain why.

Effective government is necessary for the health and prosperity of everyone today and for future generations. A threat to government is thus a threat to the health and prosperity of everyone.

Government has some powers delegated from the power of individuals, such as the power to borrow and spend, and government also has unique powers that may not be legitimately exercised by individuals independently of government, such as the power to kill or to tax other individuals. Government thus has these unique powers, not because they were delegated by individuals who do not possess such powers, but because those individuals agreed to be bound by government.

We know that 97% of individuals, if given the  choice, would agree to be bound by government rather than live without the benefits of government. Every individual instinctively knows that his life without government would be short, nasty, and brutish.

Although we would like to grant the 3% the right to live without government, many of those reactionaries would not get vaccinated, and many more would possess weapons. Therefore, it is self-evident that the health and prosperity of the other 97% dictate that all 100% of individuals must agree to be bound by government.

Everyone must be bound by government at all times, even when they disagree – especially when they disagree. Otherwise, Rule of Law would devolve into chaos and threaten the health and prosperity of everyone. No one can be above the law.

While we Progressives do not always agree with each other, we always accept the authority of government because effective government requires that 100% accept the authority of government. Anyone who does not accept the authority of government is thus a threat to the health and prosperity of everyone.

Some governments have committed atrocities in the past, but we will not let our government commit atrocities. However, individuals and businesses will always allow themselves to be ruled, and thus, if Progressives do not rule, then a worse faction would rule. Any other faction would be less effective and may even commit atrocities, and thus a threat to our rule is a threat to the health and prosperity of everyone. In other words, we are the good guys, in the vernacular, as it were.

Given that we are the good guys, and that we know we are right, then if we think for ourselves, we can deduce many other self-evident corollaries, such as the fact that it is OK to lie to maintain our rule. Such action is not only OK, but it is indeed noble. It is the Noble Lie advocated by Plato.

For all these reasons, it is thus legitimate for progressives to take any action up to and including killing any number smaller than a majority in order to maintain our rule. Obviously, if we had to kill a majority to maintain our rule, then our rule would not have been legitimate. We are people of principle after all.

More important than maintaining our rule is defending government itself. Government would be justified in killing a majority rather than letting anarchy prevail. Then, at least, the surviving minority would have the blessings of government.

More important than maintaining government and defending our rule is defending the future. For example, defending the planet is the most critical element of defending the future, and thus we would be justified in killing all but a tiny remnant of individuals if that were necessary to stop a threat to the planet, such as Global Warming, but of course, if it were possible to save the planet by merely sterilizing (instead of killing) all but a small remnant of humanity, then we would do that instead.

Another threat to the future is bad genes. In order to improve the human gene pool, it could be necessary to kill and/or sterilize all but small remnant of humanity. It should be self-evident that any such eugenics program should begin with those reactionaries who are least progressive.

By now it should be clear that only by our rule can everyone experience the full blessings of government; and though we mean to rule with benevolence, make no mistake, we mean to rule.

Wed, 12/31/2014 - 20:59 | 5610955 surf0766
surf0766's picture

It is time to start calling them what they are

American Progressive = Communist supporters

Wed, 12/31/2014 - 20:58 | 5610956 surf0766
surf0766's picture

It is time to start calling them what they are

American Progressive = Communist supporters

Wed, 12/31/2014 - 21:13 | 5610991 Harbanger
Harbanger's picture

"It was, in a way, strange for me to be part of the Reagan Administration.  I was then and still am an unabashed defender of the welfare state, which I regard as the most decent social arrangement yet devised." -Krugman

Progressives like Krugman have been entrenched in our system for a long time.  The US is being taken over a cliff brought on by progressives.  Central bankers are progressives, Yellen is a progressive, Bernanke, Greenspan, Obama they all are.  The Federal reserve itself is a progressive creation.  People blame Obama personally but he's just a figurehead. 

Thu, 01/01/2015 - 05:14 | 5611747 ebworthen
ebworthen's picture

Paul Krugman, the PhD bearded potato.

Full off starch and no Vitamin C.

Break a window, and a country!

Wed, 12/31/2014 - 20:51 | 5610939 Counterpunch
Counterpunch's picture

Krugman believes that if I spend a dollar, it has less of a positive effect on what he calls "the economy"  [by which he means the system of frac reserve fiat debt creation] than when the government takes it, and gives it to an employee, or spends it on bombs on the other side of the globe.

As that is his central, statist, starting point, he simply ignores any evidence to the contrary.

Clearly he is not a stupid man, the question is merely is he a knowing shill of private central banking, or has academia brainwashed him and placed him in a 'cognitive bubble' in which his premises not only aren't examined, but may actually escape his awareness.

 

He mixes his pseudoscience with Potemkin liberal politics, and serves it up to an audience eager to believe that all opponents of government power and deficit spending are not merely wrong, but are the only thing standing in the way of their view of utopia - one in which the laws of thermodynamics do not apply, where debt can grow faster than currency forever, and where freedom and liberty and the rule of law are just words which may be "interpreted" to accomodate any state-enforced social or political inclination at all.

 

 

 

Wed, 12/31/2014 - 20:55 | 5610948 Future Jim
Future Jim's picture

I think Krugman looks at it this way:

"Given that we are the good guys, and that we know we are right, then if we think for ourselves, we can deduce many other self-evident corollaries, such as the fact that it is OK to lie to maintain our rule. Such action is not only OK, but it is indeed noble. It is the Noble Lie advocated by Plato."

Thu, 01/01/2015 - 12:48 | 5612293 Fun Facts
Fun Facts's picture

Protocol #22 Give bad advice to governments and everyone else

Sincerely, Paul Krugman

Wed, 12/31/2014 - 21:45 | 5611070 ombudsmanrules
ombudsmanrules's picture

Excellent comment.  

He's a very smart guy but completely deluded.  I doubt central bankers are lining his pockets - not directly anyway.
His fatal weakness is ego; he's utterly convinced of his intellectual superiority and blindly refuses to accept the very tenets of his life's work may in fact be chaotic and inherently unpredictable - or outright wrong.  This is understandable coming from academia where a figure like him is revered, almost religiously.  

The article is a great example of how simplistic, backward looking analysis with fuzzy starting positions can always be used to 'prove' just about anything.   As a scientist I say it's complete crap.  My bet is economics will never be an absolute because the laws of chaos will always jump in, especially when a system is pushed too far away from an approximately steady state.     The west's fiscal and monetary position is now further away from steady state that it has ever been in history 

Wed, 12/31/2014 - 22:26 | 5611171 Duc888
Duc888's picture

Krugman and his ilk do not "roll" or interact with the average American.  He lives a drive by lifestyle which just relegates the average US person to being a statistic.

 

So from his POV he is correct.

Wed, 12/31/2014 - 20:53 | 5610943 max2205
max2205's picture

Krug is a paid tool

Wed, 12/31/2014 - 21:00 | 5610957 MrButtoMcFarty
MrButtoMcFarty's picture

"Krugman is an American Progressive."

And as such should be drawn and quartered in Times Square.

Wed, 12/31/2014 - 21:54 | 5611101 Cynthia
Cynthia's picture

Krugman is not part of the left. He is a soulless mouthpiece of the empire's rape, murder, torture, and pillage of the world. He works at a propaganda rag and sells out humanity with every word. He is a despicable excuse of a human being and should be ignored by any serious thinker.

Thu, 01/01/2015 - 02:38 | 5611603 Nexus789
Nexus789's picture

Government is just a ‘multi headed’  asset through which the various vested interests - corporations, bankers, etc, get their policies in place and secure resources to attack other interests within the US or external to the US. Plenty of budding Fascists to observe - Neocons and the Project for the New American Century, but not a commie in sight.

Thu, 01/01/2015 - 15:08 | 5612616 Otto Zitte
Otto Zitte's picture

You just described the left, except you used the pronoun He instead of They. They aren't left anyway, they are the scum seeking to enslave everyone else by any means possible. Leftist rhetoric is just a weapon that works well on emos.

Wed, 12/31/2014 - 21:11 | 5610982 Fred Hayek
Fred Hayek's picture

This would be the same Herr Krugman who released a book LAST YEAR with the title "End This Depression Now!"? That's the Krugman who is calling this a "recovery"?

Wed, 12/31/2014 - 21:19 | 5611004 Falling Down
Falling Down's picture

Working in manufacturing as I do, this article hits home.

The guy's right, nothing in the real private sector in the U.S. started to move until the summer of 2010. Almost everything else was 'stimulated' by the Porkulus Package, a massive tool used by the statists/jerkoff central bankers to spread fiat dollars around to cronies.

Anyone who supports this charade is naive and/or is dependent upon the status-quo continuing on, ad infinitum. 

At least a lot of who see this charade for what it is will be prepared for it, when the shit storm hits.

Wed, 12/31/2014 - 21:48 | 5611079 Soul Glow
Soul Glow's picture

I wish Dr Paul Krugman still wrote here :(

Wed, 12/31/2014 - 21:59 | 5611107 Bumbu Sauce
Bumbu Sauce's picture

Reported to fishy.gov and attackwatch!

Go Truth Teams!

Wed, 12/31/2014 - 21:58 | 5611111 will ling
will ling's picture

piece of advice: don't waste anymore time on this reprobate.

Wed, 12/31/2014 - 23:04 | 5611247 kappal_toba_dhu...
kappal_toba_dhurr_ne_thook's picture

It is a shame that USA media is now no better than that of  China when it comes to reliability.  It s all propaganda and gupsup rubbish.  When I read Bloomberg and WSJ  I really laugh (and that is why I read them).  But the ecoomic statistics, the finger pointing at other nations, etc.  makes it all one big joke.  No one can take them  seriously any more.  

Wed, 12/31/2014 - 23:05 | 5611248 kappal_toba_dhu...
kappal_toba_dhurr_ne_thook's picture

It is a shame that USA media is now no better than that of  China when it comes to reliability.  It s all propaganda and gupsup rubbish.  When I read Bloomberg and WSJ  I really laugh (and that is why I read them).  But the ecoomic statistics, the finger pointing at other nations, etc.  makes it all one big joke.  No one can take them  seriously any more.  

Wed, 12/31/2014 - 23:44 | 5611338 f16hoser
f16hoser's picture

Krugman is the "Villiage Idiot!"

Prove me wrong...

Thu, 01/01/2015 - 13:32 | 5612399 HardlyZero
HardlyZero's picture

K-man puts the 'dismal' into economic science.

Thu, 01/01/2015 - 00:31 | 5611413 Luckhasit
Luckhasit's picture

Less government spending opens the door for private business maybe? Because if the gov needs a job done, they are going to pay someone to do it. Perhaps trim those fucking agencies, starting with FEMA, DHS, TSA, ATF (we can go on and on), that'll cut down on government expenditure alright. 

Let other agencies do the job they were created for *cough* DOJ *cough*

Thu, 01/01/2015 - 05:19 | 5611752 ebworthen
ebworthen's picture

Sure, because a corporation deemed an "individual" by the Supine Kangaroo Court will get it done.

It is not about Government versus Private industry, but Humans versus Sociopaths/Psychopaths.

Sun, 01/04/2015 - 07:00 | 5620235 Luckhasit
Luckhasit's picture

Sure is.

Thu, 01/01/2015 - 00:58 | 5611449 bigfire
bigfire's picture

Oceania has always been at war with Euroasia.

Thu, 01/01/2015 - 01:13 | 5611470 stant
stant's picture

I hope when they lay him in the ground the put 2 trillion dalla platinum coins on his eyes so he doesn't rise from the dead.and attack aliens from another planet

Thu, 01/01/2015 - 01:16 | 5611471 stant
stant's picture

I hope when they lay him in the ground they put 2 trillion dalla platinum coins on his eyes so he doesn't rise from the dead.and attack aliens from another planet

Thu, 01/01/2015 - 05:17 | 5611750 ebworthen
ebworthen's picture

Krugman is the poster boy of failed ideology, of lies heaped upon lies upon a strachy mashed potato pile of bullshit masquerading as a vegetable made of excrement upon a plate of falsehoods.

If Satan himself could conjure such an illusion he would conquer time and eternity.

This one is meant to make us suffer in the puff of time we inhabit.

Thu, 01/01/2015 - 08:08 | 5611880 Raoul_Luke
Raoul_Luke's picture

It's really quite simple.  If there had been no sequester the red line would have been 700,000 jobs higher.  See, he can never be proven wrong...

Thu, 01/01/2015 - 09:46 | 5611991 Ulludapattha
Ulludapattha's picture

Government spending of the right kind: infrastructure development, healthcare (not Obamacare, which is concocted to appease the insurance induustry by giving them a blank check),. Not starting wars all over the globe, multiplying bases all over (they sent 8000 troops to Liberia - to fight ebola? or to expand bases). In other words catering to all the needs and demands of the war companies is weakening the USAS, not strengthening it.

Thu, 01/01/2015 - 14:17 | 5611997 damicol
damicol's picture

Anyone wasting time attempting to prove  the fucking krug-cunt wrong is wasting valuable life..

 

 If i could shoot the krug-cunt right now, I would not hesitate for one second in blowing that foul piece of shite to smithereens

Someone kill the cunt please

 

Thu, 01/01/2015 - 15:57 | 5612771 Caleb Abell
Caleb Abell's picture

We should be fair and at least give Krugman credit for pointing out the millions of new jobs the recovery has created.  All of those engineers and manufacturing workers laid off after 2008 can now luxuriate in the comfort of their 15 hour a week jobs at places like McDonalds.

Thu, 01/01/2015 - 23:34 | 5613831 Otto Zitte
Otto Zitte's picture

What Is Money? by Frederic Bastiat, audio

Do NOT follow this link or you will be banned from the site!