Krugman's Historical Three Card Monte

Today's Krugman op-ed blog is a doozy.  See if you can spot the intellectual and historical sleight of hand here:

No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis.

But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.

Can you spot it?  He's quite correct that Hoover tried to balance the budget in 1932, and he's also arguably correct that doing so was harmful.  But notice what he doesn't actually say and only implies:  Hoover tried to balance the budget by cutting spending.  He did NOT.  In fact, he tried to balance the budget by signing the Revenue Act of 1932, which was a large tax increase, increasing the top marginal rate from the mid-20s to 63 percent. The effects of that tax increase on the deepening of the Great Depression can certainly be debated, but there's no doubt that it made matters worse to some degree or another, and that its relevance for cutting spending right now is questionable. 

What is particularly galling about Krugman's blog post op-ed (those are just the first two paragraphs) is that he both leads the reader to believe Hoover slashed spending (in fact he raised it) and also refuses to engage the question of whether the mistake Hoover made was "balancing the budget" per se, or raising taxes.  Again, one could have a good debate about the effects of the tax increase, but first Krugman would have to admit that it was in fact what Hoover did!  (UPDATE:  I should add that it's probably obvious why Krugman and other liberals would not want to admit that Hoover raised taxes to balance the budget - not only does it provide more evidence that Hoover was no friend of laissez-faire, it also puts them in the position of frequently taking the same policy position as Hoover did at the depths of the depression.  Talk about some history Krugman would certainly like to sweep under the rug...) Notice further how "Clintonian" this is:  he never lied here, just led the reader to believe something through implication that was not true.

In my last post, I wondered whether Krugman really read what his opponents have to say, leaving open the question whether he was ignorant or malicious.  Today's blog entry leaves much less doubt:  I'm doubtful he doesn't know the history and I'm far more certain that he very intentionally engaged in this sort of sleight of hand to take the important question of the role of tax increases off the table.

Nobel Prize winning scholars should behave better than that.  So should the Nobel Prize committee.

Comments

[Bill Stepp]

Someone should start a blog devoted just to correcting the commentary of Krugman and Brad DeLong. Maybe there are others like them too. Call it againsthackonomics.com or something like that.

[Greg Ransom]

Krugman is a deeply dishonest man.

Once you've allowed yourself to openly acknowledge the central truth embedded in any Krugman "anaylis", the whole thing becomes a bit less "galling", you can then deal with the truth and not a mirage.

For the truth of the matter is that when you're engaging Krugman your engaging a pathological prevaricator, not a scientist equally struggling for the truth in the "Republic of Science".

Krugman simply an honest citizen in the Republic of Science. He's the Ponzi schemer asking folks for his trust. He's the shoplifter in your store talking nice and trying to walk away with your stuff.

He's a pathogen in the body of economic science, and the sooner people recognize it and acknowledge it the better for everyone.

"What is particularly galling about Krugman's blog post (those are just the first two paragraphs) is that he both leads the reader to believe Hoover slashed spending (in fact he raised it) and also refuses to engage the question of whether the mistake Hoover made was "balancing the budget" per se, or raising taxes."

[Mario Rizzo]

The basic problem is that the aggregative frame of mind totally misconstrues the current problem. There are four aspects: (1) the set of underlying causes along with, perhaps, a catalyst; (2) the aggregative manifestations of rising unemployment, reluctance of banks and others to lend, problems of the financial sector, etc.; (3)the relative or sectoral phenomena, some of which are due to exogenous shocks to specific industries that have been accelerated in the current climate and some of which are due to unsustainable allocations of capital brought about by poor policies; and (4) the issue of whether particular forms of stimulus will improve or worsen matters.

Krugman has no time for these niggling details. The great danger, it seems to me, is that the stimulus policies will prevent the reallocation of resources from the areas into which they have been misdirected into the areas consistent with sustainable consumer-investor preferences.

The politically operative principle of stimulus where people of hurting is a perverse principle of resource allocation. It prevents needed adjustments and leads ultimately to more "hurt."

BTW, I don't know if it is better or worse but the article to which Steve refers is not Krugman's blog post but his print column which is also online.

[Hans Palmstierna]

Paul Krugman seems more and more of a joke. A rather cruel joke on everyone ever awarded the nobel prize.

[simone]

Krugman is not a joke, but a Nobel prize winner who is morally bankrupt. It saddens me greatly that he chooses ideology and spite over the truth. He owes the american people an apology.

[Bill Stepp]

Btw, Brad DeLong wrote in his blog the last day or so that Bush adhered to free market principles!

[Josh Hendrickson]

"No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession."

Except for FDR in 1937!!

[Daniel Klein]

Krugman and DeLong are deeply dishonest.

[Bob Murphy]

As usual, Steve, I am in total agreement with the spirit of your post. I just have one niggle. (Mario, are we going to ironically adopt that proudly now as the Austrian n-word?)

Steve wrote:
"I'm doubtful he doesn't know the history and I'm far more certain that he very intentionally engaged in this sort of sleight of hand to take the important question of the role of tax increases off the table."

I personally would reverse these two. I.e. to me, it is inconceivable that Krugman thinks Hoover slashed spending and held the line on tax rates.

On the other hand, I do leave open the possibility that Krugman's model of the economy is so bereft of supply-side considerations that to him, all that really matters is the net deficit (positive or negative). So if the government levies another trillion dollars in taxes, so long as it raises spending by a trillion, Krugman might truly believe that to a first approximation, this will have no effect on the macroeconomy.

And then, if he sincerely believes that, it might not be sheer dishonesty for him to say modern governors are acting like Hoover by slashing spending, since to Krugman, it's just the net stimulus that matters.

Just to be clear, I agree that Krugman is very dishonest, but I'm just niggling with your ranking of certainty in the two points above.

[Steve Horwitz]

You may well be right Bob, but I'm so convinced he is without shame, that, contrary to my normal assumption of good faith, I'm willing to believe he's being intentionally deceptive rather than just invoking a bad economic theory.

[Jock Phillips]

Was my earlier post removed or was there some sort of technical glitch?

[Steve Horwitz]

Probably a glitch. I haven't removed any comments.

[Jock Phillips]

Thank you very much...definitely an end user error on my part. My apologies.

[Pravin]

Heres my question: We all know that the Krugmans and Samuelsons of the world are going to dominate the govt's thinking.Bubbles will be created,capital will continue to be force-misallocated.We have to live with that.But in doing that,can we not profit from their behaviour?

Austrians should all turn practitioners like Jim Rogers or Marc Faber and make a lot of money.That is the best way for those of us who are aware that we are the minority.

Shouting that the emperor is naked is of use to the deaf .

[Mike S.]

What beef I have with Austrians is that I haven't found one yet that will actually show me numbers. Austrians make a lot of claims, but not numerical ones. This increases ambiguity sufficiently to keep you off the hook on some questions.