George Will Smacks Down Paul Krugman With Simple Reaganomics
George Will on Sunday once again proved how little Nobel laureate Paul Krugman actually knows about economics.
As the Roundtable segment of ABC’s “This Week” approached its conclusion, host Christiane Amanpour referred to French Finance Minister Christine Lagarde’s claim earlier in the program that her country’s economy is already growing and doesn’t need any further stimulus spending.
Krugman, who is always interested in government laying out more dollars it doesn’t have, bashed Lagarde’s view saying, “I think she's got a fantasy, which is a popular European fantasy, which bears no relationship to what's actually happening.”
With the ball nicely teed up, Will smacked a monster drive down the middle of the fairway that would make Tiger Woods proud (video follows with transcript and commentary):
CHRISTIANE AMANPOUR, HOST: Well, let's just talk about the economy right now, because you heard what Christine Lagarde said, very, very tough on austerity, saying that her numbers show that it's actually working. Why should there be more stimulus? I just want to play what Alan Greenspan said about this also this week, and then we'll discuss it.
(BEGIN VIDEO CLIP)
GREENSPAN: I know everyone says, let's wait for a couple of years, keep the stimulus going, and then we'll solve the problem. I think that's a very risky strategy. I don't -- I don't deny that -- if I knew that was -- you could do that, that is obviously the best strategy. I'm not sure the markets are going to allow them to do that.
(END VIDEO CLIP)
PAUL KRUGMAN, NEW YORK TIMES: Let me just -- I don't know quite how to say this. Christine Lagarde said, "Let's not talk about theory. Let's talk about the numbers." My numbers are not the same as hers. The European Commission numbers say that the unemployment rate in France is going up, not down. So I don't know where she's getting that from. And where she says people are worried about the deficit, the people who have a real stake in worrying about the deficit are investors, bond investors. Interest rates are at near record lows in all of the G-7 countries. I think she's got a fantasy, which is a popular European fantasy, which bears no relationship to what's actually happening.
GEORGE WILL: For 20 months now, we've had the most rapid expansion of federal discretionary spending in our history, not just in nominal dollars, but relative to the size of the economy. In that 20 months, private-sector non-farm employment has declined by 1 million jobs. We have a contrast. In 1983, when the Reagan tax cuts kicked in, we had a booming job creation which, relative to the size of this economy, would translate to 7 million new jobs.
KRUGMAN: All of this is -- that boom in federal spending never happened. Once you take out the stuff -- the special emergency spending, it just never happened. And, you know, Reagan had the help of a huge cut in interest rates.
The ignorance and/or dishonesty on display here was astonishing. To claim there has been no boom in federal spending in the past two years requires what Hillary Clinton would call a willing suspension of disbelief.
George W. Bush's fiscal ’09 budget originally called for outlays of $3.1 trillion. This indeed ballooned to $3.52 trillion.
However, if such an increase was just “special emergency spending” as Krugman claimed, we should have seen a decrease in expenditures after the financial crisis ended.
Of course, nothing could be further from the truth for FY ’10 spending rose to $3.72 trillion, and FY ’11 is projected to be $3.83 trillion.
As such, Krugman is either horribly informed as one of the Left’s most respected economists or he’s a liar.
As for Reagan having “the help of a huge cut in interest rates,” Krugman just moments before said, “Interest rates are at near record lows in all of the G-7 countries.”
Indeed. The current federal funds rate is basically zero, and is therefore far lower than when Reagan was president making it quite fascinating to see a Nobel Prize winner in economics contradict himself in roughly sixty seconds.
Maybe most importantly, expounding on Will’s point that clearly Krugman will never agree with, a 20 percent increase in federal spending combined with the lowest interest rates in American history has yet to bring down the unemployment rate in this country.
If that is not an indictment of Obamanomics, I don’t know what is.
*****Update: After getting smacked down by Will, Krugman decided to reiterate this nonsense in his column Monday.