Three Times Interventionists Moved the Goalposts, Part 1Robert Murphy • Wednesday July 12, 2017 11:40 AM PDT •
Part 1 of 3
One of the most frustrating things in debate is when you decisively win the initial point of contention, only to have your opponent “move the goalpost” to a different claim. To be sure, this is a human failing, not unique to any particular political perspective. I’m sure I myself do this too. But I have certainly noticed it when people use it against me, and so in this series of posts I’ll review three times that interventionists moved the goal posts in a political debate.
Episode #1: Paul Krugman on the 2013 Budget Sequester
As part of the bipartisan compromise to raise the debt ceiling, a combination of tax hikes and budget cuts was activated in February 2013 when certain conditions hadn’t been met. At the time, New York Times columnist Paul Krugman was aghast, calling the automatic measure a “fiscal doomsday machine” that would cost 700,000 jobs.
By April 2013, the economy didn’t seem to be in great shape. Krugman was confident that the budget cuts were taking their toll, even though the Federal Reserve had launched QE3 (in September 2012). Some economists—calling themselves “market monetarists”—had argued that easier money could offset the effects of the Republican austerity measures. But Krugman disagreed, writing in April 2013:
[A]s Mike Konczal points out, we are in effect getting a test of the market monetarist view right now, with the Fed having adopted more expansionary policies even as fiscal policy tightens.
And the results aren’t looking good for the monetarists: despite the Fed’s fairly dramatic changes in both policy and policy announcements, austerity seems to be taking its toll. I would add that the UK experience provides a similar lesson. Mervyn King advocated fiscal consolidation – I’d say that he shares equal responsibility with Cameron/Osborne for Britain’s wrong turn — but more or less promised (pdf) that he would and could offset any adverse effects on growth with monetary policy. He didn’t and couldn’t. [Bold added.]
So as of April 2013, the economy wasn’t doing so hot, and Krugman was happy to endorse Konczal’s idea that the U.S. experience would be a test of the relative power of monetary policy versus fiscal policy.
Well, as it turned out, the year 2013 was economically pretty good, relatively speaking. Several market monetarists, remembering that Krugman himself had said the fiscal tightening would be a test, started running victory laps. So did Krugman admit he had been wrong, and maybe the (modest) cutbacks in federal spending weren’t so disastrous as he had warned?
Nope. Here’s what Krugman wrote in January 2014:
One way to look at the US economy in 2013 is that it was, in effect, trying to begin a strong recovery, but was held back by terrible federal fiscal policy. Housing was making a comeback, state and local austerity was, if not going into reverse, at least not getting more intense, household spending was starting to revive as debt levels came down. But the feds were raising the payroll tax, slashing spending via the sequester, and more.
Incidentally, these other factors are why I don’t take seriously the claims of market monetarists that the failure of growth to collapse in 2013 somehow showed that fiscal policy doesn’t matter. US austerity, although a really bad thing, wasn’t nearly as intense as what happened in southern Europe; it was small enough that it could be, and I’d argue was, more or less offset by other stuff over the course of a single year. [Bold added.]
Does everyone see how Krugman moved the goalposts? Back in April 2013, when he thought he would win the argument, Krugman was happy to say the U.S. economy was providing a good test of his claim that budget cutting wasn’t going to be offset by the Fed. Then when the test he himself put forward blew up in his face, Krugman acted as if the market monetarists were the ones who had invented such a silly criterion—of course there are all sorts of other complicating factors, making it impossible to glean much from a single episode like the U.S. experience in 2013.
(Incidentally, not only did Krugman never admit any problems due to his warnings over the problems of Republican austerity, he eventually turned vice into a virtue: By early 2016 Krugman was citing the “Obama Boom” as proof that the Republicans had been refuted for warning about the job-killing effects of ObamaCare and the 2013 tax hikes.)
Thus we see a classic case of Paul Krugman moving the goalpost in the debate over fiscal “austerity.” In my next post I’ll document how interventionists moved the goalposts in the climate change debate.
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For more on economic theory and public policy, see Choice: Competition, Enterprise, and Human Action, by Robert P. Murphy.