Posted by: Rick | Friday, April 16, 2010

Paul Krugman Vs. Me: I Win!

Don’t get me wrong: Paul Krugman rules. I steal most of what I know about economics from his columns.  But as I’ve noted before, he is, by nature, a Dr. Doom.  And here he’s forced to capitulate — once again! — to my mindless optimism of last year:

If you want to say that the advocates of nationalization were excessively pessimistic about the prospects for a light-touch bank strategy, fine.  But caricaturing their position, making it sound far more extreme than it was, is definitely not OK.

Whatever.  But it’s undoubtedly true that a rank amateur like me proved to be a better economic prognosticator than a Nobel Prize winner.  Here’s what I wrote last April:

Krugman’s problem with the Obama recovery plan seems to have five main components:

1) Inelegance: The plan is surely very messy looking.  It has lots of moving parts — TARP, TALF, Bernanke, the FDIC, the stimulus, ad infinitum — and most of them have to work.  Krugman admits he’s not a detail man.  Swedish nationalization would be much prettier.

2) Residual Obama Animus: Speaking as a fervent Hillary Clinton supporter, trust me when I say that last year, Paul Krugman was in the same big foxhole as the rest of us Clinonites.  He didn’t like Obama’s “post-partisan” approach any more than we did, and he’s still not ready to cut him much slack.

3) Fatal Toxicity: Krugman seems to think the “troubled assets” are essentially worthless.  Great polemicist that he is — and I mean that as a compliment — you can almost feel the scorn dripping from his keyboard as he types phrases like toxic sludge.  I think he’s unduly pessimistic.

4) Personality and World View: Speaking of pessimism, take a look at the Newsweek profile.  While containing its share of “Nutty Professor” tropes, it also paints a picture of a man extemely reluctant to be wrong on the downside.

5) Justice: Krugman is very angry that the people who caused this crisis aren’t getting a well-deserved and total beatdown immediately.  What’s worse, their victims are footing the bill for their misconduct.  My response would be that in order to mitigate the people’s suffering, we have to fix the credit markets now.  And it’s not as if Krugman-style nationalization would be cheap.

I don’t see Geithner as quite the Wall Street stooge that Krugman sees.  I think we’re going to get out of this mess in one (smaller) piece, thanks largely to the Fed.  But who knows?

I’ll get back to you in a year.

My point: Economics seems to be something of an inexact science.  And — as the great Paul Krugman is constantly pointing out — the media’s obsession with budget deficits is extremely short-sighted.

Don’t get me started on the teabaggers worrying about 2080!



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