April 19, 2004

THE WASHINGTON GENERALS ARE JUST IN THE DOWN CYCLE:

A Crash Course in Dubyanomics (Peter Robinson, January 6, 2004, Uncommon Knowledge)

Peter Robinson: Welcome to Uncommon Knowledge, I'm Peter Robinson. Our show today: the economic policies of George W. Bush. The decades of the 1980s and 1990s would seem to offer two quite different models for promoting economic growth. The 1980s under Ronald Reagan? Deep tax cuts and mounting federal deficits. The 1990s under Bill Clinton? Tax increases and growing federal surpluses. Yet the results in both decades were similar: economic boom. George W. Bush has clearly been following the Reagan model, cutting taxes even as federal deficits mount to now record levels. But has the President drawn the correct lessons from our recent economic history? Are his policies genuinely promoting long-term, sustainable, economic growth or endangering it instead?

Joining us today, two guests. Robert Barro is an economist at Harvard University, a senior fellow at the Hoover Institution and a columnist for Businessweek magazine. Paul Krugman is an economist at Princeton University, a columnist for the New York Times and the author of a recent book highly critical of George W. Bush entitled The Great Unraveling.

Title: A Crash Course in Dubyanomics

Peter Robinson: Nobel Prize-winning economist George Akerlof on the fiscal policies of George W. Bush, "What we have here is a form of looting." Robert?

Robert Barro: I think the tax policy's been very good. The economy's doing great so I don't agree with that.

Peter Robinson: Paul?

Paul Krugman: He's exactly right. It's a form of looting.

Peter Robinson: A form of looting. All right. Let's set the fiscal policies of George W. Bush in the context of recent, economic history, Eighties and Nineties. Reaganomics. Ronald Reagan cuts personal income tax rates by some 30% across the board, engages in a major increase in defense spending and runs up chronic deficits, adding 1.4 trillion to the federal debt. And the economy responds how? By entering on the--to that point in American history, longest peacetime expansion we had ever seen, 18 million new jobs, interest rates down, inflation down, stock of assets in the United States increases in value by $17 trillion. What did Ronald Reagan do right? Paul?

Paul Krugman: There are a lot of things that explain that expansion and it was just a business-cycle expansion. It was just taking up the slack. If you look at the underlying rate of growth of productivity, nothing good happened during the Reagan years. It was the same as it had been before.

Peter Robinson: And you give Ronald Reagan no credit at all? Reagan's policies had nothing to do with it. Purely cyclical.

Paul Krugman: It was purely cyclical. Did Ronald Reagan's policies have anything to do with the good cyclical developments after 1982? A bit. Federal Reserves policies had more to do with it. But I think you could easily have come up with a policy that would have not have built up all that debt and would have done just as well in the business cycle. So I give him nothing.


Invocation of the "Business Cycle" is, so far as any non-economist can tell, simply a device to obscure ignorance. That our economic lives are in the very broadest sense cyclical is a truism. Sometimes the economy is thriving and other times it's failing. For the "Cycle" to mean anything though those periods would have to correlate to something, not just be historical observations.

The French tend to think of war as cyclical. They've won some and lost others. As it happens, they've been in a down cycle since Waterloo. But the win cycle has to come around again soon, right?

Here's the ignorance that Mr. Krugman is trying to obscure in this specific instance: if the Reagan boom is just cyclical then why has it lasted for twenty-plus uninterrupted years?

Results



EH.Net

What Was the GDP Then?






















































































































Year Real GDP
(billions of 2000 dollars)
Real GDP
per Capita
(2000 dollars)
1982 $5,189 $22,349
1983 $5,423 $23,148
1984 $5,813 $24,597
1985 $6,053 $25,386
1986 $6,263 $26,027
1987 $6,475 $26,668
1988 $6,742 $27,518
1989 $6,981 $28,225
1990 $7,112 $28,434
1991 $7,100 $28,010
1992 $7,336 $28,558
1993 $7,532 $28,943
1994 $7,835 $29,743
1995 $8,031 $30,131
1996 $8,328 $30,885
1997 $8,703 $31,891
1998 $9,066 $32,837
1999 $9,470 $33,907
2000 $9,817 $34,758
2001 $9,866 $34,553
2002 $10,080 $34,937
2003 $10,390 $35,790



 
Source "What Was the GDP Then?"
 



Copyright (c) 2004 by EH.NET. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author.  For other permission, please contact the EH.NET Administrator (administrator@eh.net; Telephone: 513-529-2229; Fax: 513-529-6992).

 

Posted by Orrin Judd at April 19, 2004 2:52 PM
Comments

While Krugman has become more and more embarassing as an economist, he's become better and better as a humour columnist.

Posted by: Carter at April 19, 2004 3:46 PM

Does the business cycle play the same role in economicic theory that stasis plays in natural selection?

Posted by: Peter B at April 19, 2004 3:56 PM

Peter:

The comparison is precise. History shows us that economies go up and down and species change. No one's explained the causes of either satisfactorily.

Posted by: oj at April 19, 2004 4:02 PM

Next week : Krugman proves that Reagan never existed.

Posted by: Peter (not B) at April 19, 2004 4:26 PM

I got the MEGO reaction ("My Eyes Glaze Over") the second I saw Krugman's name. There's nobody on the NY Times' editorial staff whose opinion is more worthless, and that's saying quite a lot; in sheer dunderheadness, I think he's got even MoDo beat.

Posted by: Joe at April 19, 2004 5:07 PM

I agree, MoDo's opinions are at least informative of a certain Manhattan Snarky Elite. Krugman should be tested for heavy metal poisoning.

Posted by: AML at April 19, 2004 6:07 PM
« DON'T HAVE A SEIZURE, DUDE (via Kevin Whited): | Main | JURASSIC BOB: »