If there’s any establishment economist I dislike almost as much as the egregious Paul Krugman, it would be Jeffery Sachs of Columbia University. Sachs is smug, arrogant, condescending, and has his own list of Epic Fails to match Krugman’s (but no Nobel Prize). As our faithful reader RS points out to me often, it would be worth comparing the dreadful economic advice Sachs gave to Russia after the collapse of the USSR to the much better advice Milton Friedman gave to Chile when it decided to liberalize its economy.
So it is with a certain amount of cognitive dissonance that I note today’s article from Sachs in the Puffington Host smacking down Krugman for his indifference to the federal deficit and debt levels. “Crude Keynesianism” Sachs calls it, which I expect is the Ivy League equivalent of “So’s your old man!”
First off, here is what I mean when I say that Krugman is a crude Keynesian: he takes a simplistic and inadequate version of the Keynesian economic approach as his guide for budget policy. . .
[C]rude Keynesians like Krugman believe that we don’t have to worry about the rising public debt for many years to come, perhaps well into the next decade. This is remarkably shortsighted. The public debt has already soared, from around 41 percent of GDP when Obama came into office to around 76 percent of GDP today (and with no lasting benefit to show for it). If Krugman had his way, and deficits were not restrained, the debt-GDP ratio would already be above 80 percent by now and would be rising rapidly towards 90 percent and above (as shown in the recent CBO alternative scenario).
Krugman now writes: “everyone repeat with me: there is no deficit problem.” He says, in effect, that since the debt-GDP ratio is now likely to be stable at around 75%, we need not worry. But his claim is thoroughly misleading. The forecast of a stable debt-GDP ratio is precisely because Washington has rejected Prof. Krugman’s advice. If DC instead followed his advice, the debt-GDP ratio would indeed already be significantly higher and would be rising rapidly. . .
In my view the result of this misguided approach, adopted by the Obama Administration, has been a large build-up of public debt with no long-term benefits for an economy that instead needs a public-investment-led recovery. If we had followed Mr. Krugman’s long-standing advice to double down on this failed approach the situation would have been even worse. Yes, Mr. Krugman, I believe that you are a crude Keynesian at a time when we need subtler, surer, longer-term policies.
Okay, perhaps Sachs is just jealous that Krugman is the lefty celebrity economist with the New York Times column instead of himself. Still, from whatever corner, it is always fun to see Krugman get his comeuppance.