Thursday, August 04, 2011

Mr. Economy needs to file suit for medical malpractice

Paul Krugman:
It’s kind of annoying when people claim that I said the stimulus would work; how much noisier could I have been in warning both that it was grossly inadequate, and that by claiming that a far-too-small stimulus was just right, Obama would discredit the whole idea?
He goes on to compare his predictions with those made by the WSJ at the time. Click through only if you're in any suspense how that turned out.

But actually the stimulus was worse than Krugman or anyone else knew at the time:
Specifically, when Barack Obama took office in the first quarter of 2009, the BEA was saying that the economy contracted 0.5 percent in the third quarter of 2008 and 3.8 percent in the fourth quarter. In fact, we now know that it plunged 3.7 percent and 8.9 percent. This is a huge error. Imaging making the same error in the opposite direction. That would be the BEA describing a major economic boom as a serious recession. Instead they mistook a cataclysmic collapse for a mere serious recession. And this recession happened before Obama took office, meaning that he was faced with a much larger output gap than he realized. Consequently, he framed a policy response that was inappropriate to the actual severity of the situation.
The "consequently" gives Obama too much credit, as PK insists. Regardless, the upshot was that the patient presented with influenza, the Dems prescribed cold medicine, and it turns out the poor Mr. Economy had pneumonia.

And now, the GOP is treating the patient with leeches -- er, spending cuts.

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