Who’s line is it anyway?

Here’s an interesting interview with Barro and Krugman in 2003 regarding Bush’s fiscal stimulus plan. My uncharitable eyes have Barro 2003 being more consistent with the priorities of Barro 2009 than the Krugman versions, but on the pro/anti-stimulus front the combatants have flip-flopped.

BTW, the most important fact about the economy bar none and don’t listen to any idiots who claim otherwise, THE one and only interest rate was getting close to zero in January 2003.

2 thoughts on “Who’s line is it anyway?”

  1. Hey Will, could you explain in what way Krugman wasn’t consistent? This time around, as we all know, Krugman was against tax cuts as stimulus, and only if given to the poor (who are more likely to spend it)… 2003, by contrast, was a large, long-term tax cut heavily weighted to the “haves and have mores” as your hero George W. Bush put it. In addition, it also increased in size each year… B/c of the budgetary consequences, yields on long-term interest rates shot up by nearly a point in the year after the passing, even with the short-term rate held steady at one. Hence, due to the flawed design, it’s easy to imagine there was considerable crowding out, in stark contrast to now, of course.

    On the other hand, I agree with you that it appears Barro changed his tune quite a bit. Now he says 100%-plus crowding out is likely. The difference though, is certainly easily explained. Barro himself got a large tax cut from Bush in 2003, whereas he will not benefit from the stimulus today.

  2. George W. Bush? Who’s that?

    Anyway, Krugman 2003:
    “It’s a plan that is budget-busting at a time when the deficit seems to be really exploding. It’s a very odd thing.”

    “if we’re thinking about the long run, we’ve got to ask ourselves how are we going to pay for this thing? ”

    “There’s a little bit, you know, in a perfect world where you didn’t have to worry about budget deficits, I might try to do something about this.”

    This doesn’t sound like someone worried about liquidity traps or someone that thinks budget deficits are the way out of a liquidity trap (which we were very close to in 2003 per Krugman’s definition). Its fine if Krugman wants to be polemic. That’s great. But it doesn’t mean we should take his economics seriously.

    Barro on the other hand seems pretty consistent in his concern for incentives and long-run growth.

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