Jeffrey Sachs Joins Team Scarborough (and Team Deception)
Okay, there’s lots here, but I have to start somewhere.
Joe Scarborough’s been tilting against Paul Krugman, despite basically arguing the same things, for months now. Plainly Scarborough knows that conflict sells, so he blatantly and continually misrepresents what Krugman said on his show. But this short post isn’t about that. It’s about the obviously misleading critiques of the 2009 stimulus.
Cut to Scarborough, who added economist Jeffrey Sachs to his byline in last weekend’s Washington Post op-ed.
Not so long ago, Keynesians guaranteed that Obama’s stimulus plan would move the U.S. economy more quickly toward growth by providing full employment and lowering deficits. We both were skeptical from the start, for good reason. In May 2009, the White House forecast 4.6 percent growth in 2012, an unemployment rate of 6 percent and a budget deficit of $557 billion. The actual outcomes were much worse: growth of 2.3 percent, unemployment at 8.1 percent and a budget deficit of nearly $1.1 trillion.
First off, Keynesians like Krugman (and others) have argued for years that the 2009 stimulus was too small; Krugman made that point on the day the Romer/Bernstein report was released. But that’s a minor deceit compared to what comes next. Scarborough and Sachs use a May 2009 OMB projection to point out that the White House’s economic predictions were wrong, arguing that it was because the stimulus was ineffective. What they willfully fail to note is that the best estimates of the recession at that time were very incorrect, and that everybody’s 2012 projections were wrong.
In May 2009, the most recent BEA estimate of 2008 4th quarter GDP was that the economy contracted at an annual rate of 6.3%; now it’s understood to have been 8.9%. And the White House wasn’t alone in getting things wrong; in May 2009, CBO’s latest projections for 2012 had real GDP growth at 4.1% and unemployment at 6.6%. The Blue Chip Consensus estimates were GDP growth of 3.3% and unemployment of 7.1%. CBO’s Doug Elmendorf said in Congressional testimony in May 2009 that CBO was in the beginning stages of revising their future estimates down in response to new data that the recession was worse than originally thought.
And of course none of the 2009 estimates included adjustments for House Republicans inexplicably trying to sabotage the recovery at every turn.
Since the hole was deeper than we thought when we were at its bottom, why do Scarborough and Sachs pretend that we should expect predictions based on such assumptions to be accurate? This is the same obvious, logical explanation for why the stimulus was sized the way it was (too small to address the problem): the first BEA estimate of 2008 Q4 GDP, which came out at the same time as Romer and Bernstein’s stimulus-advocating white paper, showed an annualized 4Q contraction of 3.6% –more than 6% less than reality.
Put another way: how can Scarborough and Sachs argue that the White House predictions were wrong because the stimulus wasn’t as effective as they expected, without even mentioning the rather pertinent fact that they were based on incomplete and very inaccurate economic data? And without mentioning that almost everybody else was also predicting the future badly? Well, these are really questions for Sachs, since we already know why Scarborough would do it.
Don’t let facts get in the way when you’re playing to people’s emotions.