For years, Paul Krugman has been warning that the inadequate fiscal stimulus package of early 2009, coupled with the disastrous spending cuts of the ‘sequester’ package, were leading to a ‘postmodern recovery’ and ‘jobless trap’ for the millions of Americans locked out of employment due to coldhearted Republicans. Even though GDP growth had officially returned by the summer of 2009, Krugman told us, we could expect a terrible plight for America’s workers, all because the people in charge were more concerned with fiscal prudence than American families.
Well, now that we’ve had a few quarters of decent GDP growth and private sector job creation – at least according to the official statistics – Krugman has had to alter his narrative. Now, you see, Obama’s recovery has actually been impressive – much better than the recovery under George W. Bush from the dot-com recession. Does this prove that Krugman was wrong about the need for big deficits? Of course not. No, it just shows that the right-wing critics of ObamaCare and other regulations were wrong for thinking these regulations would hurt hiring.
A recent example of this newfound perspective is a December 28 Krugman post entitled, ‘The Obama Bounce’:
Dean Baker is, of course, right: this is not a boom, and comparisons to the 1990s are insane. Still, growth has clearly picked up, and the public seems to be noticing. So what can we say about the Obama non-boom?
I’d argue that much of what we’re seeing reflects the tapering off of austerity. The US has never had a proclaimed austerity plan, UK style, but we’ve had a lot of the thing itself, especially from cutbacks in state and local spending. Spending hasn’t rebounded yet, but at least it has stopped shrinking:
[Krugman then inserts a FRED graph showing the year/year level change in real government consumption and investment spending. – RPM] And it’s important to realize that, despite all the rhetoric about how Obamacare/antibusiness rhetoric/Kenyan Islamic atheism is destroying business, the private sector has actually been relatively strong under Obama. Here’s employment:
This post was published at Mises Canada on December 30th, 2014.