Usually when they call macroeconomics the dismal science, they're paying the field the compliment of pretending it's a science. But what if leading economists are as susceptible as politicians or journalists to basing their pronouncements not on research but on party affiliation?
In Econ Journal Watch, George Mason University economics student Brett Barkley tries to quantify how likely economists are to change their tune based on whether the Silly Party or the Sensible Party is in power. He focuses on what may be the central fiscal question of the age: Does an economist change his or her view of deficit spending when political power shifts?
Large budget deficits represent a burden on the future, and debt accumulation eventually poses great problems. Economists writing for the public can either highlight such truths, neglect the issue, or try to allay worries or excuse or justify large budget deficits (as anti-recession policy, for example). Economists affiliated or aligned with one of the parties may be suspected of changing their positions on budgets deficits to serve their favored party or win favor with its constituency.
Barkley's finding is that of 17 prominent economists surveyed, six showed evidence of shifting their views on deficits when power shifted, and the most significant changes came in the prognostical pontifications of New York Times columnist Paul Krugman — the Nobel Laureate, 2002 E&P columnist of the year, and three-time winner of the CableACE award:
Barkley opposes Krugman's deficit hawkishness during the two Bush administrations with his calls for more deficit spending during the Clinton and Obama administrations (and also after the Democrats took control of Congress in 2006). In some cases, his willingness to keep going deeper into debt has put him at odds even with the politicians he supports, as it did during the debt-reduction period late in Bill Clinton's presidency, and in some strident columns urging Barack Obama not to go wobbly on deficit concerns:
While the administration was beginning to question the efficacy of fiscal stimulus in light of increasing deficits, Krugman argued that with such high unemployment and impending elections no viable option was left but to increase deficit spending. Krugman's main concern seemed to be winning elections and he feared that Obama's "centrist" tendencies would impede such an agenda by giving in to deficit reduction…
In general I don't pay much attention to Krugman's phantasmagorical philosophizing, but I'm not sure Barkley's methodology makes that strong an indictment. He tabulates comments made at by his subjects at various points, and not surprisingly, Krugman's comments are more voluminous than anybody else's. In fact, if you count up the references, there seems to be a very strong correlation between the number of citations he has for a given economist and the economist's tune-changing, with Krugman and Alan Blinder having both the highest degree of changeability and the highest number of references used.
Nor is there definitely a contradiction between changing your tune by party politics and being a true believer of the drink-yourself-sober school of fiscal management Krugman advocates. It's in the nature of Keynesianism to believe not just that the economy needs to be managed, but that it needs to be managed by the right sort of fellows. Krugman himself addresses this notion in a ramble about the difference between good deficits and bad deficits:
Broadly speaking, there are two ways you can get into severe deficits: fundamental irresponsibility, or temporary emergencies. There's a world of difference between the two. Consider first the classic temporary emergency — a big war. It's normal and natural to respond to such an emergency by issuing a lot of debt, then gradually reducing that debt after the emergency is over…Consider, on the other hand, a government that is running big deficits even though there isn't an emergency. That's much more worrisome, because you have to wonder what will change to stop the soaring debt. In such a situation, markets are much more likely to conclude that any given debt is so large that it creates a serious risk of default. Now, back in 2003 I got very alarmed about the US deficit — wrongly, it turned out — not so much because of its size as because of its origin. We had an administration that was behaving in a deeply irresponsible way. Not only was it cutting taxes in the face of a war, which had never happened before, plus starting up a huge unfunded drug benefit, but it was also clearly following a starve-the-beast budget strategy… Compare and contrast the current situation. Most though not all of our current budget deficit can be viewed as the result of a temporary emergency. Revenue has plunged in the face of the crisis, while there has been an increase in spending largely due to stimulus and bailouts. None of this can be seen as a case of irresponsible policy, nor as a permanent change in policy. It's more like the financial equivalent of a war.
This reminds me of how my dad assured me he would beat his cancer because it was the good kind of cancer, not the bad kind. Then it turned out it was actually the bad kind of cancer, and he died. Certainly it's worse to have money committed on a permanent basis than it is to have the option of paying or not paying each year. But ultimately, every dollar you spend on credit has to be paid back with interest by somebody. Krugman's willingness to change his tune on deficit spending when it's the Democrats doing the spending is unseemly. But his honest belief — an astonishingly cavalier approach to deficit spending — is worse than his partisan positioning.