September 5, 2003

#119: But, hey, that's what Treasury secretaries are for ...

P. Krugman

Paul Krugman's The China Syndrome (09/05/03) is a blunderbuss of a column covering all of his favorite and oft repeated rants�Iraq blundering, aggressive unilateralism, job losses, tax cuts for the rich, Bush duplicity and all the rest.

It's worth noting that one negative aspect of rapid productivity growth is that adding payroll during a recovery is definitely slower because employers can do so much more with fewer workers. The good news is that once employment does start to grow (and it will) the associated GDP growth rate will be much higher (because of greater productivity) than we have come to expect. Less than 10 years ago most economists, including Krugman, would have been happy with our current status of GDP growth at 3% and unemployment at 6%. But now we know we can do better.

Krugman is hoping that employment growth will lag long enough to defeat Bush for re-election. This is very unlikely. As we said last week, we think Bush is in almost perfect position with the timing of the recovery cycle�strong GDP growth going into an election. We expect Krugman to keep harping on the lagging jobs growth simply because it is his last card. When that is played there will be a "great unraveling" sound coming from across Nassau street.

By the way, Krugman was right on one thing. Sending Treasury secretary Snow to China was a fool's errand. But, hey, that's what Treasury secretaries are for. Besides cheerleading what else do they have to do with their time?

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]


* I would add that Krug's belief that Bush has done an about-face on Iraq is wishful thinking. Den Beste is very good on the subject today. And there's this by Paul Wolfowitz. My question: Between Chirac, Schroeder and Krugman; who is most eager to see America and Iraq fail? --JW

Posted by John Weidner at September 5, 2003 1:47 PM
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