Joe Scarborough and Jeffrey Sachs Write a Very Serious Column

      In a rather gruesome merger we now have fellow VSPers Scarborough of the Right and Sachs-ostensibly on the Left-combining to give us yet another piece razzing Krugman: "Krugman is wrong." Well there's a claim you don't hear someone making everyday. Evidently Scarborough didn't feel his debate on Charlie Rose with Krugman settled the matter so now he's teamed up with Sachs.

     Sachs is one of these VSP who are supposedly on the Left. His big claim is that we should make some big government investments in technology, education, etc. but first we have to balance the budget. Only after that's done can we get to it. Unfortunately this may be one of those times when two heads aren't better than one.

     "Dick Cheney and Paul Krugman have declared from opposite sides of the ideological divide that deficits don’t matter, but they simply have it wrong. Reasonable liberals and conservatives can disagree on what role the federal government should play yet still believe that government should resume paying its way."

     http://www.washingtonpost.com/opinions/joe-scarborough-and-jeffrey-d-sachs-deficits-do-matter/2013/03/07/82de539a-82bd-11e2-b99e-6baf4ebe42df_story.html?hpid=z2

     So we come right out the gate with some false equivalence. It gets two things wrong:

     1). Krugman and Cheney weren't motivated by the same concerns in saying what they did about deficits. Because two people say "A" doesn't mean they both have the same reason. Two people can predict it will rain. One because he's a good meteorologist, the second because he thinks its God's will. 

     2). Krugman has certainly never said that deficits don't matter. 

      "It has become part of Keynesian lore in recent years that public debt is essentially free, that we needn’t worry about its buildup and that we should devote all of our attention to short-term concerns since, as John Maynard Keynes wrote, “in the long run, we are all dead.” But that crude interpretation of Keynesian economics is deeply misguided; Keynes himself disagreed with it.
  
      In fact it's nobody's interpretation but the two authors. And I really think it's time we start assessing penalty points on the widespread abuse and misuse of Keyne's point about the long run. 

      "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.

Both of us opposed the stimulus package, the increased spending in Afghanistan and Washington’s fixation on short-term thinking. We said that the only result of this short-termism would be exploding deficits. And well before Obama acknowledged the point, we said that there was no such thing as “shovel-ready” projects worthy of public investment in the 21st century."

     "Sadly, our concerns have been borne out. Public debt was around 41 percent of the gross domestic product in 2008. Today it is around 76 percent and still rising. Yet the economy continues to languish."

     The economy is clearly improving. It's not as fast as we all hoped. There's no question that the Obama Administration were overly optimistic in 2009 however this was true of most of the mainstream economic profession. 

      The fact that the economy got much worse than Obama's incoming team in 2009 realized doesn't change the fact that the economy has improved a lot since the bottom back in June, 2009. Romney tried to win an election on this misleading, cherry picking method of analysis. It didn't get him too far. 

     Let's be honest, the mainstream economists who thought the economy would come back quickly werent the only ones who were wrong as Krugman points out. The VSP predicting disaster for 4 years don't have a very impressive track record themselves:

   "Four years ago, as a newly elected president began his efforts to rescue the economy and strengthen the social safety net, conservative economic pundits — people who claimed to understand markets and know how to satisfy them — warned of imminent financial disaster. Stocks, they declared, would plunge, while interest rates would soar.

     Even a casual trawl through the headlines of the time turns up one dire pronouncement after another. “Obama’s radicalism is killing the Dow,” warned an op-ed article by Michael Boskin, an economic adviser to both Presidents Bush. “The disciplinarians of U.S. policy makers return,” declared The Wall Street Journal, warning that the “bond vigilantes” would soon push Treasury yields to destructive heights.

    Sure enough, this week the Dow Jones industrial average has been hitting all-time highs, while the current yield on 10-year U.S. government bonds is roughly half what it was when The Journal published that screed.

     http://www.nytimes.com/2013/03/08/opinion/krugman-the-market-speaks.html?partner=rss&emc=rss&_r=1&

     Now they're back to telling us what Keynes would say if he were here today:

     "Keynes worried about the long-term buildup of public debt and called for balancing the budget over the course of a business cycle — allowing deficits during downturns to be offset by surpluses during good times. Unfortunately, Republicans and Democrats spent the past decade supporting reckless tax cuts, irresponsible wars and budget commitments without supporting revenue. That shortsightedness has created a crisis, soon to be exacerbated by an aging population and rising health-care costs."

     Exactly. Do they not realize that this is a downturn?

     UPDATE: Another piece looks at this Scarborough-Sachs paper and is no more impressed.
The question that begs is how Sachs earned his liberal monikor:

     "The ambiguously liberal/conservative duo, Joe Scarborough and Jeff Sachs, self-denominated reasonable (what Krugman refers to as 'serious' people), suggest that we need austerity in their WAPO op-ed. Forget for a second the inconsistencies of Scarborough, the conservative in the duo. What I find incredible is that Sachs continues to push the fiction that he is a liberal in the American sense of the word, meaning progressive or lefty, rather than a right wing neoliberal."

       "Let's not forget that Jeff Sachs is Dr. Shock Therapy,* a doctrine that suggested that budget deficits should be cut to control inflation, and that deregulated markets would promote growth and development, and that he applied in Bolivia, Poland and Russia, among other countries. The collapse and failure in these countries foreshadowed the failures of the so-called Washington Consensus. Forget also the institutional problems Sachs had regarding his advice in Russia [note that he did not have the same legal problems that led his collegue "Andrei Shleifer, whose misbehavior cost Harvard something like $25 million in damages, plus another $10 million or $15 million in legal fees," according to David Warsh]."

      http://nakedkeynesianism.blogspot.com/2013/03/reasonable-liberals-and-conservatives.html

     HT: Woj-the link was at his site. I got to read Naked Keynesianism more often.