Paul Krugman Has Become an Embarrassment to the Economics Profession.

Voodoo Economics: Paul Krugman Rejected By His Peers

By John C. Goodman

Paul Krugman has become an embarrassment to the economics profession. Despite his Nobel Prize and despite his previous high regard in the profession, his twice-a-week editorials in The New York Times are causing even progressive economists to treat him as somewhat of a kook.

Since 2011, the United States has followed what Krugman correctly calls a policy of “austerity.” For example, the federal budget deficit has declined from 8.4% of GDP in 2011 to a predicted 2.9% of GDP for all of 2014. All along the way Paul Krugman protested that such policies would prolong the recession and even push us into a “low-grade depression.”

In fact the opposite occurred. As Jeffrey Sachs wrote the other day:

“… rather than a new recession, or an ongoing depression, the US unemployment rate has fallen from 8.6% in November 2011 to 5.8% in November 2014. Real economic growth in 2011 stood at 1.6%, and the IMF expects it to be 2.2% for 2014 as a whole… [It is likely] that aggregate growth for all of 2015 will be above 3%.”

Sachs, who is every bit as left wing as Krugman, writes:

“Not one of [Krugman’s] New York Times commentaries in the first half of 2013, when “austerian” deficit cutting was taking effect, forecast a major reduction in unemployment or that economic growth would recover to brisk rates. On the contrary, ‘the disastrous turn toward austerity has destroyed millions of jobs and ruined many lives,’ he argued, with the US Congress exposing Americans to ‘the imminent threat of severe economic damage from short-term spending cuts.’ As a result,’Full recovery still looks a very long way off,’ he warned. ‘And I’m beginning to worry that it may never happen.’ ”

And Sachs makes the more general point that you can believe in progressive government without buying into Krugman’s kooky economic theories:

“There is nothing progressive about large budget deficits and a rising debt-to-GDP ratio. After all, large deficits have no reliable effect on reducing unemployment, and deficit reduction can be consistent with falling unemployment.”

Read the rest here.