Reading the London Review of Books, I came across this interesting essay by historian Adam Tooze about the transition of Paul Krugman from 1990s snobby center-left academic economist to 2000s angry left-wing pundit. This is something that’s puzzled me for awhile (see for example here and here), and Tooze gives a plausible account of Krugman’s transformation as explainable by a combination of political and economic events.
There was one thing that Tooze didn’t get to, though. Part of his story is the disappointment of Krugman and others on the left because the Obama administration’s 2009 economic stimulus package wasn’t as big as they wanted it to be. It’s not clear how much Obama should be blamed for this, given the willingness of Senate conservatives to use the filibuster rule, but let me set that aside for a moment.
Right now I want to remind you of my theory of Obama’s motivation in 2009 to keep the stimulus from being too big. I suspect that Obama advisor Lawrence Summers, or some part of Summers, feared that a big stimulus at the beginning of Obama’s first term would work all too well, leading to a 1978-style economic expansion followed by a 1980-style dive. I’m sure that Summers’s preferred outcome was steady economic growth, but given all the uncertainty involved, I wouldn’t be surprised if he preferred to err on the side of a lower stimulus to avoid overheating the economy. Here’s what I wrote on the topic back in 2010:
Why didn’t the Democrats do more?
Why, in early 2009, seeing the economy sink, did Obama and congressional Democrats not do more? Why didn’t they follow the advice of Krugman and others and (a) vigorously blame the outgoing administration for their problems and (b) act more decisively to get Americans spending again? . . .
Several Democratic senators did not favor the big stimulus. Part of this can be attributed to ideology (or, to put it in a more positive way, conservative or free-market economic convictions) or maybe even to lobbyists etc. Beyond this, there was the feeling, somewhere around mid-2009, that government intervention wasn’t so popular—that, between TARP, the stimulus, and the auto bailout, voters were getting a bit wary of big government taking over the economy. . . .
On not wanting to repeat the mistakes of the past
But didn’t Obama do a better job of leveling with the American people? In his first months in office, why didn’t he anticipate the example of the incoming British government and warn people of economic blood, sweat, and tears? Why did his economic team release overly-optimistic graphs such as shown here? Wouldn’t it have been better to have set low expectations and then exceed them, rather than the reverse?
I don’t know, but here’s my theory. When Obama came into office, I imagine one of his major goals was to avoid repeating the experiences of Bill Clinton and Jimmy Carter in their first two years.
Clinton, you may recall, was elected with less then 50% of the vote, was never given the respect of a “mandate” by congressional Republicans, wasted political capital on peripheral issues such as gays in the military, spent much of his first two years on centrist, “responsible” politics (budgetary reform and NAFTA) which didn’t thrill his base, and then got rewarded with a smackdown on heath care and a Republican takeover of Congress. Clinton may have personally weathered the storm but he never had a chance to implement the liberal program.
Carter, of course, was the original Gloomy Gus, and his term saw the resurgence of the conservative movement in this country, with big tax revolts in 1978 and the Reagan landslide two years after that. It wasn’t all economics, of course: there were also the Russians, Iran, and Jerry Falwell pitching in.
Following Plan Reagan
From a political (but not a policy) perspective, my impression was that Obama’s model was not Bill Clinton or Jimmy Carter but Ronald Reagan. Like Obama in 2008, Reagan came into office in 1980 in a bad economy and inheriting a discredited foreign policy. The economy got steadily worse in the next two years, the opposition party gained seats in the midterm election, but Reagan weathered the storm and came out better than ever.
If the goal was to imitate Reagan, what might Obama have done?
– Stick with the optimism and leave the gloom-and-doom to the other party. Check.
– Stand fast in the face of a recession. Take the hit in the midterms with the goal of bouncing back in year 4. Check.
– Keep ideological purity. Maintain a contrast with the opposition party and pass whatever you can in Congress. Check.The Democrats got hit harder in 2010 than the Republicans in 1982, but the Democrats had further to fall. Obama and his party in Congress can still hope to bounce back in two years.
Avoiding the curse of Bartels
Political scientist Larry Bartels wrote an influential paper, later incorporated into his book, Unequal Democracy, presenting evidence that for the past several decades, the economy generally has done better under Democratic than Republican presidents. Why then, Bartels asked, have Republicans done so well in presidential elections? Bartels gives several answers, including different patterns at the low and high end of the income spectrum, but a key part of his story is timing: Democratic presidents tend to boost the economy when the enter office and then are stuck watching it rebound against them in year 4 (think Jimmy Carter), whereas Republicans come into office with contract-the-economy policies which hurt at first but tend to yield positive trends in time for reelection (again, think Ronald Reagan).
Overall, according to Bartels, the economy does better under Democratic administrations, but at election time, Republicans are better situated. And there’s general agreement among political scientists that voters respond to recent economic conditions, not to the entire previous four years. Bartels and others argue that the systematic differences between the two parties connect naturally to their key constituencies, with new Democratic administrations being under pressure to heat up the economy and improve conditions for wage-earners and incoming Republicans wanting to keep inflation down.
Some people agree with Bartels’s analysis, some don’t. But, from the point of Obama’s strategy, all that matters is that he and his advisers were familiar with the argument that previous Democrats had failed by being too aggressive with economic expansion. Again, it’s the Carter/Reagan example. Under this story, Obama didn’t want to peak too early. So, sure, he wanted a stimulus–he didn’t want the economy to collapse, but he didn’t want to turn the stove on too high and spark an unsustainable bubble of a recovery. In saying this, I’m not attributing any malign motives (any more than I’m casting aspersions of conservatives’ skepticism of unsustainable government-financed recovery). Rather, I’m putting the economic arguments in a political context to give a possible answer to the question of why Obama and congressional Democrats didn’t do things differently in 2009.
Anyway, this is what I think Tooze is missing in his story. He talks about politics and he talks about economics. He recognizes that economic policy has a political element, but I don’t think he’s fully catching on that policies can be set based on anticipated political consequences of economic conditions—and, for that, I think political science research is relevant. Or, should I say, policymakers’ understanding of political science research is relevant. Sure, everybody knows about juicing the economy during an election year, but the idea of not going too fast because you want to rebound back in 4 years, I think that’s a real Carter vs. Reagan lesson, reinforced by research such as that of Bartels. The funny thing is that now it seems that even moderate Democrats want a big stimulus right away to avoid what they see as the negative political consequences deriving from Obama not going big in 2009. Always fighting the last war. Not that I have any policy recommendations of my own; here I’m just trying to trace some logical motivations.
P.S. Tooze is a professor at Columbia University but I’ve never met the guy. He’s in the history department. I guess Columbia’s a pretty big place, and there’s a lack of complete overlap among the historians who study American politics and the political scientists who study American politics. I’ve never met Eric Foner either. I looked up Tooze on Wikipedia and . . . his grandfather was one of those upper-class British communists! I wonder if he was the model for any of those John Le Carre characters. It also says that he (Tooze, not the grandfather) used to teach at Jesus College so maybe he knows Niall Ferguson. Given their much different politics, I imagine they don’t get along so well.
“the transition of Paul Krugman from 1990s snobby center-left academic economist to 2000s angry left-wing pundit”
Since this blog has an international audience, it should be pointed out that the term “left” here refers to the American concept of leftist politics. That is, still somewhat right of center by international standards (we Americans tend to forget that there are actually socialist and communist countries beyond our shores). More than anything else, I see Krugman-the-pundit as advocating for benchmarking, implementing the policies that have been shown to work, regardless of country of origin. Since these policies are mostly socialist, Krugman seems to be coming from the left to most Americans.
Krugman-the-academic is necessarily a different profile.
Paul Krugman is absolutely not right-of-center by international standards. It makes very little sense to say that state ownership of the means of production is a *requirement* to be considered left-wing. By that standard, how many of the world’s nation-states are truly left-wing?
This argument has been used to bludgeon the US Democratic Party by ignorant communists are Twitter (resulting in the meme “Bernie Sanders would be right-wing in Europe!”) but it is patently absurd, as a cursory look at the platforms of social democratic parties in e.g. Denmark or Sweden shows.
Jack,
It’s my impression (possibly wrong) that Krugman’s policies and arguments are somewhere close to the center of European economists or at least European economic policy. I know a fair amount about Krugman’s views, or at least the ones he discusses in the NYT, but I’m not all that familiar with the details of European economic policy, how the countries differ, etc., etc., so I wouldn’t know whether to characterize him as center-right or center-center in Europe. But I thought I knew enough to say that he wouldn’t be considered noticeably left-of-center in Europe. Is that wrong? Do you think even Denmark or Sweden or France would consider him to be on the left?
I think what makes the categorization difficult is that a lot of the differences are due to decisions that were made after the second world war (e.g., national health care). Arguing that a national heath care system should be privatized would be a pretty extremely right position in Europe, but that’s only because that national health care is the status quo and not a current debate on spending priorities (probably in the same way as Medicare is in the US). I think it makes more sense talking about where one falls on the general question of deficit spending. I think anyone advocating *that* would be firmly on the left side of the equation in a European context, and I believe Krugman has criticized the EU (and Germany in particular) for being extreme deficit hawks.
“It makes very little sense to say that state ownership of the means of production is a *requirement* to be considered left-wing.”
My point was only that everyone who thinks state ownership of the means of production is a good thing are left of Krugman. But that is just one chunk of folks to the left of Krugman. Krugman is also a free trade guy. That means that pretty much everyone who thinks that developed nations benefit from policies that protect first world workers from directly competing with third-world workers are also left of Krugman. Here in the US, the bottom half of the wage scale has collapsed, and that is the biggest economic development of the last 30 years. I cannot claim that Krugman did not see it coming, because I don’t know, but his free trade arguments sure look misguided now. The irony is that while both US political parties have insisted that free trade and globalism would create a rising tide, the American public has always been dubious that workers would rise with it. The public had it right and the “smartest people in the room” (sensu Tim Geitner) were either wrong or lying.
> while both US political parties have insisted that free trade and globalism would create a rising tide
which is why free trade is orthogonal to the left-right economic axis IMO, and thus does not have bearing on Krugman’s position of the left-right economic axis.
Also you take it as a given that free trade agreements are why the bottom half of the wage scale collapsed, a claim that I and the vast majority of economists as far as I can tell would heavily contest.
My problem with your original comment was chiefly the notion that Krugman, who is further left than the median Democrat, would be center-right in the a worldwide context.
Your analysis of Obama’s possible strategic choices early in his admin is interesting. I hadn’t thought of his term-one policies as a strategic choice rather than just what he believed should be done given an emerging crisis.
My impression was that he ran as a moderate Democrat and more or less followed through on that in his first term. Back then health care was the Dem’s big deal and had been for some time. I don’t think Obama was thinking that much about the economy at the outset of his presidential run. Whatever the case unprecedented events overtook whatever ideas he had in mind and as I recall it was a seat-of-the-pants operation in early 2009. Summers, Hank Paulson, Bernanke and Geithner were the experts on hand and Obama more or less followed their advice.
I’m not sure I buy the thesis that Dems are trying to counteract a perceived economic smallness on Obama’s part. IMO he did as much as could possibly be done and much more than many people wanted. The stimulus was viewed by people on both sides as bailing out the perps and extreme in the extreme. IMO Dems always want to spend as much money as they can get their hands on and I can’t recall them being shy about borrowing.
jim, you say “I don’t think Obama was thinking that much about the economy at the outset of his presidential run”. The financial crisis of 2007-08 was already in full swing by mid-2007. It’s true that Obama had announced his candidacy a few months before that, but the majority of Obama’s campaign was conducted against the backdrop of a historic recession. Obama may not have thought that much about the economy in the first month or two of his campaign, I don’t know, but it was a huge issue for the rest of the time.
“IMO Dems always want to spend as much money as they can get their hands on and I can’t recall them being shy about borrowing.” Those aren’t opinions, those are purported statements of fact, and they’re wrong. I’d say “bizarrely wrong” but I’m guessing the only Democratic president whose economic policy you actually remember is Obama, so maybe it’s not ‘bizarre’. The democratic president prior to Obama was Bill Clinton. You could just read the second paragraph here: https://en.wikipedia.org/wiki/Economic_policy_of_the_Bill_Clinton_administration
Phil said: “The financial crisis of 2007-08 was already in full swing by mid-2007.”
Not sure where you got that idea. My comment in moderation will detail events, but the DOW peaked in mid October 2007. At that time there was no intuition that a major international crisis and related economic collapse was unfolding – that’s readily apparent from the subsequent course of events. The situation was believed to have been contained a number of times. The full weight of the issues wasn’t apparent until after Lehman collapsed in late 2008, and while Obama could have intuited some ideas about banking regulation, until Lehman went down, he had no way of knowing that the crisis would be the major event of his first term.
It depends on who’s opinion you’re talking about. Lots of us were looking at the bullshit house flipping and home decorating TV shows and crazy refinancing in 2003-2005 and saying “this shit is going to hit the fan big” the question was more like **when** than if. And unfortunately when was in many ways determined by policy than by fundamental economic issues, so it wasn’t particularly predictable. But it was certain to happen in Obamas first term, I mean it certainly wasn’t going to continue for 4 full years at that crazy pace. I was drawing graphs and discussing it with my russian coworker all throughout 2006-2007. In April 2008 when we bought our house it was already during the freefall in LA housing prices.
Obama certainly could have been strategizing in 2006-2007 “how will I handle the unwinding of this bullshit?” there’s no question.
Lots of people, including the fed even, anticipated the hammer to fall in the housing market, but very few predicted that the collapse in housing prices would trigger a global financial crisis and topple established banks. I find it dubious that Obama would be planning to center in his campaign what was then believed by official institutions to be a curiosity and correction.
Jim, ok, “in full swing” is putting it too strongly. Home lenders and some hedge funds had started going bankrupt. As I remember it, that’s when it was obvious (to me) that things were getting bad. So that’s the answer to where I got that idea.
“But [why] didn’t Obama do a better job of leveling with the American people? In his first months in office, why didn’t he anticipate the example of the incoming British government and warn people of economic blood, sweat, and tears? Why did his economic team release overly-optimistic graphs such as shown here? Wouldn’t it have been better to have set low expectations and then exceed them, rather than the reverse?”
Maybe they released the graphs because they believed them. I recall Krugman writing that he an other economists did not pay enough attention to household debt, which amplified the downturn. What I don’t understand is why, given his experience with community organizing, Obama didn’t have a better sense of the effects of the recession on people in the lower end of the income distribution.
It’s worth remembering that, from the vantage point of 2007-2009, the collapse of the housing bubble and the Great Recession took the form of a scary dysfunction of the financial system. The problems appeared to be extremely complex, something that only market specialists, especially if they were either from the upper tier or econophysicists, could understand. Obama had Rubin, Summers and Geithner to listen to. They were all afraid that too much “sugar” (Geithner’s term) would spook the markets in view of the unprecedented intervention of the Fed. Krugman, like many other economists, knew enough about both finance and macroeconomics to recognize this was wrong, but in a crisis atmosphere there was little rational debate within the administration. It’s not like Summers sat down with Christina Romer to hammer out differences on fiscal policy.
A more speculative consideration is that Obama was persuaded to a neoliberal view during his days moonlighting at the U of Chicago law school. That was a hub of the law and economics movement at the time, and our friend Cass Sunstein was said to be something of a mentor to the up-and-coming adjunct.
The political economy motive — weak economy early in the term, boom before the election — goes back a long way; Tufte right? It has a logic, but one flaw for me is that there ought to be at least some telltale signs of calculation along these lines, like minutes of policy discussions, offhand remarks of staffers, etc. Did Bartels come across anything like this?
To put this in a somewhat larger historical perspective, in 2008, with the Great Recession underway, some thought that this was the Democrats’ “Rooseveltian Moment” to institute fundamental changes. Others’ pointed out that Obama had gotten elected too soon after the recession started, and people were not desparate for change, as they had been after 3 years of Hoover’s term.
Perhaps this idea was somewhat in the air at the time, as I recall reading an article by Cass Sunstein a day or two after the 2008 election saying that Obama, as a matter of temperment, was no Roosevelt, and those who wished for a Rooseveltian Moment were not going to be satisfied. (Sorry, I can’t guarantee the accuracy of my recollection, as I don’t have the patience to try to find the article.)
Speaking of guys down the hall from you, I just ran across this guy https://musaalgharbi.com Maybe you should look him up and reflect on why Tooze never mentions Money Power Fame or Leisure as part of Krugman’s motivation.
But forget that, the main point is this guy’s book is riffing on Bruno Latour! Not only might he enhance your encounter with post-modernism, but who knows what he might bring to the next Brunolympiad? Or romance might bloom, like in “The Mirror Has Two Faces.” (* Blech!) The Abiding Dude vs. Barbara Streisand and the winner to face Robert Smith of The Cure, it couldn’t happen anyhwere else, could it? It is your density.
(*) http://www.columbia.edu/cu/record/archives/vol21/vol21_iss6/record2106.17.html
Dzhaughn,
He’s not down the hall from me, but he took my class a few years ago!