Bill Black: Krugman’s Failure to Speak Truth to Power About Austerity

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published at New Economic Perspectives

In the first column in this series I explained how Hillary Clinton, during the closing 40 days of her campaign, showcased repeatedly her promise to assault the working class with continuous austerity. I explained that her threat represented economic malpractice – and was insane politics. I showed that the assault on the working class via austerity was such a core belief of the New Democrats that their candidate highlighted that assault even as the polls showed massive, intense rejection of her candidacy by the white working class. I also noted that in this second series in the column I would discuss the failure of her campaign team, and her de facto surrogate, Paul Krugman to speak truth to power about the dual idiocy of her campaign promise to wage continuous war on the working class through austerity forever.

The broader point is the one made so often and so well by Tom Frank – it is morally wrong, economically illiterate, and politically suicidal for the New Democrats to continue to assault the working class via austerity, “free trade” (sic) deals, and financial deregulation. The only thing worse is to then insult the working class for reacting “badly” to being pummeled for decades by the Party that once defined itself as the party of working people. The New Democrats decided to insult the white working class in response to polls showing that the white working class was enraged at Hillary Clinton. Arrogance and self-blindness are boon companions.

I grew up in the Detroit-area and saw George Wallace win the Democratic Party primary for the presidential nomination, so none of this is new to me. We all know that the New Democrats are never going to listen to my warnings or Tom Frank’s warnings. But the leaks show that Hillary had many competent staff who raised difficult questions. Why wasn’t any senior campaign staffer willing to tell her that her austerity threats were economically illiterate and politically suicidal? Krugman warned President Obama several times that austerity was a terrible economic policy.

John Boehner, March 2009:

It’s time for government to tighten their belts and show the American people that we ‘get’ it

Barack Obama, yesterday:

“At a time when so many families are tightening their belts, he’s going to make sure that the government continues to tighten its own,” Obama said. “

We’ll never know how differently the politics would have played if Obama, instead of systematically echoing and giving credibility to all the arguments of the people who want to destroy him, had actually stood up for a different economic philosophy. But we do know how his actual strategy has worked, and it hasn’t been a success

Why did he cease speaking truth to power as the election came down to the wire?

The New Democrats Were Locked Into Austerity

Ever since the birth of the New Democrats, their adherents have embraced austerity. This act of mutual economic and political self-destruction has become so core to their identity that Hillary unhesitatingly made it one her most important closing pitches during the last 40 days of her campaign against Trump. At the very moment when her pollsters were warning her that she could lose due to working class hostility, she chose to showcase her hostility to the working class by promising to inflict eight more years of austerity on them. In your face working class! This is a political strategy that has no upside, but a toxic downside. Despite intense criticism from progressives of her austerity threats, Paul Krugman never urged her publicly to promise to end austerity’s assault on the working class. Similarly, no one on her official campaign team had the courage and strength to tell her to stop and reverse her position.

Part of Krugman’s problem was that while he has come some distance from his long-held support for austerity, his reflexes are still wrong because he does not understand sovereign money. A November 14, 2016 Krugman column revealed the hold his past dogmas still had on him.

Eight years ago, as the world was plunging into financial crisis, I argued that we’d entered an economic realm in which “virtue is vice, caution is risky, and prudence is folly.” Specifically, we’d stumbled into a situation in which bigger deficits and higher inflation were good things, not bad. And we’re still in that situation — not as strongly as we were, but we could still very much use more deficit spending.

Many economists have known this all along. But they have been ignored, partly because much of the political establishment has been obsessed with the evils of debt, partly because Republicans have been against anything the Obama administration proposes.

Krugman still does not understand sovereign money. A budget deficit for a government with a sovereign currency is not a moral issue. Budget surpluses are not a “virtue” and deficits are not a “vice.” The economic issue is strictly pragmatic – what size budget deficit or surplus is best for the overall economy? The political issue is the one Krugman made in his criticism of President Obama’s embrace of the self-inflicted wound of adopting your opponents’ economic illiteracy.

But notice that even though he was writing after the 2016 elections, Krugman could not bring himself to be candid about the identity of “much of the political establishment.” Yes, Republicans always said they favored austerity (except when they held the presidency and had to deal with a recession). But New Democrats believed in the same terrible economics and, unlike the Republicans, Hillary’s embrace of continuous austerity as a means of waging a unceasing onslaught on the working class was so passionate that she highlighted that embrace during the last 40 days of her disastrous campaign even as ever poll and pundit warned her that she was enraging the white working class. Krugman cannot identify Hillary and the New Democrats as the most prominent leader of “the political establishment [that] has been obsessed with the evil of debt” without raising the obvious question – why didn’t he speak truth to power? Why didn’t he advise her to end her obsession with sovereign debt and her economic policies that made war on the working class?

Of course, Krugman did something worse than simply fail to speak truth to power. He joined in the reprehensible effort to trash the reputation of a well-respected economics scholar, Professor Gerald Friedman. Friedman had donated to Hillary’s campaign, who dared to point out that Bernie Sanders’ economic stimulus proposals were far superior to her proposals. On what basis did Krugman seek to destroy the scholar? Krugman complaint was that the economist was insufficiently “obsessed with the evils of debt.” Friedman’s study made a point that Krugman had long made (and I quoted above). The 2009 fiscal stimulus was far too small and that the federal government had made a dire mistake in moving toward austerity in 2010 rather than increasing substantially the size of the stimulus package.

What was really going on, of course, is that Krugman was out to defeat Bernie’s candidacy for the nomination. Had Bernie won that nomination he would now be President-elect. Sanders was the one candidate for the nomination that embodied what Krugman said the Democratic Party desperately needed – ending the hold of “the political establishment obsessed with the evils of debt.” Krugman simply viewed truth and Friedman as collateral damage in his zealous fight to defeat Bernie. Krugman has been unable yet to summon the integrity and courage to admit how badly he served the Nation and the millions of Americans that rejected that “political establishment.” I hope he will reach out to Friedman and begin to offer his apologies.


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  1. Dick Burkhart

    Krugman does not even understand banking and debt. See Steve Keen’s critique.

    The one thing Krugman does understand is counter-cycle spending, yet not limits-to-growth.

  2. nobody

    It’s a shame that this piece is marred by the use of disablist slurs. About a quarter or a third of my facebook friends are active in the disability rights movement or the neurodiversity movement or both. If I do go ahead and share it, I know that a lot of people will be offended by the prominent use of words like “insane” and “idiocy,” and will probably be provoked to feelings of antipathy towards the post and its author. I hope that Bill Black will consider discontinuing the use of such words in such a fashion in his writing.

    1. Foppe

      Although I agree that this piece could easily have been written without using those terms, I feel somewhat compelled to add that this general attitude drives irritates and frustrates me greatly. Everyone encounters things that they can choose to take offense at if they are so inclined; but why on earth would you, especially when it’s utterly secondary to a point being made, and not indicative of a discriminatory attitude? There aren’t enough hours in the day. And meanwhile, much worse things are being ignored (the majority of my fracquaintances who get worked up over these sorts of issues are quite well-off, and — not accidentally — supremely uninterested in economic justice, and understanding political economic developments, beyond uttering the requisite platitudes).

    2. Bugs Bunny

      Is this some kind of trolling? Are insanity and idiocy actual psychological conditions? I really don’t understand this comment and how could anyone take offense at this.

    3. Patricia

      Gotta agree with Foppe. ‘Insane’ is no longer a field-descriptor for the mentally ill, and when it is now used towards them, it is demeaning. Likewise, which mentally disabled person wants to own ‘idiocy’? These words have become derisive descriptions of particular actions or viewpoints.

      Some mentally ill people occasionally become psychotic, which can be perhaps termed ‘insane’, but that is specific and not definitional to the group. Same too for the mentally disabled which are a wide variety, of which only the most severe could be labeled ‘idiocy’, but not done even then (because of what it does to the person who uses the contemptuous term, not because someone in that state would notice).

      Check the dictionary.

    4. Katharine

      With reference to Webster:

      Insane, from the Latin meaning unsound
      Idiocy, anything idiotic, i.e. foolish, senseless

      Both words were appropriate in the context in which they were used.

      I wish your friends would spend a little more time reading dictionaries and thinking about language and less looking for offense where none is intended.

      1. KLG

        Exactly. No one uses “insane” and “idiot” as clinical terms anymore. But Hillary Clinton ran an insanely idiotic campaign that was clear to anyone to her left who is not a denizen of “The Village.” Of course, there are all village idiots, when you get right down to it, and none of them is to her left. The entire Clinton campaign consisted of “EEEEKKK, TRUMP!” Yep, unsound, foolish, and senseless, not to mention insensate, ridiculous, self-defeating, and stupid. Hillary Clinton had one chance against Trump, and that was to embrace the half of the Democratic primary vote that supported Bernie with enough fake sincerity to get her over the hump. BTW, has anyone lately mentioned that her big lead in the primaries was built up in mostly Southern states in which she had not one chance in the election, while Bernie did well in the Upper Midwest? Didn’t think so.

    5. lyman alpha blob

      We’re supposed to be concerned about ‘neurodiversity’ now?!?!?

      Better neologisms and thicker skin please. No offense meant to leptoderms.

      1. two beers

        Call me crazy, nuts, or even wacko, but I think “nobody” is using Prof. Black’s article (which is implicitly critical of the Democrat Party’s overemphasis on identity politics) to satirize the identity politics fetishism at the root of the Democrat Party’s self-inflicted defeat at the (small) hands of a gibbering Cheetoh-hued charlatan.

        1. ChiGal in Carolina

          Aha – a subversive sense of humor, eh?

          What seriously does get old is Black’s incessant referrals to the white working class. Thought the point was we’re all in this together.

        2. lyman alpha blob

          If that’s the case then touche nobody!

          And while you’re at it would you mind sending a comment to my kid’s principal who just informed me that the elementary school teachers and guidance counselors did everything they could to address the “concerns” of students and “comfort” them after the recent election without seeming to understand that such behavior is exactly why so many people voted for the giant Cheetoh in the first place.

          I wonder if any school counselors offered comfort after either of Barry’s election victories?

          1. Adamski

            This historic defeat calls for a radical change of course. The Democrats not being good enough, we must found a new party. And it shall be called: the At Least I’m Not Racist Party. Then all the ppl who need comfort over Trump’s victory or seeing the word “idiot” on the internet can join it and leave the rest of us alone

    6. Temporarily Sane

      Do your disabled friends “self-identify” as ‘idiots’ or ‘insane’? As a person who has been diagnosed with a “mental illness” these words do not bother me at all nor do they bother other “crazy” people I know. Why not? Because nobody uses them to describe or slander “mentally ill” people. Okay, they might use ‘crazy’, but that doesn’t bother me either. Sticks and stones and choosing ones battles etc.

      There are of course still words thrown around that are incredibly ugly and demeaning whenever they are uttered…but ‘insane’ and ‘idiot’ are not among them. Sure, they can be used as insults but so can many words. Sometimes I think identity politics itself is a sign of a collective “mental illness”. It is, at the very least, irrational.

      I wish people got as passionate about actions as they do over words. Eg. how many Dem true believers are “outraged” at American government sanctioned extrajudicial executions of Muslims via our bombs and UAVs (drones) and USG policy of funding and arming murderous sectarian mercenary groups? Certainly not many when a Democrat president is in power.

      Sorry for the OT rant…

    7. Bill H

      It’s astonishing the degree to which a sense insult can be contrived. Each word is used precisely once in the article, the word “insane” applied to politics and “idiocy” to a campaign, so neither was applied to a person. It seems the drive to “political correctness” has reached such a fever pitch that almost any word in the language can create offense that sends someone running off to a “safe space.”

  3. Disturbed Voter

    Speaking truth to power doesn’t pay the bills. Being ideological means you don’t have to consider the facts on the ground.

    1. Temporarily Sane

      It doesn’t pay the kind of bills Krugman et al are accustomed to running up, that’s for sure.

      I wonder if peopke like PK really are always as out of touch as they seem or if they consciously write what they think their masters want to read even if they themselves do not fully believe it. I wonder because sometimes Krugman, and other pundits, write stuff that implies they do “get it” and then go back to propping up the status quo.

  4. flora

    I’m glad Hillary ran her campaign as a New Democrat without trying to disguise her pro- Wall St. and anti-worker/anit-Main St. views. Bill and O disguised their New (aka Fake) Dem views and got elected. They then proceeded to run GOP programs and policies. Hillary didn’t disguise who she would represent and what she intended to do. She lost.

    It’s startling to read Krugman defend her bad economic policy. clarifying, too.
    New Dems changed what’s considered acceptable Dem debate topics: don’t talk wages, talk identity; don’t talk Main St., talk trade deals; don’t talk pensions, talk feelings, etc. The topics for debate never challenge GOP Wall St./TBTF/mega-business interests. Did Krugman fall into this trap? For the US working class free trade doesn’t work. Is Krugman defending his comparative advantage theory in the face of a glaring failure?

    In my state the very weakened Dem party a couple of years ago elected as its state chair a guy who, once elected, said the state Dems needed to be more like the GOP. It was nuts for the guy to talk like this. He was ousted. Looking at the US map of all the now GOP controlled states, I think this GOP sweep didn’t happen by accident. New Dem party central thinking had a lot to do with this. If the New Dems are in disarray and confused about the way forward I’d say that for them there isn’t one. They thrived only as long as they could sell out their base. The old “vote Dem or something bad will happen” doesn’t work when the somethings bad and worse have already happened to the base under Dem admins.

    Thanks for these posts.

  5. Carolinian

    Not only did Hillary promise austerity but she also promised more war. The truth is she was not running for president of the country but rather president of the current establishment and she thought that their approval would be enough. For example she was reportedly quite pleased when Kissinger told her she was doing a good job as Secretary of State.

    Whatever happens with Trump, we’ve escaped rule under somebody who, if not crazy, is delusional at best. Today’s news that Trump may be softening his stance on the Paris accords is yet another hint that in policy if not appointments he may be moving left from the extreme stances necessary to win the GOP nomination. Having a president who cares about public opinion is not the worst thing in the world.

    1. flora

      “she was not running for president of the country but rather president of the current establishment …”

      In that sense, she ran a more honest campaign about what she’d do than either B.C. or O ran.

    2. pretzelattack

      The truth is she was not running for president of the country but rather president of the current establishment and she thought that their approval would be enough.

      that’s very well put.

    3. TK421

      Trump might be delusional, but Hillary has committed numerous acts that showed her to be unfit for the presidency. Trump might commit such acts in the future, but one step at a time.

    4. animalogic

      What does it say about both the electorate & the success of Clinton’s campaign if we entertain
      two propositions ?
      1. It appears Clinton won the popular vote by a quite reasonable margin (1.7 million votes ??)
      2. It is being suggested, on the basis of exit poll data, that a number of States were won by Trump on the basis of fraud. The discrepancy between “actual” votes & exit poll data in these States were “Ohio (8.5 percent discrepancy), North Carolina (5.9 percent discrepancy), Pennsylvania (5.6 percent discrepancy), Wisconsin (4.9 percent discrepancy), Florida (2.6 percent discrepancy).” * As Eric Draitser, points out (& is well known), these were ALL States Trump had to win.

      1. John Wright

        However, the Republican, Democratic,and financial elite sure seemed in Hillary’s camp.

        Was the fraud implemented and coordinated by lower level Republican officials who ignored the wishes of the top?

        These Republicans were willing to risk possible jail time if fraud was proven by an angry Democratic party?

        Perhaps it was the clever Russians, doing the vote tampering under the very eyes of the Democrats who have been claiming the Russians want to influence the election by electronic means.

        And there is a Democratic President who can request the NSA/CIA to be hyper vigilant to possible election tampering by foreign/domestic sources.

        Yes, it could be explained by Russians and lower level Republican officials who depended on the technical incompetence of the Democrats to allow them to proceed with little risk of discovery.

        What does it say if the Democrats knew the “vote tampering” train was coming were still unprepared to react.

        1. jrs

          Many of the elite seemed in Hillary’s camp until the Comney thing, yea hmm pretty loud announcement of defecting there. Of course Trump always had a few ugly establishment on his side as well, but Hillary had the numbers of them.

          Maybe the Dem party is in on it. Didn’t Trump hire a known election tamperer?

      2. TheCatSaid

        We don’t know what actual vote counts were in most places. We don’t know who cheated more or less than others. We don’t know how much voter suppression affected primaries or general elections, though some have opined on this.

        If people request Ballot Images maybe we will find out something about the vote counts. These files are available even for paperless voting machines. More info at

        If we want a democracy then we have to ask for it.

        It’s disappointing to see so much ongoing discussion of purported results and so little discussion of the absence of meaningful data. Would NC take accept financial “reports”–based on no existing financial records or paperwork, only a dodgy CEO’s claims–to be a meaningful departure point for credible financial analysis? Why are NC and its readers not challenging election results as vigorously as they would do if there were a similar lack financial data? This has nothing to do with one’s candidate preferences–it has everything to do with having a factual basis for results.

        Wouldn’t the better starting point for discussions about elections be to highlight the need for auditable election systems, and to encourage genuinely auditing those aspects that can currently be audited? NC folks know a thing or two about auditing. Election systems require at least as much scrutiny, and the lack of awareness about what constitutes “auditing” in an election system–including what election audits can and cannot tell us–is unfortunate.

        I don’t know who would have / should have won because there’s little data to support any particular view.

  6. Paul Art

    Billionaires and Millionaires and the top 1% love austerity. Why? Because it has everything to do with preserving their accumulated wealth. Once you have accumulated your wealth then the next thing you constantly work on is to preserve and increase it. One of the dangerous risks to wealth comes in the form of inflation. Government spending can increase inflation. Unfortunately inflation also is the engine of economic growth. You can never have growth without inflation – unless there is an unnatural rise in the price of an essential commodity (oil) that is causing overall inflation to rise (stagflation in the 70s). Government spending indirectly causes inflation because its causes wages to rise by giving good jobs to everyone. More money in the hands of more people increases their spending power and increases demand and therefore increases prices and hence inflation rises. But this is a good thing. It energizes the market and companies spring up to mop up this extra spending of consumers – they are willing to take risks to get at this cash. The 1% hate it because new product innovation is risky and also because inflation decreases currency values. CEOs in particular who are charter members of the 0.1% club are today sitting on huge monopolies that own 60-70% market share and peddle products that are only marginally different from earlier versions or products that customers perforce buy due to lack of choice. Honeywell and GE are pretty much Oligopolies as are Northrop Grumman and General Dynamics. A CEO will never take a risk if he/she does not have to. They are happy with their market shares and do as little product innovation as they can. The great business guru Michael Porter actually has written of this as a legitimate business strategy – i..e a company must use all resources at its power including lobbying to make itself a monopoly – it is one of the ‘Porter’ forces. Most corporate profit growth in the last 2 decades has come from outsourcing and layoffs and taking an axe to labor costs in one way or another. Coming back to inflation, keeping things static like this and living off current market share is a wonderful way NOT to increase wages. Zero competition in the corporate sector means zero wage raises for labor. Zero inflation. All nice and dandy. All your millions and billions are safe and sound and retaining their value in the bank and stock market. This is why B**rds like Pete Peterson and the other Wall Street vultures not to mention their water carriers in the main stream economy like Jeff Immelt of GE or Dave Cote of Honeywell love austerity and keep whinging about uncertainity as an excuse not to invest in new products etc. This is the root cause of the 1% love of austerity.

    1. TheCatSaid

      @ Paul Art:

      They are happy with their market shares and do as little product innovation as they can.

      That might seem like a safe strategy but M-CAM has found that not to be the case over the long term. They have found that genuine innovation (and there is precious little of it) has very real market benefits. They developed ways to measure meaningful innovation (not the buzzword type of fake innovation). Earlier this year their metrics were incorporated into the CNBC’s IQ 100 innovation ranking procedures.

    2. Minnie Mouse

      The same top 1% have no sense of austerity when it comes to running up massive trade deficits with the rest of the world.

  7. PeteW


    I usually love your work but not this. I think you have fundamentally misunderstood Krugman. He is NOT saying budget deficits are a moral issue. He is characterising that as the flawed argument of right-wing economists.

    No-one has done more than Krugman to popularise the phrase “economics is not a morality play”.

    Similarly no-one – really, no-one – has done more to bring the root criticisms of austerity to a wide, mainstream, non-economist audience. His NYT columns were like a beacon of light to many non-economists in the aftermath of the financial crisis and beyond: clear, pungent, well-argued and direct.

    His support for HRC over Bernie may have been a mistake, who knows? I didn’t much care for his anti-Bernie stuff but, benefit of the doubt, I think it was sincere: he thought HRC was the best candidate to beat the Republicans in a presidential election, a defensible – if possibly wrong – point of view.

    1. Yves Smith Post author

      Sorry, having read Krugman regularly on this topic, and particularly during the many budget fights during the Obama Administration, Black is 100% correct. Krugman has been willing to call for deficits only as a short-term measure and repeatedly endorsed the idea of longer-term fiscal balance. If you understand the fact that the US has a sovereign currency plus fiscal balances, that is a prescription for low growth at best and weak employment. Think of the economy as consisting of a household sector, businesses and the government (we are excluding the export/import sector because it would not change the conclusion in the case of the US). Double entry bookkeeping says the net savings of all three sectors must add up to zero, as in savings by one must be spent by another. The household sector is always a net saver for retirement and emergencies. The business sector chronically does not invest enough to meet the demand for savings of the household sector (this is well documented historically, businesses set their return targets higher than is optimal for society and the pattern has only gotten worse, see this 2005 article: That means the government must deficit spend, pretty much all of the time, until it is on the verge of generating too much inflation and needs to run a surplus. Having a lot of social safety nets accomplishes that since spending goes up when times are bad and falls a lot when employment and wages are high)>

      1. RMO

        The funny thing is that even the (relatively) limited way in which Krugman accepts the need for stimulus spending and government intervention places him well beyond the pale in terms of what is acceptable in Washington, especially among the candidate he pushed so intensively and irrationally. I still wonder if he really though that Bernie would have lost badly and that Trump will be so terrible that Clinton would have been preferable OR was he actually deluded enough to think he would be allowed in the club in an HRC administration even to the extent of being part of the cabinet?

        I can still give old Paul a little credit because it was his writing on economics that first showed me that “a country is not a company” so to speak, though he certainly has a lot of blind spots and arrogance. It was only the full blown craziness that took over his blog and columns when it looked like Bernie chad a genuine chance at the nomination that made him impossible to read anymore.

        1. PeteW

          Well he may not be ideologically pure enough for y’all but when I see Krugman laying into moronic hacks like John Cochrane and Niall Ferguson, et al, I give a little cheer.
          Training his guns on Bernie was certainly not his finest hour but for me he still has credit in the tank.BTW did Bernie ever reach out to Krugman and ask for his input? Genuine question.

          1. TheCatSaid

            “Did Bernie ever reach out to Krugman and ask for his input?” I don’t know, but I can’t imagine why he would. Why would one ask someone who has clear political bias and–possibly related–gigantic economic blind spots for their advice?

        2. Adamski

          He has Stockholm Syndrome. Just because he preferred Bill Clinton to beat Bush Snr in 1992 means, apparently, that you always pick the Democrat. And since the party moved right since Reagan, the need to get centrist voters is the priority and you never need to look at polls again. (E.g. on the basis of available evidence at the time, however flawed, Sanders was more electable than Clinton versus Trump in national polls, therefore Dem primary voters and PK should have supported Sanders even if they didn’t like him).

          And he’s still not changing his tune on the centrist electability crap. He literally blames racists and Russians, racists and Russians, it was the FBI and not the economy that sank Hillary Clinton. It’s not the reality-based party anymore, epistemic closure has set in, the same as with the Republicans. (I will add the proviso that some Sandernistas are equally blind e.g. insisting he had a path to the nomination long after the numbers showed otherwise, or believing Clinton committed election fraud to beat him).

          Going left of Clinton to get more votes? No way, can’t be true, Americans are conservative. As if that would somehow mean that Clinton or Obama should never have been elected? But things, and voters, can change between 1992 and 2016, or between 2008 and 2016.

        3. WhiteyLockmandoubled

          I occasionally wonder whether Krugman is consciously ideological or a little dense. then I remember health care. He, like every Democratic economist keeps saying that growth rate in health care costs, and, in particular, private sector health care premiums has slowed dramatically since passage of Obamacare.

          Not true. Nominal premiums have plunged due to the drop in underlying inflation. Private sector health care premiums have grown at 333% of inflation over the past 5 years compared to 257% the five prior years.

          Imagine Krugman getting a paper from a freshman at Princeton discussing the cost of another, less politically important service or commodity, and babbling on about the nominal rate of growth while ignoring inflation. Big, fat, F, no doubt. He knows.

          1. TheCatSaid

            ideological? a little dense? Maybe, but I think it’s because he wanted his candidate to win for self-serving reasons (an advisory position in a HRC administration, or favored access or other career perks).

  8. jake

    By temperament and inclination, Krugman is a “free market” status quo Republican with one or two sound ideas which exceed his otherwise narrow ideological range.

    Only the intellectual poverty of post-Clinton liberalism and the arithmetic failures of American journalism could confer on him his preposterous status as a Liberal Avatar with a Conscience.

    The Sanders campaign unmasked him for what, at heart, he is: a vain hack in love with his formulas, indifferent to social justice, vituperative in the face of his own errors and actively hostile to any proposed change which puts his own guru status in doubt.

    1. NotTimothyGeithner

      Being correct on the Iraq War is only a minimum standard. It’s the equivalent of not punching the elderly trying to cross the street.

    2. Spring Texan

      Yep, you nailed it on Krugman with the “vain hack etc.” verbiage. He’s not worth my time. Should have become disillusioned with him much sooner than I did. Now it’s crystal clear.

      Can’t ever admit mistakes, either.

      1. juliania

        Well, he did have that ‘deer in the headlights’ look about the eyes when they gave him that Nobel prize, or maybe more like ‘the man in the iron mask’. I hope they don’t give one to Mr. Black

  9. KYrocky

    I won’t pretend to understand Krugman’s motives, but in his critiques of Friedman, as I read them in real time, I did note Krugman’s almost complete avoidance of the computational elements used by Friedman and his use of much more personal attacks and derision.

    Krugman’s one technical observation, the growth rate Friedman used in his modeling, was harshly attacked; however, Friedman’s explanation for it, as well as those of others, supported that it was consistent with other widely accepted forecasting models when judged in the context of the total model. In many of his other writings Krugman would not have hesitated to get into the deep weeds of the modeling (the man loves his models), yet he seemed to completely avoid doing so with Friedman’s, and other’s, detailed explanations and defense. At a minimum I expected Krugman to blog, under his typical heading of “wonkish”, and provide a detailed dissection of every mathematical and modeling defense offered on Friedman’s behalf. I was really looking forward to it, but that never happened. So unlike Krugman. My impression was that Krugman, like Reinhart-Rogoff, had gone silent when cornered.

    1. Foppe

      How can he have felt cornered when he was the one who initiated an attack, though? He knew he had nothing to say substantively; but felt compelled to enforce the Dem Party orthodoxy, much like Brad DeLong, that other credentialed hack who pretends to be outside the mainstream but really isn’t. Quoting him/them is about as sensible as quoting Larry: why on earth would you want to give people the idea that these guys are worth listening to? (Even Stiglitz is rather a mixed bag, imho.) There are so many better sources that are more “deserving” of being platformed, and who will be more likely to reeducate those who take an interest. E.g. David Harvey, Mark Blyth, Richard Wolff.

    2. Adamski

      More importantly, Friedman wasn’t working for Sanders, and overall a big stimulus and universal healthcare is what Krugman himself wants. One campaign spokesman saying he liked the 5% claim doesn’t make it the campaign’s claim. Clinton could make as many mistakes as she likes and still deserves to win the general election, Because She Is the Democrat, and few voters would have cared about the 5% claim or even noticed it. So why the freakout? Already settled on Clinton and was looking for ammo? Or it showed the Sanders campaign wasn’t properly deferential to professional centrist “wonks”?

      Bigger than the Friedman controversy was the Urban Institute’s hatchet job on Sanders’s healthcare plan. Check out Physicians for a National Health Plan, who should be Krugman’s heroes as they are leading the campaign for single payer. They said the Urban Institute was talking rubbish. Yet Krugman repeated the line that Sanders’s numbers do not add up because “progressives” said so. Clinton said the same in debates about “progressive economists” on health. Sadly Sanders dropped the ball at that point, he should have called out the Urban Institute but he immediately retorted that other countries have universal healthcare anyway.

  10. Greg T

    Krugman wrote an entire book ( End This Depression Now! ) devoted to the thesis that government retrenchment in a slump is the worst policy to support. So what does he do? He trashes the one candidate whose economic policy proposals most closely mirror his own. Sometime around 2010, he became a chief propagandist for the Democrat Party and surrendered objective analysis.
    It’s really too bad. Paul Krugman went from can’t miss to can’t read in very short order. Many of us appreciated his columns calling out the Bush administration for its lies. But time after time, he has refused to turn that critical eye on his own party, preferring instead to regurgitate the party line.
    I’m at the point where I can’t trust him to offer an honest appraisal of the incoming Trump administration. Once you’ve lost your credibility as a columnist, it’s time to retire.

    1. Arizona Slim

      End This Depression Now! was an excellent book. I still don’t understand why it didn’t get the audience that it deserved.

      1. Greg T

        I agree. I read the book twice. He’s still a first-rate economist. Krugman didn’t get dumb overnight. He’s chosen to succumb to party pressure. In doing this, he has sacrificed his credibility.

        1. TheCatSaid

          Can one separate Krugman’s “succumb[ing] to party pressure” from thinking “what’s in it for me?” KYrocky takes a more noble stance. To me it just looks like a sell-out and pandering to someone one hopes will be a source of future career & status-nourishing tidbits.

  11. Ptolemy Philopater

    The fundamental question as to why Keynesians like Paul Krugman ultimately support austerian policies is cui bono? Ultimately they must opt out of the deficit solution to fight deflation because they defend an economy based on debt, the private as opposed to sovereign creation of money. Just as Secretary of the Treasury Henry Morgenthau persuaded Roosevelt to austerity in 1937, so Krugman defends austerity today. Once the cat is out of the bag, and it is recognized that the Treasury can finance ALL functions of government without incurring debt, the ability of the parasite class to leech off the taxpayer is destroyed. The private creation of the money supply is the chief means by which the .01% can control the economy. Hence all the propaganda against deficit spending.

    This economy has been de-industrialized and financialized for one reason only, namely to divert the power of the government to finance society’s needs to preserving the economic power of the ethnically privileged. There is no longer any need to service the people through the physical economy, there is only the need to launder the money that the Federal Reserve hands out gratis to those same ethnically privileged. By ethnically privileged I mean those born into the class that creates and manages the money supply. There is a need by this class to justify their privilege through myths of superiority and to degrade the working class as deserving of their fate, even as they rely on the working class to supply their needs.

    Abraham Lincoln was not assassinated because he abolished slavery, but because he was about to abolish debt slavery by continuing to produce the Greenback and the prosperity that it created. This could not be allowed to stand and the .01%, gathered all that prosperity to themselves as they continue to do today. This is the fundamental issue of our time. All talk of deficits and national debt are used to obscure this fact. Hillary Clinton’s continuing defense of austerity can only be understood in this context, namely the context of class warfare.

    1. Russell

      The way I have been characterizing what you wrote Ptolemy Pilopater is “they” perpetuate the fiction that we are still on the Gold Standard to continue to loot all treasuries that hire or listen to one of Goldman Sach’s Alums.
      I mean Financial Engineers of Wall Street operating in the Meyer Lansky group, as opposed to the Petroski Group.
      Or “Mobster Financial Engineers” as opposed to “Civil” Engineers.
      Financial Terrorists were good friends with the Clinton Unit, where Missouri School Economics led by Hudson & Knowlton are not insiders, but were advisors to Sanders.
      I recognize that without reading most people who vote have little background in Financial Engineering & Economics.
      If I was in a producer position for TV from which all curses & blessings flow, I’d be putting every ounce of effort into a show featuring the personalities, & writers of Naked Capitalism.
      my references are Henry Petroski, Michael Hudson, The History of Economic Thought, Robert Reich, and David Cay Johnston.
      Johnston seems to have taken a time out from the development of a Tax Code to tell of Trump, but how it is that the Tax code effects the Economy & Economics is no mystery to him.

    2. Tim

      I agree. Private banks want to be the ones deficit spending by creating money with new loans. Per Yves comment above. The economy should be considered to have a household sector, business sector, government sector and private bank sector, the last two fighting over who gets to do the same job of deficit spending.

      The oligarchy always wins so the deficit spending is always done by the private bank sector. Example, for the great recession instead of helicopter money direct to the populace we got quantitative easing that facilitated the private bank sector in loaning money (supposedly, we all know how innefective this transmission method really was).

      Private banks just love getting a cut of our money!

  12. Karl Kolchack

    Good essay, but leaves out one very important point–if austerity is so important to the New Democrats, how come none of them ever advocated that it be practiced on the Pentagon? Obama borrowed nearly ten trillion dollars during his presidency, yet very little of that money ever made down to working people. A goodly portion of it was spent on unnecessary weapons systems and launching wars that made the nation less safe. What would have been so wrong with saying that instead of building the boondoggle F-35, we use the money instead to repair the nation’s crumbling infrastructure? Big contractors would have still made a bundle either way.

    1. Balakirev

      I think the New Dems never advocated austerity at the Pentagon, or for corporations receiving tax breaks and subsidies, or for the burgeoning spooks branch of the federal government, because austerity isn’t ethically driven. It’s simply the old “more for the rich and powerful, less for everyone else” policy in a new three-piece suit, with pretensions to learning. But the questions are never answered, and the numbers are always fudged. It’s a joke, but a very expensive joke.

      Its greatest success has been transferring funds to the one percenters, without causing the slightest outrage from so many whose pockets are being systematically picked.

  13. Seamus Padraig

    It’s obvious to me what happened in this case: Krugman was angling for a post in a Clinton administration, so he spent the whole of the campaign season sucking up to Hellary and being her hatchet-man. What a hack! I can’t believe I once took this guy seriously.

  14. Seamus Padraig

    As far as Hellary is concerned though: even if Krugman had leveled with her, she would have ignored him anyway. The Clintons are a wholly owned subsidiary of the banks, and austerity (for the reason described above by ‘Ptolemey’) is exactly what they want.

  15. juliania

    One thing Mr. Black doesn’t mention is maybe the fact that Hillary could not go anti-austerity because husband Bill had started the ball rolling. We could speculate that as the reason he threw his phone off the roof – to warn her against making that turnaround. Poor Hillary. Damned if she did and damned because she didn’t. We’ll find out “the truth” in her memoirs.

    1. Samuel Conner

      That’s a good point. To have argued against continuing austerity would have put her in opposition to policies that both WJC and BO were proud of — and both of them seem to still be well-regarded by many D voters. So she may have felt politically constrained to advocate bad policy. Which, if true, would be another reason she was the wrong candidate.

  16. sgt_doom

    Great article, but I stopped long ago commenting on that lobbyist for the central bankers, Krugman (

    My only comment is in the Inspector General’s report on the DHS awhile back, it was mentioned that they were missing around a thousand rifles and badges.

    Latest report states they are missing thousands of green cards.

    So far, they aren’t missing any paychecks?

    (Best argument against gun control: DHS, FBI, CIA, DIA, NSA, SEC, IRS.)

  17. Davidt

    Krugman devalued his brand with his articles concerning Hillary and the coming election. It was written such that long time readers could have thought he had someone else guide his hand. Also during this period it seems reader comments were censored. The number of comments were very low compared to those of the past and top commenters usually found in the comment section were missing.

    He was not alone in this devaluing of brands leading up to the election. Many blogs presented arguments and repeated the thread of the day to their readers out of step with their past writings and persona The fact that the same propaganda, dare I call it that, appeared in many other places at the same time.

    It was a real wake up call for me to reconsider my trust in these lockstep sites.

  18. Plenue

    It is quite amusing how economists will frame government debt as a moral issue, when they dispense with morality in pretty much every other instance.

  19. Jeremy Grimm

    Is Krugman still worth the candle?
    Why bother reviewing or critiquing his views? The moral loadstone of his compass fell off and sank into the pan.

    1. pretzelattack

      i just see it as part of the struggle to get the dinos out of the democratic party. he’s still got a major platform that he uses to fight for the neoliberals, so he’s still relevant.

  20. LA Mike

    With all due respect to Bill Black and Yves, two people I have great respect for, I’m at a bit of a loss here. I see things the same way as PeteW above.

    Krugman has written an endless number of columns and blogs about how we’re in a liquidity trap and that austerity is the worst possible prescription. He’s quoted Keynes many times with that, “we’ll all be dead” line, about how government should stimulate now instead of waiting for no reason.

    I’m confused. I definitely noticed how Krugman aligned with Hillary over the last year and a half. It made me want to puke the way he’d attack Bernie. Still, that’s a distinct time frame and modus operandi from all of his anti-austerity writings.

    Did he support Hillary and trash Bernie? Yes. Did he support a candidate more likely to maintain the status quo instead of the candidate who would stimulate according to Krugman’s own prescriptions? Yes.

    But has Krugman long been some sort of champion of austerity? I really don’t see how anyone is coming to this conclusion. There must be something I’m missing.

    1. Foppe

      How can someone be a “champion” when he shuts up precisely when he might have an impact, and only talks when he knows he won’t? To Krug, it’s all “academic”. (And note that being anti-austerity — while not really criticizing anything else / more fundamental — is about as daring as being against arterial bloodletting as a remedy for disease.)

      1. PeteW

        Maybe he “shut up” – that’s if he did, I’m not going to trawl through all his columns to check – because the US unemployment rate had fallen from 10% at the peak of the crisis to 5%, so the case for stimulus spending was not longer quite so pressing. Plus there’s only so many times you can say the same thing.

        Here we are facing the existential horrors of Trump and you guys are still sniping at the Wicked Witch and Paul Krugman. You sound like Glenn Greenwald.

        1. John Morrison

          “You sound like Glenn Greenwald.”

          Seriously, is that bad?

          It is reasonable to hit hard against those who enabled Trump’s win — if, for no other reason, to educate and deter those the next time around. It’s also reasonable to realize that Clinton would also probably have been a bad president, continuing the Bush and Obama policies of aggressive war and attacks on civil liberties.

      2. LA Mike

        Hi Foppe,

        That’s what I think is the valid criticism. For potential personal gain, he compromised his own belief system publicly.

        But the article seemed to imply that Krugman’s always been pro-austerity. That’s why I’m confused.

  21. Sanford Calef

    I do not understand why Bill Black is wasting words dissin Krugman.
    Krugman was always for stimulus and deficit spending.
    Remember his diatribes against “the Confidence Fairy”?
    (The false belief that somehow if confidence is restored everything will be alright?)

    i do not know how much louder he could have shouted the obvious.

    I suspect his sin was being a Hillary supporter.
    Bernie backers seem to be still quite steamed over the primary,
    and doubly so over the election.
    I saw more anti-Hillary stuff in Naked Capitalism than in Facebook for Pete’s sake.
    Yves must be proud.

    Bernie Crybabies remind me of French Leftist still pining for Trotsky.
    Bernie would not have won against Trump.
    Couldn’t even win the frickin primary!
    He would have been crushed much worse than Hillary.
    So best let that mental unicorn go.
    and move on.

    1. pretzelattack

      bernie polled a lot better than clinton. which is why we need to either take over the party that rigged the primaries for clinton, or start a 3d party. clinton stupidly decided to throw all the left leaning and working class democrats under the bus in order to court her natural republican constituency, and predictably lost for that.

    2. John Morrison

      I agree with you about Krugman up until a year or so ago (maybe longer). The problem is that he seemed to change, when it came to the Democratic primary.

    3. Yves Smith Post author

      Sanders would have beaten Trump, so crybabies are the Dems who are still having childish tantrums over Hillary’s loss. There was nothing remotely like that from Sanders supporters. Your remark is pure projection.

      As to NC having more anti-Hillary material than your Facebook friends, that simply indicates that we are better informed than they are. You need to rebut what was presented, rather than tell us that you (largely) inhabited an echo chamber.

  22. tongorad

    Krugman still does not understand sovereign money.

    Neither does the working class. If they did, you would see broad support for public spending.
    I think it’s safe to say that most people’s mental model is government budget = household budget.
    I think a big problem for MMT is the level of abstraction, as in asking people to learn and familiarize themselves with concepts that run counter to their own lived experience.
    We are subjects in an empire of deception.

    1. Yves Smith Post author

      It’s not the working class that objects to budget deficits. It’s the Acela corridor types and the guys on Wall Street (who overwhelmingly see government as like a business despite the fact that business provide income statements and USG might look “profitable” if you differentiated between expenditures and investments).

    2. John Morrison

      I think that there were times when Krugman seemed to understand sovereign money.

      Asking most people — not just the working class — to understand things at an abstract level is just too much. (I’m speaking from experience as a physics instructor. Heck, it’s hard enough to get them to understand a plain direct statement.) Then we have the trouble with (trying to) explain things: “If you’re explaining, you’re losing.”

      Something also happens when one tries to say something going against hard-held beliefs. Something that turns them into mindless incompetents — at least temporarily. (Seriously!) I wonder if that happened with Krugman. Perhaps the idea that Hillary Clinton was likely to be an evil president struck that note.

  23. ellen moody

    Can someone explain to me why Krugman would not want Sanders? I do not understand why all these democrats not linked directly to the Clintons rejected Sanders? is he too nice a man?

    1. John Morrison

      Sanders challenged the mainstream orthodoxy. Clinton embodied the orthodoxy. Granted, Krugman should not have been one of those, since there was a time when he was outside the orthodoxy.

      There was also the scary possibility that certain people would be jailed, or even executed. Maybe even tortured as punishment.

  24. pat b

    Hillary was willing to enrage the White Working Classes because she hated ‘Everyday Americans’.
    She also wanted to see infrastructure decay so that she could sell it off to Goldman…

    She wasn’t stupid, she was doing what was in her nature.

  25. pslebow

    Semantics – Why is it any surprise that sovereign money is not understood when the promoters of it use the negative terms “debt” and “deficit”, which are entrenched in common usage, to describe the positive act of “investment”? Those terms should always be used with qualifiers – at the very least “so-called…”. One surrenders the argument even before it begins by debating on their “terms”.

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