Krugman: "shaping, slicing and selectively citing numbers" Posted by: Jon Henke
on Friday, June 03, 2005
I've waded briefly (but effectively!) into the fight over Daniel Okrent's comments about Paul Krugman's habit of "shaping, slicing and selectively citing numbers". Now I think it's time to do something more comprehensive. Herewith, a roundup of instances of Krugman "shaping, slicing and selectively citing numbers". Appropriate links to quotes/etc can be found in the original posts.
But since the politics of privatization depend on convincing the public that there is a Social Security crisis, the privatizers have done their best to invent one.
Reality: The "privatizers" have "invented" no such crisis. In fact, it was widely recognized during the 90s by such luminaries as, ahem, Paul Krugman: "The paper debt is the least of our problems. The big problem for the U.S., If we're looking about the long term is the implicit debt, Social Security and Medicare. And that's huge..."
That claim ["that Social Security faces an imminent crisis"] is simply false.
Reality: Who's claiming that Social Security is facing an "imminent crisis"? In fact, as Bush said, the problem is that "the longer we wait, the more expensive the solution become".
Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning." ... When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund.
Reality: "it's true that when the Social Security system starts cashing in its i.o.u.'s the federal government will have to have higher taxes and/or lower spending than it would if it could simply renege on its promises."—Paul Krugman
Further, while Krugman noted that "we can't have a Social Security crisis without a general fiscal crisis", he also suggested that a general fiscal crisis is "a real possibility".
He mentioned none of those relevant facts and opinions while pooh-poohing the idea of coming problems with Social Security.
Bush loyalists begin frothing at the mouth when anyone points out that the White House pressured intelligence analysts to overstate the threat from Iraq ... But that is what happened...
Reality: From the Senate Intelligence Committee Report on the U.S. Intelligence Community's Prewar Intelligence Assessments on Iraq [pdf]: "The Committee did not find any evidence that intelligence analysts changed their judgements as a result of political pressure, altered or produced intelligence products to conform with administration policy. When asked whether analysts were pressured in any way to alter their assessments or make their judgements conform with administration policies on Iraq's WMD programs, not a single analyst answered "yes". Most analysts simply answered "no" or "never"..."
You can say this about Paul Wolfowitz's qualifications to lead the World Bank: He has been closely associated with America's largest foreign aid and economic development project since the Marshall Plan. I'm talking, of course, about reconstruction in Iraq. Unfortunately, what happened there is likely to make countries distrust any economic advice Mr. Wolfowitz might give.
Reality: Throughout the whole column, Krugman neglects to mention the fact that, while "Iraq's overall economy declined from $128bn in 1979 to $40bn in 2001", the IMF estimated "Iraq's economic growth for 2004 will surpass 50 percent", and in 2005, "the international agency expects GDP to reach 17 percent, and for the four years from 2006 to 2009, it expects Iraq's growth to average 10 percent per annum, which would make its expansion rate exceed that of red-hot China, let alone any of the mature, industrialized nations including the United States."
Paul Krugman frequently refers to foreign belief that Wolfowitz' belief in free markets have "failed", but neglects to mention the fact that the opposite is true. He is, of course, under no obligation to mention that...but it seems relevant, no?
To get effective reform, however, we'll need to shed some preconceptions - in particular, the ideologically driven belief that government is always the problem and market competition is always the solution.
Reality: Try to square that slap at supporters of free markets with Krugman's previous commentary:
However badly markets may work in the fluid new world of information technology, government bureaucrats would do worse.
Economist George Stigler once remarked that calling for government intervention because you've discovered that markets are imperfect is like giving a prize in a singing competition to the second entrant because you've just finished hearing the first. ... an antitrust policy is a blunt instrument wielded by people all too easily driven by the desire to make headlines ... Are you sure you wouldn't rather trust the market, with all its flaws?
Let's start with the jobs picture. The official unemployment rate is 5.2 percent - roughly equal to the average for the Clinton years.
But unemployment statistics only count those who are actively looking for jobs. Every other indicator shows a situation much less favorable to workers than that of the 1990's. A lower fraction of the adult population is employed; the average duration of unemployment - a rough indicator of how long it takes laid-off workers to find new jobs - is much higher than it was in the 1990's.
Reality: What Dale Franks wrote:
take a look at the historical data from the Bureau of Labor Statistics. Right now, 62.3% of the adult population is employed. That's certainly lower than the 64.4% of the labor force in the peak year of 2000. But it's also exactly the same as the labor force participation rate in 1988, a year that I think hardly anyone would have characterized as having a weak labor market at the time. Indeed, prior to 1985, the civilian labor force participation rate had never been higher than 60%. "Weak compared to the 1990s" and "historically weak" appear to be two quite different terms.
The second point that comes to mind is that the direction of the trends are all down. Since February of last year, the average duration of unemployment has declined from 20.2 weeks to 19.5 weeks. The unemployment rate is trending down from a high of 6.1% down to 5.2%. If the labor market is weak, then at least we can say with confidence that it's getting stronger.
Third, and perhaps most importantly, Mr. Krugman simply isn't making an apples to apples comparison. He's comparing where we are now, on the rising side of the business cycle—coming out of a recession—to the peak of the previous business cycle in the 1990s. In point of fact, the proper comparison between the current point of the business cycle would be a comparison to 1994 or so, when we were similarly in the second year of an economic expansion. In May of that year, the average duration of unemployment was—-you guessed it—19.5 weeks.
Moreover, economic growth has been ticking away nicely, with GDP growth above 3.5%. Stagflation implies stagnant economic growth, which is hardly the current picture.
To find a year comparable to 2004, we need to look back to 1994, when the economy was still recovering from the first Bush recession. In the first four months of that year, the economy added almost 1.3 million jobs.
Reality: Throughout the column, Krugman relies on total "payroll employment" in order to make a point about the state of the job market. He completely neglects to mention the unemployment rate at all—not surprising, since at the time of publication, the (April) unemployment rate was listed at 5.5%....almost 1 full point below the (April) 1994 unemployment rate of 6.4%. In fact, he studiously avoids mentioning the unemployment rate, even when it's highly relevant, writing of the 2002 Economic Report of the President:
President Bush needs about four years of job growth at last month's rate to reach what his own economists consider full employment.
...but neglecting to mention that the 2002 Economic Report of the President pegged the unemployment rate—which is what economists use to when they measure "full employment"—at 5.2%...barely below the unemployment rate at the time he wrote the column.
Krugman: "Yes, Halliburton is profiteering in Iraq — will apologists finally concede the point, now that a Pentagon audit finds overcharging?"
Reality: on the very same day, the NYTimes reported that "Halliburton did not appear to have profited from overcharging for fuel, but had instead paid a subcontractor too much for the gasoline in the first place."
Iraq's reconstruction, by contrast, remains firmly under White House control. And this is an administration of, by and for crony capitalists ... Cell service, they said, could be offered only by the winners in a bidding process — one whose rules, revealed on July 31, seemed carefully designed to shut out any non-American companies.
Reality: One year later, Krugman's guess turned out badly as "Middle Eastern and European cell-phone companies [edged] out American firms for lucrative Iraqi [cell] contracts".
For many middle- and low-income families, this tax increase more than undid any gains from Mr. Reagan's income tax cuts. In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent — but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down.
Reality: Krugman chose 1980 and 1988 as a baseline to compare the effect of Reagan's policies in taxes, despite the fact that Reagan didn't take office until 1981 and left in 1989. Perhaps not coincidentally, the '80-'88 dates, though having no apparent bearing on Reagan's term or on any particular economic cycle, contain data markedly more favorable to his position than '81-'89.
These are, of course, only a few of the myriad complaints and criticisms that have been levied against Professor Krugman. I should emphasize again that I think Paul Krugman is a manifestly accomplished and credible economist, and his academic work has been remarkable. My complaint with him is, much like Okrent said, Krugman is tendentious in his criticism and selective in his use of data to support that criticism. The result is not a "lie", per se—though there are examples of Krugman writing at cross-purposes with reality—so much as a misleading arrangement of facts.
The problem with Krugman is not that he criticizes Republicans—god knows there's been plenty of valid criticism to be made; the problem is that Krugman is so over-the-top partisan in his criticism—often even putting himself at wild variance with....himself—that he is forced into "shaping, slicing and selectively citing numbers" to make the facts conform to his apocalyptic picture.
The point Okrent made was not that Krugman lied, but that he was selective and misleading in his punditry. (quick: think of one time that Krugman criticized Democrats in the past few years!) That's a point can be argued successfully...though, apparently, not by Daniel Okrent.
UPDATE: More noise on this front being made elsewhere. NRO has a contest for the "Jayson Prize" "for coming up with the best-ever, most-outrageous Krugman statements within the following six categories": "Shaping, Slicing, and Selectively Citing Numbers; Biggest Howler (Political); Biggest Howler (Economics); Worst Prediction; Funniest Inadvertent Confession; N. Gregory Mankiw Award for Excellence in “Just Making Stuff Up.”"
"As growth accelerates and the number of jobless falls, much of the current despondency over the state of the world economy will surely dissipate. Stories about the "jobless recovery" will fade from the press, to be replaced by upbeat tales of business success.
The optimism that is likely then to dominate economic commentary will, however, be misguided—even more misguided than the doom-and-gloom pessimism that prevails today. The fact is that all of the industrially advanced countries are in deep economic trouble. The irregular rhythm of recessions and recoveries sometimes exaggerates their problems, while at other times it masks them; but to anyone who looks behind the business cycle, the disturbing long-term trends are unmistakable. In Europe, in the United States, and increasingly in Japan, it is becoming obvious that something has gone wrong with the promise of economic growth."
Of course, as if on cue, the US economy promptly boomed for the next 6 straight years...providing Krugman a good bubble to use as a baseline when the economic cycle turned down again.
4. Worst Prediction
Sorry, wrong crony: Krugman claims Iraq rules are "designed to shut out any non-American companies". One year later, an "international financier with ties to Saddam Hussein's regime and the United Nations' oil-for-food program helped Middle Eastern and European cell-phone companies edge out American firms for lucrative Iraqi contracts".
* Productivity will drop sharply this year. Nineteen ninety-seven, which was a very good year for worker productivity, has led many pundits to conclude that the great technology-led boom has begun. They are wrong. Last year will prove to have been a blip, just like 1992.
* Inflation will be back. Wages are rising at almost 5 percent annually, and the underlying growth of productivity is probably only 1.5 percent or less. Sooner or later, companies will have to start raising prices. In 1999 inflation will probably be more than 3 percent; with only moderate bad luck—say, a drop in the dollar—it could easily top 4 percent. Sell bonds!
* As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.
And my favorite prediction from that same source: "The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"—which states that the number of potential connections in a network is proportional to the square of the number of participants—becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's."
5. Funniest Inadvertent Confession
In light of his more recent criticism of Bush for the state of the labor market, this is funny: "I mean, basically, the number of jobs in the U.S. economy is, with some wiggle room, determined by the mind of Alan Greenspan."
KINSLEY: Well, some people think, i.e. the supply side conservatives, The Wall Street Journal editorial page and so on- think that any talk of what used to be called the Phillips [sp?] curve, a tradeoff between inflation and unemployment, was nonsense. Is there anything to that?
KRUGMAN: Well, based on their record- I think if The Wall Street Journal editorial page says something is nonsense, that’s two points in its favor. I mean, the Phillips curve - the idea that if you have low unemployment, the inflation rate accelerates, and if you have high unemployment, it slows down – has held up just spectacularly. I mean, you couldn’t have done a better demonstration of the validity of the concept on what we’ve been through for the past 15 years.
In light of everything he's been writing for years, this glimpse of the obvious is funny: "Well, I’m a liberal. I actually believe in taxing the rich..."
And in light of his claim that the "social security crisis" was being invented by privatizers and that the Trust Fund would be able to pay out just fine, this is amusing: "In short, the Federal Government, however solid its finances may currently appear, is in fact living utterly beyond its means. While the present generation of retirees is doing very nicely, the promises that are being made to those now working cannot be honored."
6. N. Gregory Mankiw Award for Excellence in “Just Making Stuff Up.”
His own opinion, but not his own facts: in which Krugman claimed "the White House pressured intelligence analysts to overstate the threat from Iraq", despite the bipartisan Senate Intelligence Committee report that reached precisely the opposite conclusion.