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Paul Krugman, Cynthia Tucker, and the Unemployment Benefits Debate, Pt. III
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The AJC’s Cynthia Tucker blogged today about a testy exchange we had last summer on ABC’s “This Week” regarding government unemployment benefits and the effect that endless extensions have on reducing the incentive to seek a job. Once again, she mistakes standard economic arguments for moral judgments: “Does the right really believe the unemployed are lazy?”

What offended Tucker’s sensibilities was the blunt manner in which I summed up taxpayer-subsidized inducements: “If you put enough government cheese in front of people, they are just going to keep eating it.”

As I said in August and reiterated last week during the Bunning Senate floor showdown, the question is where do we draw the line? There is no such thing as a “temporary” entitlement in Washington and there are precious few politicians willing to challenge the permanent, ever-expanding Nanny State (quoting from the WaPo article: “under multiple extensions enacted by the federal government in response to the downturn, workers can collect the payments for as long as 99 weeks in states with the highest unemployment rates — the longest period since the program’s inception.”)

None other than Paul Krugman of the Fishwrap of Record acknowledges that generous unemployment benefits reduce the incentive to seek jobs.

As he put it exactly:

“Everyone agrees that really generous unemployment benefits, by reducing the incentive to seek jobs, can raise the NAIRU” [the minimum rate of unemployment consistent with a stable inflation rate].

“Everyone agrees.” “Everyone?”

Tell it to Ms. Tucker. Or the nutroots and Democrat demagogues who went bananas when Sen. Jon Kyl basically said the same thing last week.

Or, um, perhaps Paul Krugman should tell it to himself. Last August, he sniffed that “Ms. Malkin’s theory of unemployment is no crazier than what’s coming out of some of our leading universities.”

Or out of crazy textbooks like…this one authored by none other than Paul Krugman and noted by the WSJ’s James Taranto:

Former Enron adviser Paul Krugman takes note in his New York Times column of what he calls “the incredible gap that has opened up between the parties”:

Today, Democrats and Republicans live in different universes, both intellectually and morally.

“What Democrats believe,” he says “is what textbook economics says”:

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Krugman scoffs: “To me, that’s a bizarre point of view–but then, I don’t live in Mr. Kyl’s universe.”

What does textbook economics have to say about this question? Here is a passage from a textbook called “Macroeconomics”:


Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries. (emphasis added)

So it turns out that what Krugman calls Sen. Kyl’s “bizarre point of view” is, in fact, textbook economics. The authors of that textbook are Paul Krugman and Robin Wells. Miss Wells is also known as Mrs. Paul Krugman.

It seems Krugman himself lives in two different universes–the universe of the academic economist and the universe of the bitter partisan columnist. Or maybe this is like that episode of “Star Trek” in which crewmen from the Enterprise switched places with their counterparts from a universe in which everyone was the same, only evil.

Like Spock, the evil Krugman is the one with the beard.

Krugman argues that right now the situation is different because unemployment is high. His position seems to be that the need for short-term stimulus trumps longer-term worries about raising the NAIRU.

The problem, as more learned economists than I will point out, is that once you’ve established that unemployment benefits will be extended during recessions, then that policy gets incorporated into workers’ expectations. And you can’t easily undo those expectations once the economy improves.

But never mind all that. Evil conservatives hate unemployed people! Bad, bad conservatives!

(Republished from by permission of author or representative)
• Category: Ideology • Tags: Fiscal Stimulus, New York Times, Paul Krugman