Remember Paul Krugman's attacks on Germany's economic policy, comparing it to Germany in the early 30s? Now read this

Remember Paul Krugman's attacks on German "austerity" in his pieces in 2010 and later?  Well, fortunately, Germany didn't take his attacks seriously.  Now with Germany's elections approaching, we see stories in places such as the Washington Post noting this:

Merkel, who is favored to win a third four-year term next week, has benefited from Germany’s strong economy and low unemployment.
That’s even truer in Bavaria, the tradition-minded homeland of retired Pope Benedict XVI and also a high-tech and industrial center, where nearly 9.5 million people are eligible to vote. Its jobless rate is just 3.8 percent, the lowest of any German state and well below the national average of 6.8 percent.
At his pre-election rallies, Seehofer has described Bavaria as “the gateway to paradise.” . . .

Scott Adams' Dilbert cartoon provides a very realistic parody of Paul Krugman

Given how accurately this strip by Scott Adams describes Paul Krugman, I am not sure that I would describe this as a parody.

Paul Krugman on owning guns for self-defense

From Krugman's appearance on ABC's This Week:

“What strikes me is we've actually gotten a glimpse into the mindset, though, of the pro-gun people and we've seen certainly Wayne LaPierre and some of these others. It's bizarre,” he said. “They have this vision that we're living in a ‘Mad Max’ movie and that nothing can be done about it, that America cannot manage unless everybody's prepared to shoot intruders, that the idea that we have police forces that provide public safety is somehow totally impractical, despite the fact that, you know, that is, in fact, the way we live.” 

 “So, I think that the terms of the debate have shifted,” he added. “Now the craziness of the extreme pro-gun lobby has been revealed, and that has got to move the debate and got to move the legislation at least to some degree.” . . .

"Paul Krugman riles fellow pundits"

From Politico:

New York Times economics columnist Paul Krugman seems to be testing the patience of a couple of his fellow pundits on ABC's "This Week." 

Conservative commentator George Will and former White House aide Mary Matalin both directed pointed remarks at Krugman Sunday that broke with the good-natured banter common among the guests on Sunday political talk shows. 

After Krugman called House Budget Committee Chairman Paul Ryan's budget a "fake document" and the columnist said he was "amazed that people haven't gotten that," Will unsheathed his verbal sword and went at Krugman. 

"I have yet to encounter someone who disagrees with you who you don't think is a knave, or corrupt, or a corrupt knave," Will said, borrowing a phrase founding father Alexander Hamilton used to rail against those unwilling to respect the good faith of their political opponents. 

"No, I've got some people," Krugman said, suggesting that some conservatives are indeed intellectually honest. 

"Specifics have indeed been offered," Will insisted, referring to Republican budget plans.
That face-off followed a couple of prickly interactions between Matalin and Krugman earlier in the program. . . .

Germany is not taking Paul Krugman's attacks seriously

I have previously noted how far off Krugman's predictions have been about Germany and other countries.  So is it surprising that German's haven't really taken his critiques seriously?  From the New Republic:

And yet, it’s equally apparent that Germans aren’t cowed by his vitriol—nor are they much persuaded by what he has to say. Merkel is still enjoying record popularity and Steinbrueck recently received a birthday greeting from an ordinary German citizen thanking him for sticking up to the New York Times columnist. When Krugman suggested the international community impose “sanctions” against Germany for its monetary policies, a number of notable German economists publicly, and sternly, pushed back. When Krugman accused Wolfgang Schaueble, the country's current finance minister, of “just making stuff up” when discussing the Euro crisis, Schaueble told the press that he had “no use for” economists with Nobel prizes. And when Krugman received a major award from one of Germany’s most prestigious economic research centers in 2010, the organizers made sure to pair his remarks on the European crisis with a speech by Schaeuble that undermined everything he had to say. . . .

Does Krugman understand that there is both Supply and Demand?

Low interest rates can be due to two reasons.  Either people don't find the US an attractive place to invest (demand has shifted down) and/or the supply of funds is increasing.

Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. . . .

So Krugman's solution?  With massive debt, the solution is yet more debt.

Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy. . . .

Does anyone notice what a failure these policies have been for the countries that have adopted them (see here)?

UPDATE: Michael Tanner has some notes on Krugman here.

"Two-thirds of millionaires left Britain to avoid 50% tax rate"

People are so much more mobile now than they used to be.  With the internet, you can often do work any place in the world.  Other countries also used to have much higher tax rates so there wasn't the same ability to avoid the high rates.  This shows what happened when Britain's top tax rate was raised from 40 to 50 percent and then again when it was lowered back to 45 percent.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs. 

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election. 

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government. 

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes. 

George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.

Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000. . . .

Paul Krugman seems to seriously argue that we could raise today's tax rates to what they were in the 1950 and everything would work fine.

But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich. 

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.” 

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today. 

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders. . . . 

Op-ed at RealClearMarkets: Austerity Works: It's Time to Give It a Try

This piece is with my son Sherwin. The graphs are pretty powerful. The piece starts this way:

Austerity or growth, is that the choice facing Americans and others around the world?

The debate never seems to abate. European Union finance ministers last week gave Spain permission to delay cutting some government spending and reducing its deficit, though many such as The Economist magazine fear that even the cuts that will be made go too far. A similar decision may soon have to be made for Greece. Even though the pro-bailout parties won the June Parliamentary election, they too are asking for a two-year delay in cutting spending and reducing their budget deficit.

The Obama administration has put increasing pressure on German Chancellor Angela Merkel to ease up on Germany's austerity prescription. President Obama continually touts more government spending as the cure, and derided Republican "let's cut more" spending strategy as the cause of Europe's economic problems.

Last month, German Finance Minister Wolfgang Schäuble was having none of it, telling Obama to fix the U.S. deficit before giving Europe advice: "Herr Obama should above all deal with the reduction of the American deficit. That is higher than that in the euro zone." . . .

Estonia doing well with "austerity" budgets, and Spain is not an example of "austerity"

Paul Krugman, the guy who kept predicting disaster for Germany's austerity program, has gone after Estonia for what he calls being the "poster child for austerity defenders."

There are a couple of things that Krugman leaves out of his discussion.


1) Estonia was getting worse relative to other countries when it followed more of a Keynesian policy and has been growing relative to other countries since then.  Figure from The Global Post (click to make larger).  As that publication wrote: "Still, its recovery, after implementing austerity, is intriguing."  By the way, the publication also accuses Krugman of cherry picking data to show.

2) As the Figure above shows, Estonia has been growing relative to the US since mid 2009.

Note on Spanish "austerity."  Spain is in a lot of trouble, but it isn't because of "austerity."  From the WSJ.com.

In 2011, total public-sector spending in Spain was 13% higher than in 2007. . . .

"Florida versus Spain"?: How Krugman misinforms readers

Paul Krugman claims that Florida is doing well relative to Spain because Florida has gotten so much aid from the Federal government.

Aid on that scale is inconceivable in Europe as currently constituted. That’s a big problem.

Brad Plumer in the Washington Post writes:

Paul Krugman points out one big factor: Florida has received billions of dollars in aid from the rest of the United States. The state’s federal tax revenue fell by $25 billion between 2007 and 2010, but Florida didn’t have to make up that entire shortfall with growth-pinching austerity measures, the way Spain now does. Instead, the U.S. Treasury kept paying Florida’s Social Security, Medicare, and Medicaid bills. The federal government also sent an additional $6 billion in unemployment aid and food stamp benefits to Florida between 2007 and 2010. All told, Florida received at least $31 billion in outright assistance from the rest of the country in those three years. That’s the equivalent of 4 percent of the state’s GDP. And, while Florida’s economy is still struggling, things could be a lot worse. They could be like Spain, which never received this level of aid from the healthier regions of Europe. . . .

Yet, though the end of last year, Florida is one of the 31 states that receive less than the average amount of Stimulus money from the Federal government.  Given that the money for the Stimulus has to come from someplace, if you assume that the money that is being transferred to the Federal government is being equally taken on a per capita basis from all the states, Florida is actually a net loser from all this help that the Federal government is giving out.

 
Don't you think that it would have been useful for Krugman to acknowledge how little Florida received relative to other states?

Austerity and Economic Growth: Keynesianism didn't work so well in Europe

Paul Krugman told MSNBC: 

“We have actually had a massive unethical human experiment in austerity doctrine.  Here we have had this view that cutting government spending is going to be good for the economy even when the economy is deeply depressed and we have put it into effect in large parts of Europe and we have put it into effect to a significant effect in the US . . . . And the results have been exactly what someone like me said that they would be, which is there has been a very depressing effect on the economy.  Where is the evidence that this other view is at all right?”

Unfortunately, it looks as if Romney is inconsistent with his views on government spending, though it is possible to rationalize this quote by saying that changing spending will temporarily create frictional unemployment. From an interview in Time Magazine:

Halperin: I want to get to a lot of those, and let’s go to spending, which is a big thing for you, one of the bases of comparison – you say you’d cut spending a lot more than the President has.  And like most governors I know, you can get down in the detail.  A lot of people don’t know that about you; you can really get your arms around a policy issue and go deep, so let’s talk about spending.  You have a plan, as you said, over a number of years, to reduce spending dramatically.  Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office?  Why not do it more quickly? 

Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%.  That is by definition throwing us into recession or depression.  So I’m not going to do that, of course.  What you do is you make adjustments on a basis that show, in the first year, actions that over time get you to a balanced budget.  So I’m not saying I’m going to come up with ideas five or ten years from now that get us to a balanced budget.  Instead I’m going to take action immediately by eliminating programs like Obamacare, which become more and more expensive down the road – by eliminating them, we get to a balanced budget.  And I’d do it in a way that does not have a huge reduction in the first year, but instead has an increasing reduction as time goes on, and given the growth of the economy, you don’t have a reduction in the overall scale of the GDP.  I don’t want to have us go into a recession in order to balance the budget.  I’d like to have us have high rates of growth at the same time we bring down federal spending, on, if you will, a ramp that’s affordable, but that does not cause us to enter into a economic decline. . . . 

Obama again lectures EU to ease up on austerity

Well our stimulus has worked so well.  Obama is aligning himself with the new French Socialist president on increased spending.  Notice the one country that has controlled spending the most has been doing the best.  From Reuters:

U.S. President Barack Obama will press European leaders to ease up on fiscal austerity and focus on economic growth at a summit on Saturday that will discuss ways to stem turmoil in the euro zone and head off the risk of global contagion.
At the wooded Camp David retreat in Maryland's Catoctin Mountains, Obama and leaders from other large economic powers will try to forge a common approach to tackling a crisis that threatens the future of Europe's 17-nation single currency.
Though no major policy decisions are expected from the Group of Eight summit, leaders hope they can bridge enough of their differences to soothe rattled financial markets after worries about the risk of a Greek exit from the euro zone sent European stock prices to their lowest level since December.
"Hopefully we'll get some stuff done," Obama told Italian Prime Minister Mario Monti as he and other summit participants arrived for Friday evening dinner at a lodge at the secluded presidential retreat.
Obama earlier in the day aligned himself with Monti and new French President Francois Hollande by urging a solution to the euro zone crisis that combines fiscal belt-tightening measures with a "strong growth agenda."
On the other side of the debate is German Chancellor Angela Merkel, who has pushed fiscal austerity as a means of bringing down huge debt levels that are burdening European economies. . . .

Paul Krugman thinks that those who oppose increased spending are trying to destroy the country.  Here is Krugman making the case for more government spending.

Visit msnbc.com for breaking news, world news, and news about the economy

Krugman: "We have actually had a massive unethical human experiment in austerity doctrine.  Here we have had this view that cutting government spending is going to be good for the economy even when the economy is deeply depressed and we have put it into effect in large parts of Europe and we have put it into effect to a significant effect in the US . . . . And the results have been exactly what someone like me said that they would be, which is there has been a very depressing effect on the economy.  Where is the evidence that this other view is at all right?
"

Paul Krugman on Republicans in Congress: "Sometimes you do wonder if these guys are moles, Manchurian candidates for I don't know who -- if their real job is to bring down America because they're really are doing the best they can."

It is interesting to note that Brazil's stimulus policies haven't been working out too well also.  From the Financial Times:

Brazil’s economic output shrank in March, defying government stimulus measures and surprising economists who had predicted that Latin America’s biggest economy would begin to recover from a prolonged slowdown.
The 0.35 per cent contraction, compared with February, makes Brazil’s growth the second slowest in Latin America in real terms, after Argentina. The news comes as Asia’s major emerging market economies, China and India, are also decelerating.
“The weak … conditions are likely to encourage the authorities to add more fiscal and monetary stimulus to the economy and to remain activist on the foreign exchange front,” said Alberto Ramos of Goldman Sachs in a client note. . . .

UPDATE: The WSJ's Political Diary has this on Monday, May 21, 2012:

Washington's $15.7 trillion of debt is now officially larger than the entire U.S. economy. But Team Obama has convinced much of the media that skyrocketing debt is only a problem if politicians try to restrain it.
Witness the Beltway media scorn heaped on Speaker of the House John Boehner. Last week Mr. Boehner said that before allowing the debt to grow beyond its current statutory limit of $16.4 trillion, he'll demand the same condition he attached to last year's increase: cuts in planned future spending equal to the amount of the increase.
George Stephanopoulos, interviewing Mr. Boehner yesterday on ABC, largely rejected the premise that spending cuts are necessary. He asked if tying cuts to the debt limit increase would "actually create more uncertainty over the next several months."
"No, George, the issue is the debt," said Mr. Boehner. "You know, people aren't clamoring to invest in Greece today. And if we don't begin to deal with our debt and our deficit" in an "honest and serious way, we're not going to have many options."
Replied Mr. Stephanopoulos, "Well, as you know, a lot of people say that what makes us like Greece is putting the question of whether or not we're going to pay our bills—making that a political question." . . .

Germany's economy grew at a 2 percent rate in the

So much for Krugman's predictions about Germany and their austerity policy. From the Financial Times:

The German economy grew five times faster than expected in the first quarter of the year, jumping 0.5 per cent. . . . The year on year increase was 1.7 per cent, beating expectations of a 0.8 per cent jump, and the German statistics office said growth was supported by an increase in net trade as exports to outside the eurozone gained. But this is still more a tale of divergence than cheer as French GDP came in flat and the Netherlands GDP fell 0.2 per cent as the country remained in technical recession. And while German’s performance could be the basis for a beat (with Austria providing some more support after it found 0.2 per cent growth in the first quarter), eurozone GDP is predicted to fall 0.2 per cent with the data due later this morning. . . .

New piece at Fox News: "Krugman's bad predictions"

My newest piece at Fox News starts this way:

Few prominent economists have a worse record predicting the impact of Obama’s economic policies than Paul Krugman. Writing for the New York Times and touting his close “genuine contact” with the “smart” economists and others in the Obama administration and the Democratic congressional leadership, Krugman has been, and remains, Obama’s most important champion. Not only has he been defending Obama’s Keynesian-type deficit-spending, but he has been advocating still more of these same failed policies. The economy just can’t gain ground. Thirty-four months since the "recovery" started in June 2009 and the actual number of jobs have increased by just 0.4%. Hardly making up for the 5.5 percent drop in jobs from the peak. Given Krugman’s continued prominence in supporting Obama during the coming election, the best way of evaluating the advice is going to give voters is to see how accurate his claims have been up to this point. It is important to realize just how terrible Krugman’s record has been. He predicted on CNBC: “I am still guessing that we will peak out at around 9 percent [unemployment] and that would be late this year.” . . .

Paul Krugman's embarrassingly weak analysis on the Supreme Court debate over health care

Krugman's piece on Friday, "Broccoli and Bad Faith," continues his trend for polemics over accuracy or analysis.

Let's start with the already famous exchange in which Justice Antonin Scalia compared the purchase of health insurance to the purchase of broccoli, with the implication that if the government can compel you to do the former, it can also compel you to do the latter. That comparison horrified health care experts all across America because health insurance is nothing like broccoli. Why? When people choose not to buy broccoli, they don't make broccoli unavailable to those who want it. But when people don't buy health insurance until they get sick -- which is what happens in the absence of a mandate -- the resulting worsening of the risk pool makes insurance more expensive, and often unaffordable, for those who remain. As a result, unregulated health insurance basically doesn't work, and never has. . . .

OK, so if you wait until you are sick before you buy health insurance, you drive up the price of insurance for others. But the exact same argument exists for broccoli. If broccoli makes you healthier and you don't eat it, you are more likely to get sick and you will shift up the demand curve for health care, raising the price of insurance.

unregulated health insurance basically doesn't work, and never has. . . .

Krugman is well-known for his assertions. If you got rid of insurance regulations, prices would be set according to risk.

I was struck, in particular, by the argument over whether requiring that state governments participate in an expansion of Medicaid -- an expansion, by the way, for which they would foot only a small fraction of the bill -- constituted unacceptable "coercion." One would have thought that this claim was self-evidently absurd. After all, states are free to opt out of Medicaid if they choose; Medicaid's "coercive" power comes only from the fact that the federal government provides aid to states that are willing to follow the program's guidelines. If you offer to give me a lot of money, but only if I perform certain tasks, is that servitude? . . .

The discussion before the Supreme Court was over "coercion," not "servitude." "Coercion" means to impose a cost on others. As any economist knows, costs are always opportunity costs. Giving up money represents an opportunity cost. But let me make it simple for Krugman: You take money from me by force and give it back only if I do want what you want me to do. That sure seems like coercion.

Germany's unemployment rate continues to fall

Remember Krugman's attacks on Germany over the last couple of years? Here is something from a piece that he wrote in June 2010:

And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. . . .

But German politicians seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead.

How bad will it be? Will it really be 1937 all over again? I don’t know. What I do know is that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day. . . .

Yet, Germany's unemployment rate keeps falling:

Spain and Italy creaked under record unemployment rates at the end of 2011, while the German jobless rate fell to historic lows — results that put the onus firmly on Germany, with Europe’s biggest economy, to take the lead in steering the euro zone back to recovery.

Joblessness in Italy rose to 8.9 percent, its highest level since current records began in 2004, the country’s statistics institute said Tuesday. Spain ended the year with unemployment at a 17-year high of 22.85 percent.

German unemployment, by contrast, fell to 6.7 percent in January, a decline of a tenth of a percentage point from December. . . .

Germany's manufacturing sector is pulling Europe's along.

Markets were buoyed by manufacturing data from Germany, the U.K. and the euro zone, released Wednesday morning. The German Purchasing Managers Index rose to 51.0 in January from 48.4 in December, slightly beating consensus expectations. The euro-zone PMI rose to 48.8 in January, which was above the earlier flash estimate of 48.7, also a little above consensus. In the U.K., PMI rose to an eight-month high of 52.1 in January, up from a revised reading of 49.7 in December. . . .

S&P says that "euro zone's policy response to the debt crisis has been largely misguided"

Note that S&P doesn't think that "more fiscal stimulus" will help Europe. The countries that have been doing best (Germany and Poland) didn't follow the Keynesian policy prescriptions advocated by Obama. From the WSJ:

Standard & Poor's analysts on Saturday defended their downgrades of more than half of the euro zone's 17 members, as the highest-profile victim of the mass ratings cut—France—looked to play down the impact.

In a conference call hours after the downgrades, S&P analysts said they stood by their moves as they believe the euro zone's policy response to the debt crisis has been largely misguided and is building up future risks.

"The proper diagnosis would have to give more weight to the ... rising imbalances in the euro zone," said Moritz Kramer, head of European sovereign ratings. He pointed to problems such as divergences in competitiveness from one country to another, which he said is reflected in huge imbalances in national current accounts.

Mr. Kramer said the centerpiece of a December summit aimed at arresting the crisis, the adoption of tighter fiscal rules to avoid excessive deficits, "wouldn't have identified the risks" in advance as Germany had one of the largest budget deficits of all during the first 10 years of the euro's existence, whereas Spain, which is a problem area now, had a largely balanced budget.

But Mr. Kramer stressed that S&P isn't calling for more fiscal stimulus from the countries with the biggest debt problems, saying that they have neither the room, nor enough credibility in the debt markets, to try to spend their way out of trouble.

"That certainly wouldn't be regarded as a credit positive, not by our metrics at least," Mr. Kramer said.

Something more worrisome is on the horizon. If only the Europeans could deal with these pesky bond holders, the same way Obama dealt with the GM and Chrysler bond holders. From Market Watch:

but the real story is that the Greek bond “negotiations” on a “haircut” have broken down once again. The dudes in power over there are trying to put a good face on it and are sure they can get a deal done next week…but the markets appear to be running out of patience. . . .

Portugal is just barely above "non-investment grade." Greece is "likely to default."

Brent Bozell says that Krugman's "Thuggishness" set records this past year

Brent Bozell's piece is available here.

Krugman outdid himself for outrage in 2011. Every year, the Media Research Center collects a panel of conservative journalists and talk-show hosts and puts them on ride through the worst media bilge of the last 12 months to arrive at the Best Notable Quotables. Krugman sat in the sulfurous center with three other "bests." . . .

Krugman took the Quote of the Year

Krugman won the Grim Reaper Award for Saying Conservatives Want You to Die

Does the New York Times ever fact check Krugman?

Normally, I don't even bother responding to Krugman's claims, but this one deserved some comment ("Hey, Small Spender," New York Times, Oct. 10, 2010).

the big government expansion everyone talks about never happened. This fact, however, raises two questions. First, we know that Congress enacted a stimulus bill in early 2009; why didn’t that translate into a big rise in government spending? Second, if the expansion never happened, why does everyone think it did?

Part of the answer to the first question is that the stimulus wasn’t actually all that big compared with the size of the economy. Furthermore, it wasn’t mainly focused on increasing government spending. Of the roughly $600 billion cost of the Recovery Act in 2009 and 2010, more than 40 percent came from tax cuts, while another large chunk consisted of aid to state and local governments. Only the remainder involved direct federal spending.

And federal aid to state and local governments wasn’t enough to make up for plunging tax receipts in the face of the economic slump. So states and cities, which can’t run large deficits, were forced into drastic spending cuts, more than offsetting the modest increase at the federal level.

The answer to the second question — why there’s a widespread perception that government spending has surged, when it hasn’t — is that there has been a disinformation campaign from the right, based on the usual combination of fact-free assertions and cooked numbers. And this campaign has been effective in part because the Obama administration hasn’t offered an effective reply. . . .

Despite what Krugman and others have been claiming, Government spending went up this year

The CBO report is available here (see also here). Remember Krugman's piece on "The Austerity Economy," NY Times, September 3, 2011, where he claimed:

When the recession officially ended, spending was rising at an annual rate of around $60 billion; now it’s declining at an annual rate of $60 billion. That difference is around 1 percent of GDP, and maybe 1.5 percent once you take the multiplier into account. That makes the turn toward austerity a major factor in our growth slowdown. . . .

Krugman got this claim by ignoring government transfer payments. But for some reason Krugman previously thought that such transfers were extremely important ("Punishing the Jobless," NYTimes, July 4, 2010):

One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months. . . .

In "The Austerity Economy" piece Krugman wrote:

Look, in particular, at actual government purchases of goods and services — governments at all levels buying stuff — which is what standard macroeconomics says should have the highest multiplier, since unlike transfers and tax cuts it is by definition spent rather than saved. . . .

Could someone please help explain these different statements to me? But it sure seems as if transfer payments are important except when they don't give him the right results.