At National Review Online, Kevin D. Williamson plucks the laurel wreath from the woolly head of New York Times columnist Paul Krugman and crowns Associated Press chief economics writer Martin Crutsinger our country’s worst economics writer.
Crutsinger is a destructive force in our public discourse, Williamson writes, for a number of reasons, among them “shallowness,” “unbearable prose” and “parroting conventional wisdom.” An example of this last is his repetition of the truism “Consumer spending drives 70 percent of economic activity.”
Most importantly, unlike Nobel laureate Krugman, who is merely popular, AP prose is ubiquitous and usually unacknowledged. Williamson notes that AP’s “endless sludge of dreary grey copy … is not, in the minds of most readers, tendentious commentary — it is simply ‘the news.'”
The AP’s pro-inflationary Keynesian consensus is especially striking today, when most of the media posit a strengthening economy based on news that consumer spending is becoming more profligate and that real estate prices are being re-inflated. Very few news sites are willing to note, for example, the troubling news that the rate of personal savings is close to its all-time low.
But there’s something even stranger about the strengthening-economy story that dominates the news today. How can we be recovering when just a month ago the Obama administration and the mainstream media were predicting sequestration would hurl the United States back into a recession? (Congressional Budget Office Director Doug Elmendorf is now trying to disambiguate the impact of government spending slowdowns on the economy.) Williamson gives one good reason for that anomaly — the built-in mismeasure of government spending and its effects on economic growth:
You will be hard-pressed to find an Associated Press report acknowledging the fact that government spending is accounted for at cost when calculating GDP. What that means is that $1 spent by the government on purchases, salaries, services, and the like (but excluding entitlement transfer payments) shows up at $1 in GDP, regardless of whether that $1 was put to some productive use.
For example, if the federal government should spend $200 billion on old newspapers, and then pay me $100 billion to set them on fire on the National Mall, that would add $300 billion to GDP, equivalent to adding the entire economic output of Venezuela to the U.S. economy in exchange for a lot of charred AP copy. So writing that an increase in government spending boosts GDP is the equivalent of writing that an increase in government spending boosts government spending. That this is a tautology — if we increase the things we measure, the things we measure will increase — seems never to have occurred to the ladies and gentlemen of the Associated Press economics desk, even though criticism of conventional GDP measurement is common both among conservatives and among more progressive economists, such as Joseph Stiglitz.
How does that differ from the way private spending is measured? Robert Higgs, the Independent Institute’s senior fellow in political economy, explained in an interview with The Daily Caller: “If you have a private firm and you spend a ton of money to pay employees, but what you produce is a flop, there will be no value to GDP. But government spending all gets counted as contributing to economic growth. That’s why in the early days of creating these measurements, some people didn’t want to count government spending.”
In economics, the real danger isn’t the things people don’t know, but the things they know that ain’t so. Krugman has a gift for obfuscation and a relationship to plain dealing that can most charitably be described as “arm’s length,” but his overt opinion-making and clear (if misguided) point of view do less harm than the osmosis of bad economics Williamson describes here.
Tim Cavanaugh is The Daily Caller’s executive editor.
