Paul Krugman asks if we should be surprised that "Republican assertions about what ails the economy are pure fantasy"

"I can't think of a time when a party's economic doctrine has been so completely divorced from reality."

-- Paul Krugman, in his NYT column today, "Phony Fear Factor"

by Ken

"So Republican assertions about what ails the economy are pure fantasy," Paul writes in his column, "at odds with all the evidence. Should we be surprised?"

Well, no, of course this isn't a surprise, he says -- at least "at one level."

Politicians who always cater to wealthy business interests say that economic recovery requires catering to wealthy business interests. Who could have imagined it?

But in fact our Paul does find himself surprised. "It seems to me that there is something different about the current state of economic discussion."

Political parties have often coalesced around dubious economic ideas -- remember the Laffer curve? -- but I can't think of a time when a party's economic doctrine has been so completely divorced from reality. And I'm also struck by the extent to which Republican-leaning economists -- who have to know better -- have been willing to lend their credibility to the party's official delusions.

We should back up a bit to the nature of the consensus arrived at by the right-leaning economists. On the one hand, says Paul, it's encouraging that "after spending a year and a half talking about deficits, deficits, deficits when we should have been talking about jobs, job, jobs we're finally back to discussing the right issue."

The bad news: Republicans, aided and abetted by many conservative policy intellectuals, are fixated on a view about what's blocking job creation that fits their prejudices and serves the interests of their wealthy backers, but bears no relationship to reality.

Listen to just about any speech by a Republican presidential hopeful, and you'll hear assertions that the Obama administration is responsible for weak job growth. How so? The answer, repeated again and again, is that businesses are afraid to expand and create jobs because they fear costly regulations and higher taxes. Nor are politicians the only people saying this. Conservative economists repeat the claim in op-ed articles, and Federal Reserve officials repeat it to justify their opposition to even modest efforts to aid the economy.

And Paul tells us that the first thing we need to know is "that there's no evidence supporting this claim and a lot of evidence showing that it's false."

The argument on the right, I gather, is that the only way to explain our jobless recovery is that business owners are afraid to invest because of government regulation. I'm rather surprised that Paul feels it necessary to counter "the assertion that the sluggishness of the economy's recovery from recession is unprecedented," simply because it's "the starting point for many claims that antibusiness policies are hurting the economy."

As a new paper by Lawrence Mishel of the Economic Policy Institute documents at length, this is just not true. Extended periods of "jobless recovery" after recessions have been the rule for the past two decades. Indeed, private-sector job growth since the 2007-2009 recession has been better than it was after the 2001 recession.

We might add that major financial crises are almost always followed by a period of slow growth, and U.S. experience is more or less what you should have expected given the severity of the 2008 shock.

Okay, but don't we all know -- and hasn't Paul in fact been pointing out repeatedly -- that this recovery has been worse than the others of modern times? I don't think he had to reach this far to establish the counterfactual nature of the right-wing arguments. "If anything," he argues, sketching the grim reality of business and consumer confidence, "business spending has been stronger than one might have predicted given slow growth and high unemployment." And it makes sense that businesses raking in record profits aren't investing in growth "when they're not using the capacity they already have." But still . . . .

Anyway, what matters to me is that the right-wing view still has no evidence. Is anything actually proved by all that whining from the business community about taxes (which we know are at or near historic lows) and regulation (which has been dangerously weakened)? Of course not. As Paul points out, business owners always whine about taxes and regulation.

Mr. Mishel points out that the National Federation of Independent Business has been surveying small businesses for almost 40 years, asking them to name their most important problem. Taxes and regulations always rank high on the list, but what stands out now is a surge in the number of businesses citing poor sales -- which strongly suggests that lack of demand, not fear of government, is holding business back.

To return, then, to the right's divorce from economic reality, aided and abetted by economists who should know better.

Partly, no doubt, this reflects the party's broader slide into its own insular intellectual universe. Large segments of the G.O.P. reject climate science and even the theory of evolution, so why expect evidence to matter for the party's economic views?

And it also, of course, reflects the political need of the right to make everything bad in America President Obama's fault. Never mind the fact that the housing bubble, the debt explosion and the financial crisis took place on the watch of a conservative, free-market-praising president; it's that Democrat in the White House now who gets the blame.

But good politics can be very bad policy. The truth is that we're in this mess because we had too little regulation, not too much. And now one of our two major parties is determined to double down on the mistakes that caused the disaster.

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