Krugman vs the CEA

by on March 15, 2004 at 8:01 am in Economics | Permalink

Paul Krugman goes beyond the bounds of decency and evidence when he accuses the Council of Economic Advisors of corruption. His evidence? The following graph (click to expand):

Krugman.gif

Krugman writes:

…wishful thinking on this scale is unprecedented. What you see in this chart is the signature of a corrupted policy process, in which political propaganda takes the place of professional analysis.

Now, the CEA has certainly made mistakes and can justifiably be accused of optimism (see Brad DeLong and passim) but Krugman’s chart is highly misleading. Here is the same data but over a slightly longer time-frame.

payroll10.png

With this graph it becomes clear that the CEA has in essence been predicting a return to trend. Obviously, the CEA has been wrong, employment has not returned to trend, but that surely tells us more about the peculiar nature of this recession than it does about corruption at the CEA.

Has political progaganda taken the place of professional analysis? Indeed.

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