White House Press Secretary Sarah Huckablee Sanders has declared New York Times Economist “expert” Paul Krugman’s outlook for what would happen under a Trump administration to be “the worst prediction of the year”.
Does she have a point? Well, let’s see.
Here, in its entirety, is what Mr. Krugman wrote the day after Mr. Trump was elected President (the bold print is mine):
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.
Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.
It’s true that we’ve been adding jobs at a pretty good pace and are quite close to full employment. But we’ve been doing O.K. only thanks to extremely low interest rates. There’s nothing wrong with that per se. But what if something bad happens and the economy needs a boost? The Fed and its counterparts abroad basically have very little room for further rate cuts, and therefore very little ability to respond to adverse events.
Now comes the mother of all adverse effects — and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.
So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.
Thank you, Mr. Krugman.
And how did this dire prediction pan out? Since Donald Trump was elected:
-We have had 87 new highs in the stock market – 70 or so of them since he took office;
-The GDP, anemic through almost all of the Obama years, is now at over 3% for the past two quarters – with the tax legislation likely to give it a further upward boost.
-Unemployment is at a 17 year low;
-Black unemployment, in particular, is at a 17 year low;
-Latino unemployment is at an all-time low;
-Home sales are booming.
With the above in the record books. will Mr. Krugman be putting up a column, or even a few paragraphs, comparing his doomsday scenario with what actually happened?
Well, now that Ms. Sanders has called him out, he probably will have to say something.
My bet is that he will tell us the past year’s economic boom was due to a combination of Barack Obama setting the table for Trump and just plain dumb luck.
And there are people who will believe him too. Really.
Just like they believed him last year.