Krugman’s blog, 2/5/16

There was one post yesterday, “Remembrance of Forecasts Past:”

So, do you remember this? Romney vows to lower unemployment rate to 6 percent by end of first term.

Ahem:

But everyone makes bad forecasts; Republicans are still going on about the over-optimism of the Romer-Bernstein forecast of early 2009, insisting that it proves that the stimulus was a failure. So is making fun of Mitt Romney anything more than a case of turnabout being fair play?

Actually, yes.

The big problem with Romer-Bernstein was not that they over-estimated the effectiveness of fiscal policy. In fact, their assumed multiplier of 1.5 still looks very good in the light of subsequent research and events. For example, the euro area carried out a sort of natural experiment from 2009 to 2013, in which some but not all countries were forced into drastic austerity policies. If we plot the change in structural budget surpluses as a share of GDP against GDP growth, we get this:

And a regression finds a multiplier of, um, 1.53. Similar numbers come out of a variety of approaches. So the analytics of Romer-Bernstein on policy look quite good; their mistake was to underestimate the damage the financial crisis would do.

Republican predictions of Obamadoom, on the other hand, were all about their claims about policy effects: the 2013 tax hike and the coming of Obamacare would be massive job-killers, they insisted again and again. So good employment performance really does count as a major disproof of their worldview.

Or to take a cheaper but still fair shot: imagine what they would be saying if Romney actually were president, and we had this jobs record.

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