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Paul Krugman Watches Glenn Hubbard Deny the Macroeconomic Impact of the Financial Crisis Thrice

I share Paul's view: this is very bad indeed:

Paul Krugman: More Financial Crisis Denialism: I managed to avoid reading this Times profile of Glenn Hubbard until now. Wow…. Hubbard repeats what has now become the party line — that all deep recessions are the same, and that we should have had a V-shaped recovery from the crisis of 2008-2009, so that it’s all Obama’s fault:

It is absolutely possible, Ali, both in terms of models of policy effects on the recovery and historical experience…. If you look at the recovery from ’74, ’75, or ’81, ’82, you can easily get job growth in this range. We have the wrong policy mix. We’ve had a nasty shock, we’re in a different situation, but we could do a lot better.

Words fail me.

Well, actually they don’t. Here are a few: Right at the beginning of the crisis, long before the people now advising Romney were even willing to admit that there was a problem, there was a debate between two ideas: that deep recessions were always followed by fast, V-shaped recoveries, and that financial-crisis recessions — which pushed monetary policy up against the zero lower bound — were followed by slow, “jobless” recoveries. Here’s my entry, from January 2008.

Deep? Maybe. Long? Probably: I still keep reading articles asserting that the last two recessions were brief and shallow. Formally, that’s true. But both were followed by prolonged “jobless recoveries” that felt like continuing recessions. Below is the employment-population ratio since 1989, with shading showing the official recessions. In both cases the employment slump went on for a long time after the recession was supposedly over. There’s every reason to think that the same thing will happen this time. There’s a huge overhang of excess housing inventory; it will probably take several years before housing prices fall to realistic levels; and it’s not at all clear what will fill the gap left by weak housing and consumer spending. There’s still the question of how deep the slump will be. I can see the case for arguing that it will be nasty. The 1990-91 recession was brought on by a credit crunch, the 2001 recession by overinvestment; this time we’ve got both. I guess we’ll see. In any case, whatever happens will probably last quite a while.

And Paul goes on:

This wasn’t just a political question: private-sector forecasters were divided, too. There were a number of people predicting the V. But they were wrong, and ended up either admitting that they were wrong or went silent. The Reinhart-Rogoff data on aftermath of crises actually came well into this debate, but added to the conclusion that the recovery from 2008-2009 was likely to be nothing like the recovery from 81-82 or 74-75. And this was a view validated by theory, history, and, it turns out, by successful prediction in the current crisis. And the Romney team is just waving it all away, because it’s politically convenient to ignore all that. Awesome.

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