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InsiderOnline Blog: April 2011

Paul Krugman Is Wrong, Wrong, Wrong …

 … says Bill Beach in an open letter to the New York Times columnist. Krugman had accused The Heritage Foundation of essentially “cooking the books” in order reach specific results in its analysis of the economic effects of Rep. Paul Ryan’s budget plan. In his open letter, Beach offers a point-by-point rebuttal, noting among other things that Heritage analysts used the U.S. Macroeconomic Model of IHS Global Insights, Inc., a model that has been around for 50 years and isn’t really susceptible to the sort of manipulation Krugman alleges. “[G]iven the fact that the Budget Committee gave us final inputs only a few days prior to publication of their budget,” writes Beach, “we only had time to make sure that this detailed model would solve with the enormous changes to public policy we had to introduce into it.”

Beach also points out that, contrary to Krugman, Heritage’s projections of the 2001 tax cuts stand up very well. Heritage predicted at the time that output, after-tax income, and nearly every other major economic indicator would grow above trend as a result of the tax cuts, which they did. Beach acknowledges that Heritage’s projections overstated the growth of the labor force since 2001, a trend that the Congressional Budget Office and nearly every other forecasting outfit in the country missed as well. Read the whole thing: “An Open Letter to Paul Krugman,” The Foundry, April 18, 2011.

For the record, Heritage estimates that if the Ryan plan were passed the economy would grow by 1.6 million jobs and $149.5 billion in output annually compared to current policies. See “Economic Analysis of the House Budget Resolution,” William Beach, et al., April 5, 2011.

Posted on 04/21/11 05:36 PM by Alex Adrianson

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