John Kerry and Paul Krugman

This post on the The Economist blog very succinctly points out how the left leaning pundits are colored by their ideology. Very funny and it hits the mark very well.

IT IS an interesting exercise to imagine an alternative universe in which John Kerry had been elected in 2004, and then imagine Paul Krugman's latest column in that universe:

Between mid-2003 and mid-2006, economic growth in the United States was fueled mainly by a huge housing boom, which created jobs directly and made it easy for consumers to spend freely by borrowing against their rising home equity.

That housing boom has now gone bust. But the optimists and pessimists disagree both about how bad the bust will get and about how much damage the housing slump will do to the economy as a whole.

The optimists include Alan Greenspan, whom some accuse of letting the housing bubble get out of hand in the first place. On Tuesday, he told investors at a conference that the worst of the housing slump is over, saying that “it looks as though sales figures have stabilized.”

But the very next day the government released grim data on new home sales for October, and revised its estimates for earlier months downward. Most, though not all, of the other economic numbers that came out this week were also substantially weaker than expected.
. . . Since last summer, when the housing bust became unmistakable, interest rates on long-term bonds have fallen sharply. They’re now yielding much less than short-term bonds. The fact that investors are willing to buy those long-term bonds anyway tells us that these investors expect interest rates to fall. And that will happen only if the economy weakens, forcing the Federal Reserve to cut rates. So bond buyers are, in effect, betting on a future economic slowdown.

How serious a slump is the bond market predicting? Pretty serious. Right now, statistical models based on the historical correlation between interest rates and recessions give roughly even odds that we’re about to experience a formal recession. And since even a slowdown that doesn’t formally qualify as a recession can lead to a sharp rise in unemployment, the odds are very good — maybe 2 to 1 — that 2007 will be a very tough year.

Luckily, we’ve got good leadership for the coming economic storm: the White House is occupied by a man who’s ideologically flexible, listens to a wide variety of views, and understands that policy has to be based on careful analysis, not gut instincts. Oh, wait.

If John Kerry had become president, what policy changes would he have made that would have averted this (possibly) looming disaster? Tax increases—even tax increases on the wealthy—are not commonly thought to be helpful at averting recessions. And with long-term interest rates so low that they are below short term interest rates (a phenomenon technically known as an "inverted yield curve") the Rubinomical claims for the economic benefits of deficit reduction are implausible. American markets are awash in capital; indeed, that is the basic complaint of everyone worried about the current account deficit. It seems very unlikely that America's budget deficit, which the Congressional Budget Office now estimates will be 2% of GDP in 2006, is substantially inhibiting the ability of private businesses to raise capital.

Given the constraints upon American governments, the president has very little influence over the economy—and a jolly good thing, too, many would say. At the very best, he might mildly palliate some of the recessionary pain. He certainly can't repeal the business cycle, or prevent either housing booms, or the resulting collapse*. So it's hard to see how another president—even one who was "ideologically flexible, listens to a wide variety of views, and understands that policy has to be based on careful analysis"—would change things.

Read rest of the stuff to understand how Paul Krugman's and other pundits ideology is skewing their economic analysis. The New York Times is another institution which has lost its objectivity due to its hatred of Bush.