MSNBC host Joe Scarborough blamed “a Keynesian spending spree” for the contraction in GDP at the end of 2012, while holding evidence that the opposite is true in his hands. Scarborough's claims fit into his ongoing effort to deny and marginalize demand-side economic policies which continue to enjoy broad support from trained economists.
During a discussion of the 2012 fourth quarter GDP report on MSNBC's Morning Joe, Scarborough implied that the 0.1 percent drop in output was due to government spending since the recession. From Morning Joe:
Scarborough's claim is contradicted by the Wall Street Journal article he held up during the segment, which states that “government spending, which has been a drag on growth for more than two years, declined for the ninth time in 10 quarters.” The article's subhead - “GDP Shrinks 0.1% on Government Cuts, but Consumer, Business Spending Offer Hope” - also splashed across the screen moments before Scarborough made his argument.
The Wall Street Journal's reporting is in line with the latest Bureau of Economic Analysis report. The BEA calculates the component parts of the GDP figure for each quarter. This most recent report is notable not because the government spending component of GDP continues to be negative due to shrinking direct spending into the economy, but because, for the first time in the recovery, the government component of GDP was so negative that it overwhelmed the positivity in other components.
Washington Post policy blogger Ezra Klein lays out this chart:
Prominent economists also contradict Scarborough on the matter of public spending. Contrary to his assertion that too much spending has been damaging for growth, many economists, led by Nobel Prize winner Paul Krugman, argue that stimulus spending has been too low to sufficiently boost the economy, and that further cuts could send the U.S. back into recession. While the negative GDP estimate does not mean that the U.S. is in a recession, it does fit Krugman's hypothesis.
Scarborough's claim comes in the wake of an ongoing debate with Krugman. After discussing the dangers of cutting deficit spending on the January 28 edition of Morning Joe, Scarborough published a Politico opinion piece titled “Paul Krugman vs. the world” that attempted to paint Krugman's views as out of the mainstream.
However, Krugman's belief that cutting spending would place the economy in jeopardy is hardly on the fringe. Responding to Scarborough's article, Business Insider's Joe Weisenthal published a list of 11 people - mostly economists - who agree with Krugman's theory on the deficit and debt. Furthermore, the same Wall Street Journal article that sparked discussion on Morning Joe noted that the International Monetary Fund stands with Krugman:
Deficit cutting in advanced economies is an important reason why global growth is expected to barely improve this year. The International Monetary Fund last week projected global growth of just 3.5% this year, a slight pickup from the estimated 3.2% growth in 2012, due partly to budget tightening in the U.S. and Europe. The International Monetary Fund expects advanced economies to expand just 1.4% this year, compared with 5.5% growth among developing economies.
Scarborough's reaction to Wednesday's GDP report proves that he - not Krugman and other economists - is on the fringe regarding government's role in economic recovery.