How obtuse do you have to be to win a Nobel Prize in economics? I found myself asking that question once again while meandering down the Canal du Midi this morning as I perused Paul Krugman’s latest column in The New York Times, “Now and Later.” The burden of that column, if you can believe it, is that we in the West, especially in America, are not spending nearly enough money. Yes, that’s right, Comrade, the economy is depressed, in case you haven’t noticed it, and we need to stop with all this fiscal restraint we’ve been practicing and start spending some serious dough. “How hard,” asks the Times’s chief economic guru, “is that to understand?”
I confess I find it pretty hard to understand.
Mr. Krugman is just incredulous that we don’t get it. He, in his wisdom, wants us to spend, spend, spend. But “all around the world, politicians seem determined to do the reverse.” Why do you suppose that is?
Leaving aside for one moment the question whether politicians as a class have exhibited anything resembling fiscal responsibility, to say nothing of fiscal restraint, these last several years — our problem, Mr. Krugman seems to think, is that they just haven’t been profligate enough — what should we think about the larger point?
Here, as near as I can follow it, is the Krugman Clarion:
1. we’ve spent ourselves into “a severely depressed economy”;
2. As a consequence, we have high unemployment;
3. Ergo, we need to spend gobs more money now because “stinting on spending now threatens the economic recovery, and with it the hope of rising revenues.”
It floors you, right? Let me pause while you try to conjure with that line of reasoning to note that, now that the Obama administration has shoved its horrendous (and horrendously expensive) health care “reform” bill down the throats of the American people, Mr. Krugman, who loudly championed the legislation when it was on the table, now admits that “America has a long-term budget problem” (you don’t say?) and “dealing with this problem will require, first and foremost, a real effort to bring health care costs under control.” So why did Paul Krugman join the hope and change chorus in demanding the passage of what is probably the most fiscally incontinent piece of legislation in the Republic’s history? Why?
I think I know the answer to that, but it is too depressing to bring up in public. Let’s return to Paul Krugman’s main point: “Now is not the time for fiscal restraint,” he says. Well, if that is so, why is he not dancing in the streets? Over the last 18 months, as Alan Greenspan pointed out in The Wall Street Journal on Friday (“U.S. Debt and the Greece Analogy” — are you paying attention Mr. Krugman?), federal debt to the public soared from $5.5 trillion (trillion, Kemo Sabe) to $8.6 trillion. (Again, I am reminded of that bumper sticker that reads: “It’s a good thing that Obama doesn’t know what comes after ‘trillion.’”)
Mr. Greenspan is worried that U.S. policy makers have been lulled into complacency by low interest rates when, in fact, America’s ability to borrow may be severely circumscribed by its debt obligations. “Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008,” Mr. Greenspan points out. “How much borrowing leeway at current rates remains for U.S. Treasury financing remains highly uncertain.”
Uncertain, perhaps, but not exactly promising.
Paul Krugman wants us to throw caution to the winds in the hope that better times are just around the corner and will fill our coffers and end high unemployment. Alas, as Mr. Greenspan notes, “We cannot grow ourselves out of these fiscal pressures.” The available labor force in the U.S. is unlikely to provide the sort of robust growth that Paul Krugman’s sunny scenario requires. Bottom line “Our policy focus must err significantly on the side of fiscal restraint.”
Paul Krugman believes we can spend our way out of debt. Alan Greenspan thinks that, given the stupefying level of government debt and the likely prospects for economic growth, the responsible course is to scrap the neo-Keynesian fantasies and reign in government spending. Greece, Spain, Portugal, and — be it noted — California are among the entities that have lived according to Paul Krugman’s advice. Which course do you think is more likely to lead to economic revival?
“So why did Paul Krugman join the hope and change chorus in demanding the passage of what is probably the most fiscally incontinent piece of legislation in the Republic’s history? Why?”
Easy. It’s because ObamaCare is all about establishing government control, rather than quality health care. To progressives like Krugman, expanded government and rule by technocrats is a good to be pursued for itself. Health Care reform and cap-and-trade are merely the vehicles, and the economic damage is blithely waved away.
“I think I know the answer to that, but it is too depressing to bring up in public.”
What the devil does that mean? If you know something relevant, say it. Otherwise, leave out the teaser; it is an irritant.
“I think I know the answer to that, but…”
Yes, Roger why??? Please, state the obvious!!! The obvious about Mr. Krugman and the obvious about the entire administration and congressional leadership!!!
The economic doctrines of F.A. Hayek and Ludwig Von Mises are best to increase the wealth of the overall society. But what if you selfishly want to game the system? In that case it would behoove you to seriously consider embracing Keynesianism. It underpins crony capitalism. You may be readily able to persuade your political allies to even destroy your competitors. John Maynard Keynes told politicians and voters what they prefer to hear. I wish, for instance, that the so-called multiplier argument was true. Wouldn’t it be nice if spendthrift government spending could solve most of our economic troubles? Don’t you also want to be convinced that it is wise to visit the casinos in Las Vegas to increase your chances of getting out of debt? This is why it is often tough being a conservative Republican. You are compelled to tell the truth that there is no such thing as a free lunch. The follower of Keynes has a much easier time. They can pander to our basest impulses.
A couple of weeks ago, a woman, speaking for the O(putin)bama administration (I have forgotten her name) said that Americans are saving too much money at present. She went on to say that as soon as we return to our former spending patterns, everything will be okay.
Well, ten years ago everyone was spending far beyond his or her means, going into enormous credit card debt, a habit that is certainly a factor in the current economic debacle.
Economist is to Liberal
as
Doctor is to Witch
FDR’s Policies Prolonged the Depression (And Obama’s policies will too.)
“The Depression dragged on for years, convincing generations of economists and policy-makers that capitalism could not be trusted to recover from depressions. They decided that government intervention was required. Ironically, we show that the recovery would have been very rapid had the government not intervened.”
Government Spending Divides, It Does Not Multiply
Robert J. Barro is an economics professor at Harvard. He found that spending in World War II decreased GDP by 20% (a multiplier of 0.8). Government spending actually killed GDP, even assuming that the spending itself was useful.
Quip: If you think WW2 ended the Great Depression in the U.S., then we can carry out the same enlightened policies without needing a war. Conscript most of the able bodied men and have them build tanks. Then destroy the tanks. Impose rationing for good measure. At the end, everyone is supposed to be rich.
Actually, this isn’t so funny. Keynesian economics recommends to do just that. And Obama, Krugman, and many in congress are Keynesian in their thinking, because they like the recommendation that the government should tax a lot of money and spend it on signs saying “Brought to You by a Caring Government”.
Quip: Some people think that WW2 benefitted Europe because they were relieved of the burden of having old factories. They were bombed out, and so could build new, efficient factories. If you believe that, then they could bomb their own factories, or we could bomb ours, and experience the same boost in wealth.
Keynesian economics is no more than the current theory. To gamble trillions in the hopes that it is a correct theory is truly reckless.
As far as I can make out,
spending money like water is Mr. Krugman’s
answer to EVERYTHING- good times,
bad times, war, peace, deficit, surplus, gophers
in the garden, tooth decay, grouchy
mothers in law…
Two more articles are implied by the one above:
1) The stimulus strategy: Take about $800B. Spend it overwhelmingly on the government sector shoring up education, inflationary government energy policy, and public union wages. Tell everyone it will stimulate the economy because, you know, it is the construction industry which is laying off people and rippling through the economy like a plague.
2) There are only a few sectors of the economy where prices have risen in the last 20 years. They are all defined by government control the likes of which most industries could never imagine: education, health care (even before Obamacare), military, and Medicare, social security, etc. They are now threatening the nation’s viability.
Why does anyone believe that even more government intervention and control in an incredibly complex system can fix what it has broken in the first place? It is like believing that multi-variate regressions on a highly complex non-linear system can prove that carbon dioxide affects the weather. No computer in the world could run the model that could get close to doing that correctly.
Keynes died a long time ago. The bureaucrats live on, including a devolving and hypocritical Krugman. There’s nothing quite so dangerous as a do-nothing academic who thinks he can model and control the economy, and use our money to do it.
How could the failure of the stimulus fail to stimulate a demand for more stimulation? Did anyone expect Krugman to admit he was wrong? THE MAN IS A NOBEL LAUREATE!