You’re gonna need a bigger credit card

Matthew Hoy
By Matthew Hoy on July 10, 2012

This video of New York Times columnist Paul Krugman getting his hat handed to him over his position that the government (ours and all the others) can spend its way to prosperity.

That’s gotta hurt

The key critique starts at about 35:00 in. They get going at it again at 1:06.

What I wanted to highlight was this whopper at 1:12

Krugman: We’ve just had a pretty dramatic refutation that fiscal stimulus leads to a permanent increase in spending. Certainly in the United States. When the original Obama, the original, inadequate Obama recovery act was proposed, there were many people wisely saying, “Oh, that spending will never go away.” None of it remained. We had a moderate program of infrastructure spending; has not been renewed. We had moderate aid to state and local governments has expired. We’ve even had a withdrawal of extended unemployment benefits, despite the fact that we continue to have a record number of long-term unemployed. So there’s been no hint at all of these things turning into permanent government programs. On the contrary, the actual way that the political dynamics worked was that the stimulus was withdrawn much, much too soon.

Really? While the specific programs that constituted the Obama stimulus are going away, it sure looks to the naked eye that that level of spending is the new normal.


(via Heritage Foundation)

If that spending was a one-time thing, then shouldn’t our federal spending be nearer $3 trillion than $3.5 trillion? The only reason that spending is at $3.5 trillion is because of congressional Republicans, Obama’s 2012 budget called for $3.7 trillion in spending. His 2013 budget called for $3.8 trillion.

And remember that famous crock-and-bull story about Obama being the biggest tightwad since Scrooge McDuck? About how the level of spending under the Obama administration worked out to an annualized increase of “only” 0.4 percent? According to Krugman’s logic, shouldn’t it have dropped precipitously?

Now, I realize there are other things going on in the federal budget which contribute to this story. We’ve got more and more baby boomers retiring and beginning to claim their Social Security benefits (but we have a lockbox for that—oops!). On the other side of the ledger, we’re no longer spending hundreds of billions on the war in Iraq.We’ve also got that profit we earned from the TARP bank bailouts (or do we?) so that should show up as a reduction in the deficit with that money coming in. And I’m just sure we’ll turn a profit on the bailout for GM.

As conservatives have been saying for years, the quickest way to getting the federal budget under control is to restrain spending while the economy grows. That’s something neither Krugman, no President Obama are willing to do.

Yesterday, Obama came out for a tax hike for Americans making more than $250,000 a year. (CNN’s headlines on the story are laughably biased on this: “Obama to call for Bush tax cut extensions for those making $250,000 or less” and “Obama renews call for holding down middle class tax rates,” no one’s getting their taxes hiked; Obama’s for the middle class.) Some conservative leaning media outlets had a field day showing videos of Obama saying that raising taxes on anyone in a bad economy was a bad idea. And how those new taxes will spur economic and job growth, no one seems interested in answering.

One of the criticisms of Krugman from that video above is particularly apt to this whole discussion:

Keynesians got us into this mess and now we (non-Keynesians) have to sacrifice our principles so that they can get us out of this mess.

That’s not going to work.


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July 2012



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