I saw a tweet this week by Paul Krugman asserting, “What we do have is a persistent problem of weak demand; yes, we have full employment now, but only with extremely low interest rates, which means little ability to respond to the next downturn. This makes a strong case for a big government investment program.”
Ah yes. It’s the Keynesian solution to every problem. Just spend more money!
Or break a window.
Oh, wait. Broken windows mean spending money. So nevermind, it’s always spending money.
Silly Keynesians and their silly Keynesian fiscal stimulus.
And it is silly. This is, after all, the guy who suggested a fake alien invasion would be good for the economy because it would boost government spending. Remember that? I’m not making this up. Krugman actually said this.
“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he said. “And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better—“
I think he was going to say we would be better off. Ummm. Yeah. OK. I’m pretty sure building weapons to fight off fake aliens would make my life at least 36% better, especially if I was taxed for it.
But why not dispense with the theater? Why not just hire a bunch of people to dig random holes? It’s pretty much the same thing. In fact, I think there might be slightly more utility in random holes than weapons to fight non-existent aliens.
If you think I’m just being obtuse and Krugman might actually be onto something here, please, for the love of all that’s good and true, take a few minutes to read Bastiat’s explanation of the broken window fallacy.
Anyway, back to Krugman. I’m a little confused. He says we need a big government spending program. It’s hard to even fathom what Krugman is talking about. I mean, what exactly does he think we’ve got right now?
In FY2019, the federal government spent a staggering $4.45 trillion, according to CBO estimates. That was an 8% increase over FY2018. Both military and domestic spending increased. In other words, we saw a healthy expansion in both the warfare and welfare states. Despite increasing federal revenue, the national debt grew by $1.2 trillion in FY2019. (If you’re wondering how the debt can grow by a larger number than the annual deficit, economist Mark Brandly explains here.)
But we still need a “big government investment program?” If $4.5 trillion isn’t enough government fiscal stimulus, how much is? Six trillion? Seven trillion? The federal government is already spending money like drunken sailors. (I mean no disrespect to drunken sailors. I’m pretty sure their money is better-spent than Uncle Sam’s.) The government would pass out from alcohol poisoning before it got drunk enough to spend the amount of money Krugman wants. We’re at peak silliness here.
Not to get too political, but I’ve noticed a pattern over the years. Republicans complain about Democrats spending money and then they get power and keep right on spending money. Meanwhile, Democrats claim the Republicans aren’t spending enough money and when they get into power, they spend more money.
Notice the common denominator — spending money.
We’re all silly Keynesians now!
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