Krugman: The State is Light

[Update, Thursday, August 12, 2010, 9:20 AM]: I have deleted Wednesday's post on scientific fraud because I am not sure that the false temperature listing was deliberate. There may have been an error by the satellite readings that people did not pick up until later. I do try to make sure that what I put on my website is reasonably accurate, and I am not sure that what I have alleged is true, given the information I have now. [End Update]

On August 3, 1914, British Foreign Secretary Edward Grey looked out of the window of the Foreign Office and watched as workers lit the street lamps for the approaching nightfall. Germany had just invaded Belgium, Europe was at war, and Parliament the next day would declare war on Germany and Austria-Hungary, and much of the world would be plunged into the horror of World War I.

Grey then made his famous and prophetic statement: "The lamps are going out all over Europe. We shall not see them lit again in our time," and the slaughter of 10 million soldiers and countless civilians in the next four years would prove his point.

In his column today, Paul Krugman plays off that statement, but puts things in a different context. The lamps are going out, but they are going out because the state does not seize enough property and resources from Americans:

The lights are going out all over America — literally. Colorado Springs has made headlines with its desperate attempt to save money by turning off a third of its streetlights, but similar things are either happening or being contemplated across the nation, from Philadelphia to Fresno.

Meanwhile, a country that once amazed the world with its visionary investments in transportation, from the Erie Canal to the Interstate Highway System, is now in the process of unpaving itself: in a number of states, local governments are breaking up roads they can no longer afford to maintain, and returning them to gravel.

And a nation that once prized education — that was among the first to provide basic schooling to all its children — is now cutting back. Teachers are being laid off; programs are being canceled; in Hawaii, the school year itself is being drastically shortened. And all signs point to even more cuts ahead.

We’re told that we have no choice, that basic government functions — essential services that have been provided for generations — are no longer affordable. And it’s true that state and local governments, hit hard by the recession, are cash-strapped. But they wouldn’t be quite as cash-strapped if their politicians were willing to consider at least some tax increases. (Emphasis mine)

Why are we in this terrible, terrible state? It is because Goldstein's legions, er, the few Republicans left in Congress, have not properly worshiped the Greatness of the State. (Of course, this assumes that Republicans actually shrink government, but I have seen no evidence of that claim in the past 30 years, when the Republican Party was at its strongest since before the Great Depression.)

Krugman goes on:

...the federal government, which can sell inflation-protected long-term bonds at an interest rate of only 1.04 percent, isn’t cash-strapped at all. It could and should be offering aid to local governments, to protect the future of our infrastructure and our children.

But Washington is providing only a trickle of help, and even that grudgingly. We must place priority on reducing the deficit, say Republicans and “centrist” Democrats. And then, virtually in the next breath, they declare that we must preserve tax cuts for the very affluent, at a budget cost of $700 billion over the next decade.

In effect, a large part of our political class is showing its priorities: given the choice between asking the richest 2 percent or so of Americans to go back to paying the tax rates they paid during the Clinton-era boom, or allowing the nation’s foundations to crumble — literally in the case of roads, figuratively in the case of education — they’re choosing the latter.

It’s a disastrous choice in both the short run and the long run.

In the short run, those state and local cutbacks are a major drag on the economy, perpetuating devastatingly high unemployment.

It’s crucial to keep state and local government in mind when you hear people ranting about runaway government spending under President Obama. Yes, the federal government is spending more, although not as much as you might think. But state and local governments are cutting back. And if you add them together, it turns out that the only big spending increases have been in safety-net programs like unemployment insurance, which have soared in cost thanks to the severity of the slump.

That is, for all the talk of a failed stimulus, if you look at government spending as a whole you see hardly any stimulus at all. And with federal spending now trailing off, while big state and local cutbacks continue, we’re going into reverse.

So, we are to assume that the U.S. Government is just wallowing in money when, in fact, it is borrowed money, money that U.S. taxpayers ultimately must repay. (Of course, what will happen is that the government will repudiate the debt via inflation, which also is a tax, albeit a more hidden tax.)

But that is not all. We are supposed to think that the government is sitting on piles and piles of cash, but Goldstein selfishly is letting rich people keep some of their income, and then those evil rich people also are sitting on that cash. So the problem is that those who have the money are not spending it, and that is why we are in recession. And why are they not spending the money? Krugman explains with this non sequitur:

How did we get to this point? It’s the logical consequence of three decades of antigovernment rhetoric, rhetoric that has convinced many voters that a dollar collected in taxes is always a dollar wasted, that the public sector can’t do anything right.

The antigovernment campaign has always been phrased in terms of opposition to waste and fraud — to checks sent to welfare queens driving Cadillacs, to vast armies of bureaucrats uselessly pushing paper around. But those were myths, of course; there was never remotely as much waste and fraud as the right claimed. And now that the campaign has reached fruition, we’re seeing what was actually in the firing line: services that everyone except the very rich need, services that government must provide or nobody will, like lighted streets, drivable roads and decent schooling for the public as a whole.

So the end result of the long campaign against government is that we’ve taken a disastrously wrong turn. America is now on the unlit, unpaved road to nowhere.

Now, the last time I ever heard anything about "Welfare Cadillacs" was in the 1960s, more than four decades ago. Since then, the American State at all levels has grown fantastically, and while I have heard some rhetoric from Republicans about "big government," nonetheless the reality of governmental expansion belies whatever politicians might say.

Yet, according to Krugman, the problem is that the state does not swallow enough wealth. I suppose that he believes that perhaps had his hero FDR been successful in his attempt to levy a 100 percent tax on all incomes above $25,000 (he tried to do this with an executive order in 1942, but Congress struck down his attempt and the courts did the rest), then we would be a rich, happy country right now.

Furthermore, states and localities are cutting back spending just like the rest of us because the U.S. economy is in a serious recession, and, contrary to what Krugman tells us, the recession did not happen because of anti-government rhetoric or rich people or the lack of high tax rates. There is this problem of causality, and, unfortunately, Krugman confuses cause with effect.