On another point, I know that some of you have seen your comments disappear. I am NOT deleting any of them. Yesterday, I was having problems of my own dealing with Blogger, and so I believe that what we are seeing is a technical issue at work that is beyond my own blog. I'm sorry that you have experienced those problems, but I also want you to know that I don't delete things just because I disagree with them. [END NOTE]
In his missive today on Japan and the state of its economy, as well as the state of our own economy, Paul Krugman decides that being a partisan hack is good economics. While I hold no love for the Republican Party and fully agree that the Bush administration was irresponsible and profligate, nonetheless, when the Democrats took power, they did not put the brakes on runaway spending, but, instead, stepped on the accelerator.
Here is the problem. While Krugman and the Democrats rightly accuse the Republicans of "running the economy into a ditch," they don't say how it was done. After all, with the explosion in government spending during the Bush years, they cannot accuse the Republicans of not spending enough "to give the economy traction."
Yes, the purposeful diversion of huge amounts of money into the housing market created a destructive bubble, but even there, the Democrats and Krugman have a problem. First, if all that is needed is more spending, then why did the attempts to continue to prop up the housing market fail miserably?
If recessions are caused simply by a drop in private spending (both consumption and investment spending), then fixing it should be easy: Ben Bernanke can just fly lots of helicopters over the country and drop money. Since government is not "revenue constrained," as the Chartalists are fond of reminding us, the solution is easy. As Robert Murphy noted in this article, since government monetary creation "abolishes scarcity," fixing the current problem is a helicopter drop away.
Furthermore, spending is spending, and since the Bushies launched wars on the other side of the world and spent, spent, spent, it would seem to me that they were increasing the "aggregate demand" that Krugman claims is the key to prosperity. Yet, why did the boom turn into a bust? The Austrians have the answer, but Krugman and his followers (the entire U.S. Government apparatus) certainly are not going to listen.
I also wish to address one more issue, and that is Krugman's claim that ObamaCare is a cost-cutting measure. He says:
(The Republicans) also surely (will) try to repeal health reform, which would be another twofer, reducing economic security even as it increases long-term deficits.What is Krugman's proof that this initiative will lower the future federal deficits? He cites studies from the Congressional Budget Office, studies that were made by Democrats to benefit Democrats. Now, I like to see empirical evidence as much as the next guy, but I am NOT going to accept partisan political speculation of something that supposedly will happen in the future as "empirical evidence" of something that is GOING to happen. That is not economic analysis; it is simply partisan hackery. Furthermore, name me one "cost-saving" government spending program that has cut the federal deficit. These "programs" are nonexistent.
As some of the people commenting on this blog have noted, Krugman was calling for a $1.2 trillion "stimulus," but we got "only" $800 billion. Now, we are supposed to assume that for want of just $400 billion more, the economy would have been close to "full employment." That seems absolutely ludicrous on its face. Furthermore, he demonstrates no causal mechanism on how that extra "stimulus" would have translated into longer-term economic benefits. By claiming that all of this is the fault of