If you are a preacher of Grace, then preach a true, not a fictitious grace; if grace is true, you must bear a true and not a fictitious sin. God does not save people who are only fictitious sinners. Be a sinner and sin boldly, but believe and rejoice in Christ even more boldly.No, this is not a theology lesson, but I see an analogy in Paul Krugman's latest statements, both in his latest column and on an appearance on Good Morning America.
When Mr. Obama first proposed $800 billion in fiscal stimulus, there were two groups of critics. Both argued that unemployment would stay high — but for very different reasons.Since I am not in the Wall Street Journal Supply-Side/Neoconservative camp, I'm not going to comment on what the Journal editorialists have written, but I do have a problem with Krugman's analysis.
One group — the group that got almost all the attention — declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.
The other group, which included yours truly, warned that the plan was much too small given the economic forecasts then available. As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole.
Critics in the second camp were particularly worried about what would happen this year, since the stimulus would have its maximum effect on growth in late 2009 then gradually fade out. Last year, many of us were already warning that the economy might stall in the second half of 2010.
He claims that had the government appropriated nearly three times as much as it did, the economy would be doing fine now and we would be close to full employment. However, he fails to explain just how or why that would be the case. Yes, I am familiar with the diagrams included in an earlier posting, but Krugman seems to be implying that had the government run a three-trillion-dollar-plus deficit last year, that our economy would be in fine shape today.
But, WHY would it be in good shape? Would have that injection of spending -- And how and where would Congress appropriate that amount of money so quickly? -- have boosted long-term capital investment, which is missing today? Krugman doesn't say; he just looks at GDP charts, extrapolates, and then he is off writing columns.
Second, his attribution of bad motives to anyone who disagrees with his point really strikes me the wrong way. Republicans are just obstructionists and nothing more, and the markets are run by idiots, and President Obama is just listening to the wrong people, and that maybe Krugman should be the president's top economic (and political) adviser. Who knows?
I mean, if the Keynesian paradigm really is as good as Krugman says it is, then I would be happy to participate in a scheme in which all of us could spend ourselves into wealth. Since the Chartalists seem to believe that the official government monopoly on what government calls money is the source of creation of wealth and prosperity, all that is needed is for government to spend, spend, spend, and everything else will follow.
At one level, I wish Obama had followed Krugman's advice and just lavished the spending if for no other reason to demonstrate just how wrongheaded that entire Keynesian paradigm really is. (I'm sure that Krugman would add that one not only would need new spending, but one also would have to have a religious faith in government spending and government itself in order to make the whole thing work.)
So, Obama is going to try to do something, the economy will continue to tank, and Krugman will be claiming that all we need to do to get rich is spend a lot of money, and if our bank accounts are empty, then the government will fill them with "living water."