Lest anyone think that Krugman is about anything but partisan politics, read again. His column today once again declares to the world that he is not about being an economist, but rather a political operative. Furthermore, he then attempts to claim that the New Deal and Great Society were about "values," not political rent-seeking.
You see, in Krugman's world, ANY criticism of the New Deal or Great Society can come only from an evil mind and a more-evil heart, and any criticism of President Obama when he is citing those two in favor of his own political proposals is a Really Bad Thing. From what I can tell, Krugman also believes that it is evil to employ basic tools of economics, like the Law of Scarcity and the Law of Opportunity Cost, in one's own analysis of government action.
While I have little or nothing to do with the Heritage Foundation (which openly has supported America's military adventures abroad as well as the vast domestic prison apparatus at home), nonetheless Krugman's attack on a recent report from Heritage tells us more about Krugman's lack of even basic economic understanding than it does about conservative politics. He writes:
When the (budget) proposal was released, it was praised as a “wonk-approved” plan that had been run by the experts. But the “experts” in question, it turned out, were at the Heritage Foundation, and few people outside the hard right found their conclusions credible. In the words of the consulting firm Macroeconomic Advisers — which makes its living telling businesses what they need to know, not telling politicians what they want to hear — the Heritage analysis was “both flawed and contrived.” Basically, Heritage went all in on the much-refuted claim that cutting taxes on the wealthy produces miraculous economic results, including a surge in revenue that actually reduces the deficit.My criticism of Krugman is not based upon whether or not the Heritage report is credible, but rather his statement above on "environmental protection." Let me explain.
By the way, Heritage is always like this. Whenever there’s something the G.O.P. doesn’t like — say, environmental protection — Heritage can be counted on to produce a report, based on no economic model anyone else recognizes, claiming that this policy would cause huge job losses. Correspondingly, whenever there’s something Republicans want, like tax cuts for the wealthy or for corporations, Heritage can be counted on to claim that this policy would yield immense economic benefits.
The point is that the two parties don’t just live in different moral universes, they also live in different intellectual universes, with Republicans in particular having a stable of supposed experts who reliably endorse whatever they propose.
In economic analysis, environmental issues fall under the "technological externalities" category. That is, when economic exchanges (and I include production of goods within the umbrella of "exchange") also impose costs upon third parties that do not directly benefit from the original exchange, then we say that a negative "externality" is created that not only imposes harm on the third parties, but also distorts the structure of production.
One can run wild with externalities (which often exist because of problems in the delineation of private property rights, i.e., Who owns the skies when there is air pollution?), but we have to understand that the imposition of laws and regulations to deal with things like pollution also will have costs. Furthermore, when environmental extremists, like those people who now run the powerful Environmental Protection Agency, get their way, they will attempt to impose policies that go well beyond the "environmental protection" for which most Americans are willing to pay.
There is no way to be able to find the theoretical "optimal" policy for environmental protection, but nonetheless we can say that many policies do impose costs upon production, and added costs to production mean less of something is produced. That is fundamental in economic analysis. So, when Krugman declares that "environmental protection" does NOT impose economic losses somewhere, he is violating those fundamental principles of analysis in the area where he has his doctorate.
Furthermore, his endorsement of "green energy" with its vast array of subsidies tell us that one of his "values" is to support the process of moving resources from higher-valued uses to lower-valued uses. There is no way, economically speaking, around that point. Krugman's support of the anti-energy jihad is also support of policies that make us poorer.
In Krugman's Keynesian world, all that government needs to do is to tax, borrow, print money, and spend, spend, spend, and all is right with the world. Indeed, if the Keynesian view that all resources, factors, and capital are homogeneous, then he is correct. But, if they are heterogeneous, then the Keynesian analysis falls flat.
There is one more point, and that is Krugman's idea that the New Deal and Great Society support superior moral "values," or what the New York Times in a nearby editorial (quoting Obama) calls "the basic social compact in America." A welfare state, whether it is transferring vast amounts of resources for corporate welfare or for the creation of huge urban reservations in which millions of people are subsidized in all walks of life, is an entity in which some people are expected to work to support others who are politically-connected.
To me, such "values" are not "moral" by any stretch of the imagination. They are noting but coercion by the political classes against those who are not politically-favored. This is not just political liberalism of what I speak. The Republicans in Congress (with a few exceptions) want to cut out what people call "welfare" for the poor, yet are happy to continue with the current arrangement of creating welfare for the Military-Industrial Complex, as well as agricultural subsidies that are socially and economically harmful. Republicans and Democrats both supported the huge financial and corporate bailouts that have dragged down our economy.
If such things represent "social compacts," then a "social compact" is something imposed by brute force. And that is something that Krugman, his employer, and those Republicans that Krugman hates all have in common.