Government, argues Krugman, should be borrowing even more money because interest rates have been pushed to near-zero and it should use that money to "invest" in propping up public employee unions. No, he didn't say that last part, but the very people he is claiming should be rehired by governments pretty much are represented by unions.
Why the situation exists is because of a mysterious lack of "aggregate demand," or so we are to believe:
So what is going on? The main answer is that this is what happens when you have a “deleveraging shock,” in which everyone is trying to pay down debt at the same time. Household borrowing has plunged; businesses are sitting on cash because there’s no reason to expand capacity when the sales aren’t there; and the result is that investors are all dressed up with nowhere to go, or rather no place to put their money. So they’re buying government debt, even at very low returns, for lack of alternatives. Moreover, by making money available so cheaply, they are in effect begging governments to issue more debt.
And governments should be granting their wish, not obsessing over short-term deficits.
Yes, irresponsible Americans are paying debts, which is driving us into depression. If we were willing to stop paying our mortgages, car payments and credit card payments, then we could have prosperity. But since Americans are foolish, the government needs to rescue us by ramping ujp the spending.
No doubt, the message that government spending essentially offers only benefits and no costs is very popular in Washington and at Princeton. Just think; the government by simple declarations can repeal the Law of Opportunity Cost. It's magic, I tell you! Magic!
Robert Higgs notes that the Progressivism to which Krugman subscribes has the following tenets of faith:
1. If a social or economic problem seems to exist, the state should impose regulation to remedy it.Robert Higgs notes that the Progressivism to which Krugman subscribes has the following tenets of faith:
2. If regulation has already been imposed, it should be made more expansive and severe.
3. If an economic recession occurs, the state should adopt “stimulus” programs by actively employing the state’s fiscal and monetary powers.
4. If the recession persists despite the state’s adoption of “stimulus” programs, the state should increase the size of these programs.
5. If long-term economic growth seems to be too slow to satisfy powerful people’s standard of performance, the state should intervene to accelerate the rate of growth by making “investments” in infrastructure, health, education, and technological advance.
6. If the state was already making such “investments,” it should make even more of them.
7. Taxes on “the rich” should be increased during a recession, to reduce the government’s budget deficit.
8. Taxes on “the rich” should also be increased during a business expansion, to ensure that they pay their “fair share” (that is, the great bulk) of total taxes and to reduce the government’s budget deficit.
9. If progressives perceive a “market failure” of any kind, the state should intervene in whatever way promises to create Nirvana.
10. If Nirvana has not resulted from past and current interventions, the state should increase its intervention until Nirvana is reached.
And Paul Krugman is there to give us this road map to Nirvana!
