Furthermore, Krugman seems to contradict his own Keynesianism in the following statement:
We’d be better positioned to deal with the current emergency if so much money hadn’t been squandered on tax cuts for the rich and an unfunded war. But we still entered the crisis in much better shape than the Greeks.According to Keynesian doctrine, however, it would seem that both the tax cuts (actually, rates at all levels were cut, not just the top rates) and U.S. wars abroad would have "stimulated" the economy, especially since the economy was sluggish when both things were put into place. Furthermore, if budget deficits and government spending were bad then, how are they good now? (Yes, the Democrats are in charge, so whatever they do is good, and while I am non-partisan in my economic approach, Krugman's partisanship is not exactly appealing.)
So, why is Krugman so optimistic now, even though the lower tax rates remain (through this year) and the wars continue? In his own words:
...we have a clear path to economic recovery, while Greece doesn’t.This does not compute if the Bush policies of, well, "fiscal stimulus and expansionary policies by the Federal Reserve," led us into recession. In other words, Krugman has no real causality theory as to why we got into recession in the first place.
The U.S. economy has been growing since last summer, thanks to fiscal stimulus and expansionary policies by the Federal Reserve. I wish that growth were faster; still, it’s finally producing job gains — and it’s also showing up in revenues. Right now we’re on track to match Congressional Budget Office projections of a substantial rise in tax receipts. Put those projections together with the Obama administration’s policies, and they imply a sharp fall in the budget deficit over the next few years.
Now, Krugman will tell you that the reason things got this was that the government did not effectively regulate the financial markets, which jumped into the housing bubble feet-first. Yet, he ignores the fact that the Fed was pumping money into the system, directing it to housing, and that whole issue of home ownership itself has been pushed by the federal government for more than 70 years, which has meant all sorts of programs aimed at putting people into home ownership that, to be frank, should not be buying houses.
In fact, he has claimed elsewhere that the Fed should be holding down interest rates while the government, at the same time, should make sure that it effectively determines the "safe" havens for the new money. Furthermore, Krugman forever confuses cause with effect by claiming that the recession occurred because people stopped spending, as opposed to the Austrian view that people slowed down their spending precisely because the economy moved into recession.
As for the current "recovery," Krugman still sticks to the false belief that the Fed can print us out of the downturn, and as for claiming our future will not mirror that of Greece simply because this government "controls" its own currency, he needs to get an education. Why? Much of the reason that Greece is not able to make the necessary adjustments is that government spending accounts for a much larger percentage of GDP than our own.
Moreover, the public employee unions in Greece are extremely militant, and they will fight any cuts in government spending. And what does Krugman recommend here? He believes that we need more unionization to push for higher wages (which, in his view, "stimulate" spending) and an expansion of the reach of government.
So, let me get this straight. Greece is worse off than the USA, but the way that we can improve our economy is to be more like Greece -- except for one thing. Greece cannot inflate its currency, given it is on the euro, but the United States Government can print unlimited amounts of dollars, which the ancients once called inflation.
There we have it. Inflation is our economic security. Amazing.