In this column, he attacks people who claim that there are "structural" (that is, institutional) issues of unemployment that are exacerbating the current situation, and certainly some of these would have some merit, even if the Princeton Sage disagrees. For example, the Bush administration pushed home ownership like never before, and now people "own" homes that they cannot sell, so even if jobs are available elsewhere, the families cannot easily move to them.
(I would not be surprised to see one "solution" being what men in the Third World have done: take jobs far away from their homes, and send the money back to their families. That is a fixture of life in Africa and Asia, and we mostly have avoided it here, but that might be changing.)
What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to be done, but workers aren’t ready to do it — they’re in the wrong places, or they have the wrong skills. Our problems are “structural,” and will take many years to solve.Hey, it's easy! Just "create" more "demand"! I had no idea!
But don’t bother asking for evidence that justifies this bleak view. There isn’t any. On the contrary, all the facts suggest that high unemployment in America is the result of inadequate demand — full stop. Saying that there are no easy answers sounds wise, but it’s actually foolish: our unemployment crisis could be cured very quickly if we had the intellectual clarity and political will to act. (Emphasis mine)
How do we do that? Borrow and print lots and lots of money, there will be "demand" everywhere, the economy will "gain traction," and we are back into prosperity. All it takes is some "intellectual clarity and political will."
Of course, part of that "intellectual clarity" is to operate on the assumption that factors of production are homogeneous, and that there are no "structural" issues of production that will come into play when more "stimulus" is created. An economy? No problem! Y = C + I + G + (X-M), so all we need to do is to increase "G" to cover for a lack of "I" and "C" and the ship will right itself automatically.
From where does the "G" funding come? Why ask? ANY increase in "G" brings prosperity, whether it comes from new taxes or borrowing. (The U.S. Government does not directly "print" new money to pay its bills as we have seen in places like Latin America and Zimbabwe, as new money enters through the banking system. In other words, we are more "sophisticated" in the way we create money, as we use a roundabout way to "print.")
Lest anyone think that Krugman has NOT endorsed new taxes as a means to help bring economic recovery via new "demand," that person has not read this:
If we could wave away political reality, I’d let all the Bush tax cuts expire, and use the improvement in the budget outlook to justify a large, temporary increase in public spending.Moreover, he claims that Obama can build a recovery in part on the expansion of "green jobs" and "clean-energy." Now, if that were true, it would be the first time that an economy recovery came about via the expansion of huge subsidies, since the "green technologies" need massive government help just to stay afloat.
In the reality-based world of economics, assets have real values, and if we have to prop up a set of assets via subsidies, then those subsidies must be taken from those assets that are profitable and then transferred to those that are not. Krugman and company argue that over time, these "new" assets will ultimately become profitable on their own, provided government subsidizes them enough. This is like saying that Mao could have made the backyard steel furnaces created during the Great Leap Forward work if he just had subsidized them enough.
No, assets matter. The structures of production matter. This is news to those who operate in the imaginary C + I + G + (X-M) world, but we are not going to end this hell of unemployment until government stops trying to BLOCK the recovery by re-directing assets from higher-valued, profitable uses to lower-valued and unprofitable uses. It is that simple, but Krugman will ignore it in order to push his own Keynesian fantasies.