Friday, April 8, 2011

Massive federal spending, face it, is "ludicrous and cruel"

In his column today, Paul Krugman takes his cue from the Democratic National Committee and writes yet another one of his partisan screeds on the Republicans' federal budget proposals, calling it "ludicrous and cruel." Actually, he is right, but I think for reasons other than what he might admit.

First, he demonstrates that he really is little more than a political operative because he aims much of his vitriol against Rep. Paul Ryan, the House Budget Committee Chairman. In fact, as he often does, Krugman spends as much time with personal attacks on an individual as he does with the ideas that the individual is espousing. To me, that is ironclad proof that the focus of his column is that of a partisan political operative, NOT an economist.

Second, he then goes into yet another tizzy to claim that a 4.96 percent cut in tax rates somehow has triggered every other evil that one can imagine, and he really wants us to think that if only the "rich" could be taxed at 39.6 percent instead of 35 percent, that all would be well. Only a political operative would say that, because a real economist would understand that the scenario Krugman presents is nonsense.

Third, the idea that our economy can support massive welfare spending and subsidies at home and military adventures abroad is plain delusional. Now that the Obama administration has decided to follow in the footsteps of its predecessor and continue the fiction of Empire Forever, Krugman no longer raises the objections to military adventures and its requisite spending as he did when George W. Bush was president.

Instead, he promotes the delusion that because Ben Bernanke is keeping interest rates artificially low, the USA can continue to borrow and spend into perpetuity. (No, we will borrow and spend into oblivion.)

We are seeing a period of outright political delusion that dwarfs even the delusion that accompanied Lyndon Johnson's pursuit of the "Great Society" AND the war in Vietnam. Both then and now, the politicians have imagined that they can pretend the U.S. economy can continue to carry the heaviest burdens of government in the history of the world.

So, we have reached yet another episode of the dog-and-pony show known as the government shutdown. It is all political theater, while the rest of us will learn the very hard lesson that just because economists like Paul Krugman and his friends claim that this government can spend us into prosperity does not make it so.

No doubt, when inflation begins to really catch fire -- and there is no avoiding it now -- Krugman will call for price controls and claim everything as its cause but the truth: out-of-control borrowing and spending creates disasters, not prosperity.


Bob Roddis said...

Bob Wenzel examines Krugman’s rhetoric:

Paul Krugman on Paul Ryan is Pretty Close to Paul Krugman on Paul Krugman

Krugman writes:

A correspondent asks how it’s possible that Paul Ryan would release such an extreme, unprofessional plan.
Folks, he’s always been like this. The image of Ryan as a thoughtful, serious conservative never had any basis in reality. The original “roadmap” was just as nonsensical as the new proposal; the Ryan-led attack on health reform was crude nonsense.

Ryan the serious deep thinker was a fantasy of Beltway types who think entirely in terms of images and perceptions, and can’t be bothered to dig into the policy details. Oh, and the haplessness of Heritage is also old news to anyone who has been paying attention to the think tank’s actual output.

After reading this, I thought to myself, all true. Then I looked at the words again and realized that you could substitute

"Krugman" for "Ryan"

"regressive" for "conservative",

"NYT" for "Heritage",

"attack on Austrian economists" for "attack on health reform",

"rag's" for "think tank's"

and you would have a pretty good description of Krugman.

Justin said...

Outstanding post, as usual! It's truly astounding to me that ANYONE takes Krugman seriously anymore. I'm certainly no economist...but I am at least smart enough to question the insight of anyone who's established such a public track record of being so consistently wrong about the economic consequences of actions he has advocated.

Question: Who do you consider to be the two or three top economists in the country today? The names I'm familiar with and read are guys like Sowell and Williams. I've always enjoyed watching old clips of Milton Friedman as well...but understand that he and the monetarists don't necessarily get along any better with Austrian School guys than the Keynesians do.

morse79 said...

Oh Billy, you are so smart. You finally realized that Paul Krugman is writing an op-ed!Bravo!

Again, what a bunch of nonsense you spew out here on a blog dedicated to attacking one person! Accusing Paul Krugman of engaging in personal attacks, and how that somehow denigrates what he wrote?

And what was that attack on Paul Ryan? That his "seriousness" is just talk for blatant right-wing ideology? That this is not the first time he has produced a document so full of holes and misplaced assumptions? I don't recall Krugman attacking Ryan's mother and he is echoing critiques made by several others.

Then you go ahead as usual misrepresenting Krugman's position. A common right-wing tactic - find one part of an argument you dislike and turn it into the entirety of his argument. Where does Krugman ever say that returning tax rates to Clinton era levels on the rich is the panacea for our debt woes. Find me one spot where Krugman says that long-term deficits are not a problem, and that the issue is not rising healthcare costs and an aging population. Where has Krugman not continued to support reduction of military spending and favored butter over guns?

Utter nonsense Billy.

The Ryan plan is not only economically ridiculous but political impossible to implement. It is the utopian agenda of the growing libertarian wing of the right (or if you prefer Austrians). It rests on misguided assumptions about the impact of tax cuts and reductions in government spending on the economy and does nothing to address the issue of healthcare cost. It merely shifts those costs to those who can burden it the least.

Kevin said...

jason h said...

Nobel Prizes are nice and all, but they pertain to a certain area of expertise.

"for his analysis of trade patterns and location of economic activity"

awarded jointly to Gunnar Myrdal and Friedrich August von Hayek "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena"

Hmm, is gov't spending related to trade patterns or economic, social and institutional phenomena, furthermore, is the boom/bust cycle classified under the location of economic activity or the theory of money and economic fluctuations

Anonymous said...

Professor, I just want to point out that a reduction from 39.5% to 35% is not a 4.5% reduction it is an 11.4% reduction. Otherwise great post.

Daniel Hewitt said...

Anon @ April 8, 2011 1:12 PM

Interestingly enough, if you calculate tax cuts in the manner that you did, George W. Bush was a progressive.

(Don't tell this to any leftists).

Anonymous said...

Where's Frosty the Snowman University again?

Anonymous said...

"Anonymous said...

Where's Frosty the Snowman University again?"

April 9, 2011 12:02 AM

What's 'argument from authority' again?

burkll13 said...

"It rests on misguided assumptions about the impact of tax cuts and reductions in government spending on the economy and does nothing to address the issue of healthcare cost. It merely shifts those costs to those who can burden it the least. "

its funny, because the only ones i see who actually identify the problem in healthcare are the austrians. everybody else is just hung up on insurance and dont acknowledge that they are just trying to spread already artificially scarce resources even thinner

Bob Roddis said...

Re: Frosty U

It's so easy to draw out the regressives so that they effortlessly demonstrate their maturity and intellectual depth.

William L. Anderson said...

Yeah, yeah, yeah. I hate to tell you this, Mr. Anonymous, but I kind of like teaching at Frostburg. And, yes, we get a lot of snow up here, and where I live, we average about 10 feet per winter.

That has nothing to do with economics or my arguments, but nonetheless I do like it here.

Anonymous said...

Professor please do not reply to those who rely solely on logical fallacies. Allow their comments to stand alone as a shining example of the caliber of the opposition.

ekeyra said...

Id go to frosty the snowman college...

W.C. Varones said...

So glad I found your blog! I'm adding it to my blogroll.

I've been mocking Krugman for years, but not this thoroughly. Well done and please keep it up!

Linked here.

And I love the Krugman acolytes trashing your college rather than engaging the argument.

Anonymous said...

Anyone who says we cannot spend our way into prosperity must explain the post WWII expansion. We ended WWII with well over 100% debt to GDP. And don't give me the old line that our competitors were in ruins. Ask yourself is it better to have robust or weak trading partners?

Bob Roddis said...

Re: Post WWII expansion.

What are you talking about?

The period 1945-1950 is (almost) a scientific test of the Keynesian hypothesis. Despite repeated warnings by most mainstream economists that cutting government spending at the conclusion of WW II would bring back the Great Depression, the Congress dramatically lowered government spending between 1945 and 1950. Federal government expenditures fell from $106.9 billion in 1945 to $44.8 billion in 1950. Defense spending took the biggest hit falling from $93.7 billion in 1945 to just 24.2 billion in 1950. In just 5 years, government spending (as a % of GDP) fell from 45% in 1945 to just 15% in 1950 and the annual federal budget deficit fell from $53.7 billion in 1945 to only $1.3 billion in 1950.

ekeyra said...


Almost covered my monitor in lemonade when i read the WWII challenge. Did he really think austrians havent had 50+ years to figure out when you stop rationing consumer goods and wind down a globe spanning military endeavor you end up with astonishing domestic economic growth? Oh wait I forgot, pouring half your country's gdp into things that wind up as smoldering wreckage makes us all wealthier.

Bob Roddis said...


It's really discouraging that these people will insist upon their silly Keynesian tinker-toy world regardless of facts, logic or history. And it's always "oh yeah, well how do you explain this historical event"? (taken out of context). There's never an understanding of Austrian concepts, much less Austrian analysis. Pitiful.

BTW to all the Keynesians out there, you don't establish economic principles through the use of historical narratives or anecdotes.