Krugman's 1 Percent Fallacy

I know all readers are shocked, SHOCKED that Paul Krugman still is going off on the Reinhart-Rogoff paper, but today he ups the ante. Anyone who believes that setting off yet another unsustainable boom is not good policy actually is a people-hating moralist who sides with the Evil 1 Percent.

In other words, folks, it's Goldstein (or maybe "Scoldstein") time again. Yes, everyone knows that the way to "fix" the economy is for the government to borrow vast sums of money for consumption goods, and the spending that comes with that and printing money will give the economy enough "traction" to move on itself -- at least until the next boom runs out of steam and government has to repeat the process.

Krugman goes on to explain that anyone who might question this economic "wisdom" does so out of malevolence and (maybe) some ignorance or a false belief in some sort of economic "morality," writing:

...austerity maintained and even strengthened its grip on elite opinion. Why?

Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.

However, we find that this brand of economic fundamentalism really is nothing more than a dastardly plot hatched by the Evil 1 Percent (or maybe just the Evil One himself, namely Scoldstein):

What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.

Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.

You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

Could Krugman be engaging in...conspiracy theories? Read on:

Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?

This is a most interesting position he is taking. There are two sets of policies in which government policy directly enriches that "1 percent." The first involves the massive bank and financial bailouts that have been at the heart of the "austerity" policies imposed upon countries like Greece, Ireland, Portugal, and Spain, not to mention the continuing bailouts being pushed by the central banks of Europe, the USA, and Japan.

And guess what? Krugman supports the bailouts, even though he believes that they should be financed, at least in Europe, via booms, the very kind of booms that collapsed and created the financial crises in the first place. To put it mildly, Krugman demands another round of "hair of the dog" economics.

The second enrichment-of-the-wealthy policy is crony capitalism, but when David Stockman speaks out against this get-rich-by-being-politically-connected set of schemes, Krugman lambasts him for being a "scold." So, it seems that The Great One wants it both ways: cry crocodile tears about how government policies hurt the poor, and then endorse economic schemes that...hurt the poor.

What about the so-called morality play of which Krugman speaks? He is saying that Austrians believe that somehow booms are "sinful," and that if Wall Street and the rest of the economy get drunk, then it is time to hide the alcohol and everything else. No soup for you!!

Yet, what is it that Austrians have been saying? We hold that credit-fed booms, and especially the credit-fed booms that involve heavy borrowing for purchasing consumption goods, are going to run aground because they are not sustainable. The borrowing and investment patterns do not match consumer spending and saving preferences, which means that the boom runs out of steam on its own.

If the economy is to have a real recovery, then entrepreneurs must be able to find those assets that are potentially profitable and be able to move resources from lower-valued uses to higher-valued uses. But, the Krugman plan is to have government subsidize moving resources from higher-valued uses to lower-valued uses, and keep doing it until one day things magically turn around.

The housing boom crashed when it became apparent that most Americans could not afford the super-high prices created by the boom and when a wave of mortgage defaults hit the system, it went down. Krugman, apparently not appreciating the hard fact that a family making $50K a year probably cannot afford the payments on a house selling for $500K, says that trying to keep an asset bubble alive not only is economically feasible, but also the only moral policy that can be implemented.

Austrians are not calling for "austerity" for austerity's sake or because they want people to be thrown out of work, but rather because they believe the current sets of policies are not economically sustainable. The American economy cannot subsidize itself into prosperity via "green energy," nor can the economy continue to exist as a series of asset bubbles. Furthermore, while the Fed can mask the problems by purchasing financial instruments like mortgage securities in order to prop up their prices, it cannot repeal the Law of Demand or the Law of Scarcity.

And Austrians certainly are not "austerians" of the European variety. We simply are saying we don't believe in the Debt Fairy or the Inflation Fairy, and we don't need Scoldstein to convince us that we cannot rebuild an economy by having Ben Bernanke pull financial rabbits from his hat.

Krugman, on the other hand, fervently believes that even though debt piled up during the last boom, which finally ran aground, the way to create a stronger economy -- and somehow magically pay down some of the debt, at least in the future -- is for more of the same. So, who is practicing a religious fundamentalism?

Krugman and Another Goldstein Moment

When Henry "Scoop" Jackson was confronted during the 1976 Democratic primary that his socialistic ideas violated laws of economics, Jackson replied that there was no problem: "We'll create a new economics," he told cheering supporters. Likewise, Franklin Roosevelt confidently proclaimed that since the laws of economics (read that, the Law of Opportunity Cost and the Law of Scarcity) were nothing more than human creations, his administration through majority rule and through intimidation and bluster could eliminate scarcity.

These men were politicians and one expects politicians to be divorced from reality when making empty promises to voters and if and when these initiatives fail -- as they must -- the politicians always can blame Goldstein, that ubiquitous saboteur. We expect nonsense and outright lies from politicians, and they always deliver.

However, it is quite another thing for an academic economist who is not self-identified as a Marxist to make the same claims, and especially an academic economist as decorated as Paul Krugman. In his column today, Krugman once again seems to make the claim that since voters have re-elected Barack Obama, that means that all of Obama's economic proposals must make sense, and that Obama can make it happen because he has the political will.

This was very much an election pitting the interests of the very rich against those of the middle class and the poor.

And the Obama campaign won largely by disregarding the warnings of squeamish “centrists” and embracing that reality, stressing the class-war aspect of the confrontation. This ensured not only that President Obama won by huge margins among lower-income voters, but that those voters turned out in large numbers, sealing his victory.

He adds:

Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we’re told — after all, life expectancy has risen, so shouldn’t we all retire later? In reality, however, it would be a hugely regressive policy change, imposing severe burdens on lower- and middle-income Americans while barely affecting the wealthy. Why? First of all, the increase in life expectancy is concentrated among the affluent; why should janitors have to retire later because lawyers are living longer? Second, both Social Security and Medicare are much more important, relative to income, to less-affluent Americans, so delaying their availability would be a far more severe hit to ordinary families than to the top 1 percent.

 The simple answer is that Krugman ignores the hard fact that the vast majority of people who receive Social Security benefits are the poor and middle class, and the government, including our "Lord and Savior" Barack Obama, is incapable of creating resources from nothing, which means that we only can pay SS recipients what is in the till. One cannot craft a policy for Social Security without taking reality seriously, but Krugman really seems to believe that rhetoric is reality and that mere words can trump the Law of Scarcity.

There is another point Krugman does not mention, and that is the hard fact that the only place in this country that has consistently grown economically has been the Washington, D.C., area, which lives off the lives of taxpayers elsewhere. If the transfer society that Krugman so worships (along with his "Lord and Savior" Obama), then Washington's newfound wealth should then translate into wealth for all.

That, however, is not the case. Furthermore, by all measures black Americans have fared much worse under the Obama regime than any other regime in modern history, yet Krugman is telling us that if Obama continues to have his way, only the wealthy will be worse off and the rest of us will be rolling in clover.

So far, that has not happened, and it is not going to happen under the current set of governing policies from Washington. As long as we have politicians who believe entrepreneurs (that is, entrepreneurs that actually earn real-live profits) are parasites, that political entrepreneurs who enrich themselves with taxpayer subsidies are the real wealth generators, and that we can have economic recovery through transfer payments, and as long as we have voters and academic economists that actually believe this nonsense, we are going to see the downgrading of the American economy.

Of course, as the Obama administration continues to destroy the underpinnings of wealth creation, Krugman will blame the inevitable results on Goldstein. It has worked before, and it will work again. That is the new economic and political reality in the United States of America.

Krugman: Hey, the Economy is Booming!

Wow, just in time! The election is two weeks away and finally -- FINALLY! -- the U.S. economy is doing great. Don't take my word for it, take Paul Krugman's:

The U.S. economy finally seems to be recovering in earnest, with housing on the rebound and job creation outpacing growth in the working-age population. But the news is good, not great — it will still take years to restore full employment — and it has been a very long time coming.

 Of course, the reason we are not absolutely booming is because of "Republican scorched-earth politics," except for the fact that the Democrats had an absolute majority in the Senate and huge majority in the House, and no Republican in sight to do anything but weep. Yet, even with that filibuster-proof majority, the Obama stimulus "was both too small and too short-lived."

Yes, Goldstein blocked everything, despite the fact that even Goldstein was neutered for two years.

Is Krugman an Economist or Just a Partisan Shill?

According to Paul Krugman, the failure of Republicans to pass the American Jobs Act is the reason there is at least a little bit of doubt about Obama's re-election victory this fall. You see, according to Krugman, the economy would be close to booming right now if only, if only, if only.

And how does Krugman know that this piece of legislation would have been the magic bullet? Because some bloggers said it would. Yes, a bunch of Keynesians claim that a law that did not passed was the Answer to the Great Secret, but now we never will know if this act -- THIS act -- would have set the world aright.

This is the kind of stuff that stuns me. I was taught by some very good economists not be be a cheerleader for politicians, and certainly not to be someone who repeats political talking points and pretends that they really are economic truths. At least Alan Blinder is paid to be a partisan shill, and spews his propaganda on Obama's payroll.

At the same time, Ben Bernanke is trying to rev up the inflation engines in hopes that he can give Obama at least a small boost before the election to make it seem as though the economy is better off than it really is. Gee, maybe it is a Princeton thing; academic economists as nothing but shills for politicians, paid and unpaid.

[Update]: In his latest column, Krugman repeats his tired canard that it was Goldstein's "obstructionism" that is responsible for the current downturn. Along the way, he gives some very curious economic analysis:

There were good reasons for these positive assessments. Although you’d never know it from political debate, worldwide experience since the financial crisis struck in 2008 has overwhelmingly confirmed the proposition that fiscal policy “works,” that temporary increases in spending boost employment in a depressed economy (and that spending cuts increase unemployment). The Jobs Act would have been just what the doctor ordered.

 Wow! We were almost there, almost to prosperity! Goldstein destroyed the recovery again! However, Krugman is not through "proving" that Goldstein was the evil force behind this depression. He writes:

The most important consequence of that stonewalling, I’d argue, has been the failure to extend much-needed aid to state and local governments. Lacking that aid, these governments have been forced to lay off hundreds of thousands of schoolteachers and other workers, and those layoffs are a major reason the job numbers have been disappointing. Since bottoming out a year after Mr. Obama took office, private-sector employment has risen by 4.6 million; but government employment, which normally rises more or less in line with population growth, has instead fallen by 571,000. 

 Now, I can see a politician writing this, but an economist really has some explaining to do in order to successfully claim that government jobs will lead a recovery. First, however, Krugman does more of his aggregate tricks when he tries to essentially claim that private sector employment pretty much has recovered.

Here is the problem: the kinds of jobs that disappeared versus the kinds of jobs that have grown in number in the past four years are not the same. It is clear that the private sector is not as robust as it was before the downturn, and the lack of tax revenues being generated is the main reason that employment is lagging in state and local government jobs.

Krugman, however, wants us to believe state and local government jobs are the source of economic growth. That literally is impossible. These are not wealth-creating jobs, for the most part; instead, they consume wealth. The lack of growth in those jobs is proof that the private sector still is not producing enough to fund levels of government to where they were four years ago.

Like most Keynesians, Krugman has the cart before the horse. He wants us to believe that government is a net wealth creator when it is not. Furthermore, he wants us to believe that government can inflate the economy into prosperity, which is an illusion, but a convenient illusion.

Goldstein and Gold

I had no idea that Ayn Rand and John Gault ruled the Republican Party and Congress, but Paul Krugman claims that is so, and who can doubt what he says, given Krugman is always right about everything. So, today he claims that Paul Ryan is a devoted follower of Ayn Rand and that he is going to try to impose a gold coin standard upon us and destroy the economy.

Given that we have had Republicans talking about gold for decades, including Ronald Reagan and his Gold Commission, and it was a Republican, Richard Nixon, who destroyed the remnants of the American gold standard, somehow I don't think a guy who has read Atlas Shrugged a few times is going to end the paper money standard we have had for a while. However, all of us know that Goldstein is capable of anything, and no one depends more upon Goldstein that Krugman.

Yes, Krugman goes over the Usual Stuff on how Republicans always are going to completely end the Welfare State, even though Republicans in power never have done that. Well, Ryan did read some works by Ayn Rand, didn't he? What other proof do you need? Krugman writes:

Well, it’s right there in that 2005 speech to the Atlas Society, in which he declared that he always goes back to “Francisco d’Anconia’s speech on money” when thinking about monetary policy. Who? Never mind. That speech (which clocks in at a mere 23 paragraphs) is a case of hard-money obsession gone ballistic. Not only does the character in question, a Galt sidekick, call for a return to the gold standard, he denounces the notion of paper money and demands a return to gold coins.

But then Krugman gets into the meat of this column: Ryan will impose a gold standard, and the economy will collapse. This falls into the "Yeah, Right" Category. First, Krugman has been claiming that inflation will lead us into recovery, and he also has claimed that inflation is a wonderful way to transfer money from the wealthy to the poor. (Please tell that to the poor and lower-income people who have been spending more and more money at the gas pump and the grocery store that inflation is their savior.)

Second, Krugman claims that the inflation rate is so low that we really don't need to worry about money, anyway. So, what is it? Is inflation bad or good? If the rate is low, why doesn't he come out and claim that we need much more monetary debasement?

Debt, Depression...and Goldstein (Again)

One of the constant themes of Paul Krugman's hyper-partisan columns has been the role of Goldstein in the current economic failure, and he gives us more Orwellian material in his latest column. Yes, the same president who has unleashed the Environmental Protection Agency to try to reduce our electricity output, and the same president who had absolute majorities in the House and Senate (filibuster-proof majority there) for more than half of his current term in office has seen the economy stymied by the Forces of Evil. Yes, the economy has not climbed out of the depression because Goldstein has declared that we must remain in the mire:

There has been plenty to criticize about President Obama’s handling of the economy. Yet the overriding story of the past few years is not Mr. Obama’s mistakes but the scorched-earth opposition of Republicans, who have done everything they can to get in his way — and who now, having blocked the president’s policies, hope to win the White House by claiming that his policies have failed.

Now, the president controls the executive branch, the U.S. Supreme Court handed him a victory in the ObamaCare decision, and the president's party controls the Senate. Only the House of Representatives eludes Obama's control. That Republicans would disagree with Obama's economic policies hardly is shocking, given that opposition parties generally do disagree on a few things.

The so-called "scorched earth" opposition refers to the Republicans being unwilling to raise the top tax rate from 35 percent to 39.6 percent, and their "intransigence" in supporting Obama's desire to tax investment income more heavily. I believe that people can agree to disagree on some things, and I do believe that raising taxes on private investment income during a depression is not a good thing. I guess that makes me a "scorched earth" sort of fellow.

Ultimately, Krugman lays huge amounts of upon Edward DeMarco, who heads the agency that oversees Freddie and Fannie, and DeMarco does not support policies that Krugman likes:

But Edward DeMarco, the acting director of the agency that oversees Fannie and Freddie, refuses to move on refinancing. And, this week, he rejected the administration’s relief plan. 

Who is Ed DeMarco? He’s a civil servant who became acting director of the housing finance agency after the Bush-appointed director resigned in 2009. He is still there, in the fourth year of the Obama administration, because Senate Republicans have blocked attempts to install a permanent director. And he evidently just hates the idea of providing debt relief.

Yes, that's it. DeMarco apparently is a career bureaucrat who moved into that office by default and he stands in the way of ending the depression, which means that he must be Goldstein. Of course, we are talking about a bureaucratic functionary who easily could be canned. After all, this is the same Obama administration that overrode contracts and made up its own rules on the fly in the bailout of GM and Chrysler; this is an administration that is fining oil producers for not using cellulosic ethanol, conveniently ignoring the hard fact that there is no cellulosic ethanol being produced anywhere right now. Somehow, I am sure that the Obama people are not without options here.

Nonetheless, Krugman holds this whole thing as "proof" that Goldstein purposely is driving down the economy to keep Big Brother, er, Obama, from being re-elected. Writers Krugman:

...the DeMarco affair nonetheless demonstrates, once again, the extent to which U.S. economic policy has been crippled by unyielding, irresponsible political opposition. If our economy is still deeply depressed, much — and I would say most — of the blame rests not with Mr. Obama but with the very people seeking to use that depressed economy for political advantage.

 No, Krugman never has offered proof that DeMarco is making his decisions for political reasons, and I have no idea if Krugman's housing scheme even would make a dent in the depression. However, when one is performing the "Two-Minute Hate" and putting Goldstein's picture on the screen, good sense and even truth are going to be thrown out the window.

This Goldstein Economy

Goldstein strikes again. We are not at war with Eurasia; we are at war with Eastasia!

Likewise, the economy was doing just fine UNTIL THE REPUBLICANS TOOK OVER THE HOUSE IN 2011!! We'd be in recovery by now and everyone would have a job!

For two years -- two years -- Barack Obama had an overwhelming Democratic majority in the House and a filibuster-proof majority in the Senate, but apparently even then Goldstein was lurking, directing everything in the shadows, keeping the government from spending like it should. Or so Paul Krugman would have us believe.

As I have said many times, I have no hope that Republicans in power would do any better than has Obama, especially given the fact that the housing bubble occurred under the watch of a Republican president and a Republican Congress, at least until 2006. However, I do believe that academic economists should do more than just shill for a political party, and that also means taking a critical look at what those parties are doing in regards to public policies. Instead, Krugman feeds the Democratic Underground more red meat and calls it "economics."

Krugman's latest assertion is that Obama is not spending very much at all, and if one counts state government spending, we are in a nation-wide "austerity" program. He writes:

What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War. 

How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high. 

 Speaking as someone who has had to deal with several years of furloughs because state tax receipts did not match overoptimistic projections (Gov. Martin O'Malley each year has presented budgets to the state legislature that seem to be from another planet and another economy), I know that spending is not what state politicians want it to be. However, in reading Krugman, one would think that this fall in projected spending is due to a Goldstein-like plot rather than a reflection of the hard fact that this economy is in a depression.

Yes, I know it is shocking to readers, but when economies are moribund, tax receipts tend not to be as high as politicians and Keynesian economists want them to be. However, that is a reflection of reality, not a dastardly Goldstenian Plot hatched by black-cape-wearing Republican politicians. 

Furthermore, the fall in projected tax revenues is an effect, not a cause of the depression. I know that Keynesians don't believe that; furthermore, I realize that Keynesians believe that if states raised tax rates to astronomical levels and the U.S. Government would double the amount of its borrowing, that the economy would be back to levels of prosperity in no time.

However, according to Krugman, while Goldstein has kept the Obama administration from bringing back prosperity, nonetheless this government has some "proud" and great economic achievements:

At this point, however, Mr. Obama and his political team don’t seem to have much choice. They can point with pride to some big economic achievements, above all the successful rescue of the auto industry, which is responsible for a large part of whatever job growth we are managing to get.

 Yes, the creation of "Government Motors" is a big engine of the prosperity that is left. Now, Krugman does not cite facts and figures for proof; instead, he blurts out an ex cathedra statement, knowing that the Democratic Underground and the Daily Kos will jump on that statement as being authoritative and a Self-Revealing Truth.

So there you have it. If we want real prosperity, we have to raise taxes, borrow more money, put more public employees on the payroll, and bail out failed industries. And when that rendition of the Broken Window Fallacy fails, there always is Goldstein to blame.

Goldstein Halts the Recovery!!

Paul Krugman is correct: we are NOT in a recovery. In fact, the rock is rolling quickly down the hill as we are about to have a downturn -- in a downturn.

Are policy makers in "denial," as Krugman claims? Hardly. Granted, Washington is booming, just as it did from 1933 to 1946 when government became firmly entrenched in the lives of everyone else and, well, someone had to be paid in order to carry out the "entrenching." No doubt, these people are enjoying good times and even if the rest of the country suffers, those tied to the federal government even are enjoying increased incomes. Life is good, at least in DC.

As usual, Krugman trots out the usual canards for this obvious downturn, including (1) the original "stimulus" was not large enough, and (2) Goldstein The Republican Party is blocking new spending. Let us look at both arguments, which are predicated with the nonsense that Goldstein is to blame. Krugman writes:

In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.

Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.

Let us remember that in 2009, Republicans were in NO position to engage in any "obstructionism." The Senate had a filibuster-proof majority and Nancy Pelosi firmly controlled the House. Obama had come in as a combination of Superman-Messiah, and he was in a position to do whatever he wanted, Republicans be damned.

Yet, once again, Krugman chooses to claim that the government did not take on enough debt and fund enough projects (that somehow would magically have carried us onto a wave of prosperity and four-percent unemployment) to end the recession all because a few Republicans were making noise about spending. This is nonsense, pure nonsense.

Furthermore, Krugman NEVER has laid out the causal chain to explain just how taking on a few hundred billions more in government debt would have placed our economy in the pink. He likes to say that the economy would have gained more "traction," but I would ask just what he means by that. An economy is not a perpetual motion machine, and the idea that throwing in some more dollars would have given the economy enough push to sustain itself lacks an explanation device. Instead, we are supposed to just believe it.

We also see the Silvio Gesell side of Krugman when he urges the Fed to ramp up the inflation in order to "encourage" spending. Krugman writes:

The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.

Here is the problem: businesses are not just sitting "on their cash" because it makes their bottoms feel good. They have no confidence about the future, and the anti-business rhetoric that comes not only out of the White House, but also from Congress and the media is not exactly going to give business owners and investors more confidence.

So, Krugman resorts to the "trick" of rapidly depleting the value of money in order to encourage spending. However, the problem is that businesses only are engaging in short-term investments when, in fact, we need to see long-term movement in order for a recovery to begin. Unfortunately, that is not possible in this political environment, and instead of recognizing that fact, Krugman calls for financial trickery that, in essence, would be a de facto confiscation of money from those who currently are saving.

None of this trickery and coercion will produce a strong economy. Like all good Keynesians, Krugman is worried only about the shortest-term situation, but if the government continues to follow this current path of financial folly (and even try to make Krugman happy), we won't have to worry about the long run because we really will be dead.