Let me start out by congratulating Krugman on winning the Nobel Prize. His early work on Free Trade and economy of scale apparently won plaudits among his colleagues. If Krugman would think before he writes and not insist on shilling for the Democratic party, I think his articles would be more thought-provoking and ultimately persuasive. As it is, he has made quite a career throwing pies at the GOP, to the extent that many of his colleagues find him to be an embarrassment.
It’s not necessarily dangerous that he criticizes Bush or McCain, it just that he gives bad advice, and has little idea of what kind of policy is a way out of the current economic problems. Consider the main thesis of October 16th column.
But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.
But he (Barack Obama) will face a chorus of inside-the-Beltway types telling him that he has to be responsible, that the big deficits the government will run next year if it does the right thing are unacceptable.
He should ignore that chorus. The responsible thing, right now, is to give the economy the help it needs. Now is not the time to worry about the deficit.
Let’s distill that down, or crystallize it. Inside-the-Beltway types tell Barack he should be responsible, and he should ignore them. Krugman says the responsible thing to do is spend, baby, spend. Krugman doesn’t list what the government should spend money on, either he doesn’t know or he knows but doesn’t want to share with America, because he knows it will be unpopular. Just like Barack Obama, Krugman offers a diet of hot fudge sundaes, low taxes and high spending. Everyone is a winner, right?
At least Krugman is consistent, at least as of 2006. He criticized a return to Rubinomics when the Democrats gained control of the legislature.
Before the Democrats had the purse strings, Krugman sounded the alarm for fiscal responsibility as a tool to hammer the Bush administration over tax cuts. Krugman was wily because he never attacked deficit spending per se but blamed everything on Bush’s tax cut.
The Bush tax cuts, not the retirement programs, are the main reason why our fiscal future suddenly looks so bleak.
But if our fiscal future looked so bleak in 2003, why is it that fiscal responsibility in 2008 is, well, irresponsible? Duh! Democrats control spending and have a chance at the White House. More social engineering for Krugman to cheer about, and more walking around money for ACORN. Win-win.
Bubbles arise from great economic times, as pointed out by Friedman and many others. Here’s an excerpt from a post 9/11 interview with Peter Robinson:
Milton Friedman: …let me show you what the dilemma that Alan Greenspan and the Fed were in because this is not the typical circumstance. You’re at the Fed, you’re Mr. Greenspan, what are you looking back at? You’re looking back at the fact that the 1990’s in the United States was an incredible period of rapid expansion, both in the economy and especially in the stock market. What prior example do you think of? The 1920’s…
Peter Robinson: That’s what I think of.
Milton Friedman: …almost identically the same rate of inflation of the twenties, well lack of inflation, low inflation in the twenties but enormous increase in the–in the market, a great bull market. The economy very much in a good shape. And the twenties, like the nineties, were brought about by technological innovation and change. In the twenties, it was the adaptation to the electricity and to the automobile. In the nineties, we all know that it was the computer, the Internet and so on. What other example do you think of? The 1980’s in Japan. Identical pattern. Rapid economic growth as a result of technological improvement and change, a bull market, ’29 and ’89, what do you observe afterwards?
Peter Robinson: Bad events.
Milton Friedman: Bad, bad, bad. ’29, a catastrophe. In–in ’89 in Japan, stagnation for a ten-year period. All right, now you’re Mr. Greenspan looking back at those episodes, what are you going to say to yourself? You’re going to say, if I have to take a chance, I’d rather take a chance on a little inflation than on producing–re–on–on reproducing those episodes.
Here Friedman is disagreeing with Kudlow, who is probably the best example of a GOP counterpart to Krugman. Like Krugman, Kudlow is a shill for his party who has no problem with deficit spending. Amazingly, Krugman may have more in common with Kudlow than with Rubin.
All these years I’ve heard so many praises for Robert Rubin as Treasury secretary, because he balanced the budget. Never is it mentioned in the press that it was Newt Gingrich and the GOP that devised those budgets. Clinton and a democratic congress raised taxes and cut military spending, and a GOP congress later cut welfare and other spending. Without a budget deficit, American bonds were attractive long term options to foreign and domestic investors. And the bubble began. But let’s not conflate the causes of great economic times with bad reactions to the cause. In this case the bad reactions were keeping interest rates artificially low for far too long, increased deficit spending and a culture of debt, and shady mortgage practices by banks and government sponsored entities Fannie Mae and Freddie Mac. Krugman, like Bernanke, Kudlow, and Paulson, wants to continue the bad policy, unlike the others he wants to do so to cheerlead social engineering efforts like socialized medicine and unemployment insurance.
The left wing Keynesian Democrats and Monetarian “Republicans” want to do to health care what they have done to the housing market. They want deficits as large as possible, until they can convince enough people to increase taxes, to grow the government. The NYC-DC corridor sings the chorus of a fat, bloated, Rubenesque government policies, when the answer is a leaner, meaner, Rubinesque approach. Despite the fact that Robert Rubin is an advisor to the Obama campaign, the content of the answers by the candidates in the debates suggest that only McCain has the fiscally sound approach.