So I thought that Krugman believed that it was the New Deal that helped save the US economy

I guess that this fits in with the Cash for Clunkers program. Of course, we could just pay people to go around rioting and burning down cities. Wouldn't that be a substitute for war? The UK must be really thrilled with their riots. Doesn't Krugman understand that this policy just moves spending from what else people would have been spending their money on? Here is the more serious question: we have four wars and that isn't enough? Iraq, Afghanistan, Libya, and Yemen. So Krugman is against winding down any of these wars? From CNN:

Fareed Zakaria: But even if you were, wouldn't John Maynard Keynes say that if you could employ people to dig a ditch and then fill it up again, that's fine, they're being productively employed, they'll pay taxes, so maybe Boston's Big Dig was just fine after all.
Paul Krugman: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.
I mean, probably because you want to put these things together, if we say, "Look, we could use some inflation." Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what basic logic says.
It's very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish a great deal.
If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better –
Ken Rogoff: And we need Orson Welles, is what you're saying.
Paul Krugman: No, there was a Twilight Zone episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time...we need it in order to get some fiscal stimulus. . . .

UPDATE: Krugman continues this theme:

"What we need is actually the financial equivalent of war," [Paul Krugman] said during a talk at the 92nd Street Y in Manhattan. "What actually brought the Great Depression to an end was the enormous public spending program otherwise known as World War II."

World War II boosted government spending to 42 percent of total U.S. output, according to the Congressional Budget Office. Krugman said that while a fiscal stimulus program does not have to be on the scale of World War II, ideally it would involve "useful" infrastructure projects such as repairing bridges and sewer systems and building a railway tunnel between New Jersey and New York. . . .

Krugman said he believes that the Federal Reserve should print more money to spur "above-average" inflation for five years, raising prices to bring down both unemployment and debt. The overhang of household debt has largely caused and prolonged the economic downturn, he said. The Fed's response so far has been "marginal," such as its recent decision to reshuffle $400 billion of its portfolio from short-term to long-term securities, Krugman said, since $400 billion would only make a dent in the multi-trillion-dollar U.S. bond market. . . .

Of course, inflation raises interest rates, making a difficult debt that much more difficult to pay off.



Blogger Chas said...

"But if you had a program of government spending . . ."

Mr. Krugman, might I possibly be allowed to spend my own money on what I need, instead of having some arrogant congresshole in Washington D.C. steal it and spend it for me on something for which I have no use? Is that really too much to ask, Mr. Krugman?

As for Krugman's "let's spend the money on repelling imaginary aliens" scheme, aside from the fact that he has no problem demonstrating that he’s blatantly deranged, we already have plenty of real aliens that we need to repel, but they're called Democrats and are extremely difficult to get rid of. Krugman should know that, since he's one of those aliens, which explains his outlandish desire to throw money away as fast as possible on what is admittedly nonsense. Is there nothing too crazy for these people to say when they’re trying to con us out of our money? Do they take us for fools? Do they live for making us look ridiculous? Are we just puppets to be manipulated, in their pointy, little heads?

Mr. Krugman should be making no more money, than the allowance that his father gives him, after he moves back in with his parents. He may spend it on repelling aliens if he chooses. In the mean time, he should keep his hands and such mind as he has, off of my money - it doesn't belong to him.

8/15/2011 3:38 PM  
Blogger Chas said...

Krugman seems to explain Obama's bus tour. It's stimulus spending to repel an imaginary alien threat. Seems to be working too - I haven't seen any extraterrestrials around since it began!

8/18/2011 7:57 AM  

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