There once was a man whose nam
e I refused to utter on this blog. But, after a year or so of avoiding it, I caved. So once the seal was broken, I didn’t have much of a problem talking about him anymore. I say, know your enemy. He’s not really my enemy, but we have differing views on economic policy. Meet Paul Krugman.
Let me give you a little background on Krugman so we can compare. He’s a professor of economics at Princeton, and has degrees from Yale and MIT. He also has a column with the NY Times and won the equivalent to a Nobel Prize in Economics (but not in a field related to domestic economic policy). I have none of those things.
Krugman writes a column and a blog for the NY Times, he’s highly liberal, and very much loves to spend money. I’d probably say he’s as crazy as Glenn Beck. My basis for this is he complains about policy, preaches his doctrine to loyal and brainwashed followers, and despite having so many followers nobody wants him in their administration advising on real political affairs. So that basically covers why I have such a fundamental problem with him, now I want to talk about a specific one.
In his latest column, Krugman is writing about how Congress cannot pass legislation that would extend unemployment benefits. He argues that unemployment benefits is a great way to stimulate the economy because it helps support demand, which is the biggest issue with the economy now. He even acknowledges that prolonged unemployment benefits supports a disincentive for people to seek work (see France). He says that such a situation does not apply here because there are no jobs for people to pass on.
Congress is getting held up by Republicans and some Democrats that are tired of spending money. It’s no secret we don’t have any money to spend, and since the Obama stimulus was a bomb, they’re reluctant to throw more money after bad. Krugman believes government spending money in recession is key to get it out. There is historical precedent to this, so he’s not crazy there.
Krugman misses a few things with the unemployment claim. First of all, extending benefits won’t do much for demand. People still have to pay off their demand from a few years ago, via credit cards, HELOCs, and mortgages. Second, the reason there is no demand is we have no confidence in the future. Those of us with incomes won’t spend our money until we’re sure we’ll have incomes in the future. Finally, it’s too hard for us to have demand when the government is spending all the money taking up what would be our demand.
If you’re having trouble following, it’s a chicken and egg argument. What cog in the wheel of the economy will get everything going again? I don’t know, but I don’t pretend to know either. Krugman pretends he knows. He references “recent research” (but doesn’t link to anything), but at the same time is a worshiper of the godfather of economic spending, John Keynes. Keynes’ research would be considered ancient today compared to a real science. So what matters, recent research or WWII economic thinking?
Krugman would say the stimulus wasn’t effective because it wasn’t done properly. No $#!+. But you can make that argument every time it doesn’t work until the economy is up and running again. Krugman’s brilliance is that he can be wrong until he’s right and look like a hero.
This is because he sits on the sidelines. He’s in New Jersey, not in Washington. He’s an Ivy League, east coast, cushy jobbed economist. I’d trade my job for his in a heartbeat. But, I don’t think anyone in such a position of power over people should talk the way he does about policy without actually making a meaningful contribution to it. Like I said, he’s like Glenn Beck, but for left wing economics. And like Beck, he should keep his mouth shut until he’s sitting at The Fed, in the White House, or the Capitol.
Photo: Tony the Misfit
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
