The PBS headline announces: “Krugman Says Forget Debt, Help the Unemployed .”
Paul Krugman is the world’s leading spokesman for Keynesianism. He won a Nobel Prize. He writes a blog for the New York Times. He is Keynesianism’s go-to guy.
He is Dr. Boondoggle. He wants more, way more, government spending.
The recession began in December 2007, according to the National Bureau of Economic Research, which officially announces such things. In Krugman’s view, five years of trillion-dollar federal deficits have not yet produced prosperity. He says this: “. . . aid to state and local governments is time-limited. It expires once the economy is, you know, back in the zone where we no longer need to use that kind of support.”
How much government spending of borrowed money is needed to get the economy back in the 2007 mode? More. Lots more. But don’t worry. Debt is not a threat yet.
I mean, the notion that government spending is per se evil is a big mistake. We actually need quite a lot of it, and I think if you ask, “What would it do to the U.S. debt outlook?” I think it would actually improve it because we would improve the prospect of the currently long-term unemployed. People finally do eventually get back into the work force.
What should the federal government spend on? On making the government larger. Send it to state and local governments, he says. He wants the federal government to go back to 2009, when it sent $300 billion to the states. “Rehire school teachers, fill potholes, resume infrastructure projects that have been put on hold.” It’s pothole-filling time! It’s shovel-ready time!
Also, fix those railroad tracks. The railroad companies’ executives don’t think it’s worth the money, but what do they know?
There’s a lot we can be doing on the rail system, not grandiose stuff. I’m not gonna say, “let’s build a vacuum tunnel from the East to the West Coast,” but there are a lot of, you know, just sort of bad stretches of track that need to be fixed that would accelerate stuff quite a lot.
Then there is money creation. The Federal Reserve has tripled the monetary base from $900 billion to $3.2 trillion.
But Bernanke is a piker. A wimp.
. . . have the Fed do more of what it has done recently, announce that it is actually going to raise its inflation target some, maybe. I mean, I say let’s make it 3 percent not 2 percent. That may be more than they’re willing to do, but that’s what I would do. I think all of those things would bring us a long way.
A long way. A very long way.
But that means debt. Lots of debt. No problem. We’re talking government debt. The day of reckoning is a long way off. A very, very long way off.
It’s a long way off, and it’s not a problem. I mean, the government is a long way from having a debt problem. The household sector has too much debt — that’s clear. We see that’s what’s driving our depressed economy. So, it’s not that debt is never a problem. The question is, is government debt a problem right now and is it enough of a problem even in the future to mean that you shouldn’t be doing whatever it takes to get full employment now.
That’s the latest word from Dr. Boondoggle, the shovel-ready man.
Like the Energizer Bunny, he keeps on banging the Keynesian drum.