Former Enron advisor Paul Krugman outlined his latest stimulus idea on Fareed Zakaria's Sunday talkie:
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, you know, a great deal.
If we discovered that, you know, 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.
So the economy would recover if the government hired a bunch of us to rush around with colanders on our heads staring at the sky? Well, that surely extends the list of things I am glad Sarah Palin didn't say. And Obama has tuned this guy out? Go figure.
As to the notion that prominent libs now view Cheney's misplaced emphasis on WMDs in Iraq as a failed jobs program, well, color me surprised. "Bush Lied, Not Enough Were Hired" - geez, that doesn't even rhyme.
Finally, if Paul Krugman read the NY Times he would not make "Give War A Chance" pronouncements such as this:
Think about World War II, right? That was actually negative social product spending, and yet it brought us out [of the Great Depression].
Former Obama economic advisor Christina Romer wrote this just last weekend:
AFTER the grim economic developments of the last few weeks, it’s easy to lose hope. Could the Great Recession of 2008 drag on for years, just as the Great Depression did in the 1930s? Adding to the despair is the oft-repeated notion that it took World War II to end the economic nightmare of the ’30s: If a global war was needed to return the economy to full employment then, what is going to save us today?
Look more closely at history and you’ll see that the truth is much more complicated — and less gloomy. While the war helped the recovery from the Depression, the economy was improving long before military spending increased.
DARE WE TACKLE THS SUBSTANCE? Krugman and Zakaria are advocating for valueless make-work programs as a stimulus tool, drawing this comment from the invaluable Noel Sheppard:
On the other hand, isn't it fascinating that a man that is always opposed to tax cuts - which is government allowing people to keep more of THEIR money - and doesn't think that stimulates the economy believes it would be economically stimulative to give people someone else's money to do absolutely nothing?
Well, when pressed Krugman will admit that a payroll tax cut (which puts money in lower-income pockets) is about as likely to be spent and is therefore roughly as stimulative as extended unemployment insurance. In fact, back in the run-up to Obama's inauguration Krugman described payroll tax cuts as a "pretty good" stimulus tool. Well, briefly - a few days later they were "ineffective"; presumably that reflected a shift in the political winds.
My impression of the general economic consensus is that hiring people to dig and re-fill holes, or monitor for space aliens, does not provide any more stimulus than any other cash transfer to a person likely to spend it. Handing out money on street corners, the Bernanke helicopter drop, and payroll tax cuts should all be in play, subject to caveats about the marginal propensities to consume of the various beneficiaries.
If a proposed stimulative shovel-ready project adds social value (e.g., a useful bridge, or a useful bridge repair), then borrow the money, hire some people, and start digging; if the project adds nothing, it won't be more stimulative than a cash transfer to someone with a similar marginal propensity to consume. Krugman's belief in the power of make-work and his preference for that over tax cuts, is motivated by something other than standard economic textbook theory.
LAST GASP: There is a widespread economic consensus that temporary tax cuts (e.g., cash for clunkers) don't produce permanent changes in spening or investment. So why, one might ask, would a temporary uptick in government transfer payments by way of wacky make-work projects produce a permanent change in spending or investment?
Beats me. War advocates such as Krugman could respond that WWII didn't look like a temporary blip when it started. However, Krugman is now advocating an eighteen month War on Space; maybe his real plan is to declare a seemingly open-ended war on space with the hope that it can be wound down in eighteen months. Personally, I would like to know abit more about the likely timeframe since a colander-cap is not a good look for me.
KRUGMAN GETS RESULTS! We bend space-time to find these stalwart citizens answering Krugman's call and creating jobs! (Or is that the invasion force?)
BUMPER STICKERS: "Don't Blame Me, I Voted For Kodos."