Friday, February 19, 2016

Now Go Do That Voodoo That You Do So Well, Dr. Krugman

Varieties of Voodoo, by Paul Krugman, Commentary, NY Times:
America’s two big political parties are very different from each other... Republicans routinely engage in deep voodoo, making outlandish claims about the positive effects of tax cuts for the rich. Democrats tend to be cautious and careful about promising too much...
Sorry, but there’s just no way to justify this stuff.
It would do well to recall that it was Democrats who first parlayed vulgar Keynesianism into the voodoo of weaponized growthmanship. NSC-68 set out "economic growth" rationale for tripling arms spending, conceived by Truman's Council of Economic Advisers chair, Leon Keyserling:
...the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.
Of course that was two-thirds of a century ago. Nobody believes in such trickle-down arms build-up voodoo any more these days, do they? Except Paul Krugman:
Economics, as I say often, is not a morality play. As far as creating aggregate demand is concerned, spending is spending – public spending is as good as but also no better than private spending, spending on bombs is as good as spending on public parks.
The day after he wrote the above, Professor Krugman welcomed Republicans' fondness for weaponized Keynesianism on the grounds that it would expose the hypocrisy of Wall Street's complaints that government spending undermines business confidence:
Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power -- so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts. 
So I welcome the sudden upsurge in weaponized Keynesianism, which is revealing the reality behind our political debates.


ProGrowthLiberal said...

"I welcome the sudden upsurge in weaponized Keynesianism".

I suspect that a lot of the Republican candidates (Trump and formerly Christie) have in mind a couple of new wars here or there to get us finally back to full employment.

Sandwichman said...

Krugman, no doubt would welcome that. The point being if you go back to WWII and the massive govt. spending and economic restructuring for the war you get nominal growth rates averaging 12% a year for five years. That is clearly implausible. I am not advocating the implausible but I do find it strange when economists are happy to cite the implausible when it suits them and rail against it when it doesn't.