Monday, May 11, 2009

Channeling Robert Smith

However big I ever feel / It's never enough
Whatever I do to make it real /It's never enough - The Cure

Paul Krugman is quickly becoming one of my least favorite people. If you thought record deficits and takeovers of private companies might be small indications that government is getting out of hand, than I present to you the economics go to guy over at the Old Gray Lady. The reason that we've failed to spend our way out of our national debt problem isn't because such an attempt is absurd and contradictory, and therefore doomed to fail. Instead, it's because we haven't printed enough money:

"A second stimulus is becoming clearly urgent. They need a very, very strong stimulus," said Krugman, a Princeton University professor and a New York Times columnist.

It's tough to know where to start pointing out the flaws with this recommendation. Two basic problems jump quickly to mind. First, by using subjective terms, he can always repeat his claim that when the stimulus fails to stimulate, it's because it simply wasn't big enough. I'd like to see someone confront him and get him to nail down an exact figure; but it'd be even better to just come up with an outlandish number and ask him if that should close the "output gap". I mean, if 1.5 trillion dollars will merely "ameliorate" the problem, then 5 trillion dollars should solve it completely. And if we spend 100 trillion dollars, why, we'll all be millionaires--at least.

The other problem is that he never even considers the fact that economic intervention profoundly distorts the market, something it absolutely must do. There's simply no way you can double the money supply in a few months without doing irreparable harm to the currency. The law of supply and demand applies to every economic good, including money. If you can't tell what will happen to demand when you double the currency, you just might be a Keynesian.

There's also something deeply disconcerting about the fact that there's no way Krugman will ever be held responsible for his asinine economic suggestions. None of the neo-Keynesians had any clue that there was a bubble--or that it would burst. But when a crisis emerges which they never accounted for, and for which they have no explanation, the media nonetheless goes to them for advice.

It's a direct parallel to the way we handled the Iraq War. When it became obvious to all but the most staunch true believer that the war was not proceeding according to plan, we didn't ask those who got it right in the first place; instead, Bill Kristol was given column space next to Krugman. And besides, the reason the war didn't work was that our strategy was just a bit off. A surge was needed. Think of it as a stimulus, only with people instead of money.

Heck, now that Kristol is gone, maybe Krugman can take over as the token neo-conservative over at the Times. It strikes me as a pretty easy job. Whenever your policies fail, you need only recommend that they be applied with increased vigor.

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