Paul Krugman’s column in Sunday’s New York Times opines that the stimulus bill is working and that the only problem is that it was “too little of a good thing.” While I am normally a supporter of a balanced budget, I am certainly on board with him that now is not the time for that, and I would agree that more stimulus on the jobs front would be good for the nation. I do have a few reservations regarding the “ivory tower” flavor of his column.
First he talks about the purpose of the stimulus, in rather vague terms, being to break the “free fall” of the economic downturn. Then he says, rather optimistically, “The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline.” And, “And the free fall has ended. Last week’s G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent.”
"The free fall has ended." Well, not quite; the free fall in employment has not ended. During the quarter in which he celebrates the rising G.D.P. job losses once again actually took another upward turn, and the forecast is that they will continue to climb again this month. Both Obama and Krugman hailed the stimulus as a job creator, and here they are singing of its success in terms of G.D.P. growth while joblessness continues to climb.
Then he does an analysis of long term jobs recovery which concludes that, “…at current growth rates we’d be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment.”
Spoiling that premise is that “at current growth rate” unemployment is not falling at all, it is still rising, so the jobs recovery has not yet even started. Krugman is projecting the rate at which something will happen; something which has not yet begun and we do not know when, or even if, it will.
Finally is a point which Krugman does not include, which is that the “current growth rate” itself may be an illusion because of the nature of the stimulus which was passed. A significant portion of that “current growth rate” was the “Cash For Clunkers” program, a one-month program which will not exist in subsequent reporting periods. Too much of the stimulus was short term, temporary spending.
Spending not only needs to be long term, it needs to be now, not ten years from now. For all of the criticism it received, the high speed rail project was the kind of spending we need except that it is too far in the future, with jobs that will not be created for at least five years or more. This country has a crumbling infrastructure, much of which needs to be replaced. The USCE knows what those projects are and could have them underweigh in months once funding was provided.
The stimulus was not merely, as Paul Krugman suggests, too small; it was filled with too many short term projects designed to stimulate consumer spending on credit, and too many very long range projects which constitute social policy rather than stimulus. We can’t just be throwing money into the economy for the sake of throwing money into the economy, we need expenditure which specifically and promptly produces long term real jobs.
In his blog today Krugman responds to a question from a reader about when he is going to “blow his top” over a statement by Barack Obama that now is the time to “get serious” about reducing debt. His response is that he is not concerned, that he knows Obama is merely saying that to appease “centrists” in his party and does not really mean it; that Obama has no intention of actually doing anything silly like that.
So in Paul Krugman’s opinion it’s okay for the President who promised to “change the way things are done in Washington,” the President who promised a new level of “honesty and transparency” in government, to say what people want to hear rather than to promise what he actually intends?
It is perfectly okay for the President to describe his policy with every intention of doing nothing of the sort.
I think Paul Krugman is becoming the Bill Kristol of the left.