Krugman again


In case you thought Krugman isn’t part of the problem.

From his recent column:

Ideas for Obama

by Paul Krugman

Jan 12 (New York Times) &#8212 OK, I’ll bite — although as I’ll explain shortly, the “jump-start” metaphor is part of the problem.

First, Mr. Obama should scrap his proposal for $150 billion in business tax cuts, which would do little to help the economy. Ideally he’d scrap the proposed $150 billion payroll tax cut as well, though I’m aware that it was a campaign promise.

Money not squandered on ineffective tax cuts could be used to provide further relief to Americans in distress — enhanced unemployment benefits, expanded Medicaid and more.

If he understood non-convertible currency, he wouldn’t make this statement.

First, it’s not a trade off.

Second, tax cuts not spent indicate the tax had no value in reducing demand in the first place.

Third, a tax cut that goes unspent is not ‘squandered’. Government squandering would take the form of wasting real goods and services (which does happen too often but that’s another story), not the funds spent per se.

There is not a finite pot of funds that government can spend. The limits of government spending are inflation tolerance, not any specific quantity. Government can do both tax cuts and relief payments if the political will is there, and if the tax cuts are ‘ineffective’ all the better as other government spending can be higher than otherwise without any extra movement of the inflation needle.

And why not get an early start on the insurance subsidies — probably running at $100 billion or more per year — that will be essential if we’re going to achieve universal health care?

Krugman is contributing to more real damage than the dynamite that funded his nobel prize.

If anyone reading this knows him, please forward, thanks!