Magazine article USA TODAY

Beware the Spendthrift Twins

Magazine article USA TODAY

Beware the Spendthrift Twins

Article excerpt

WHILE ADVANCING the central thesis of his new book, End This Depression Now/, Nobel laureate economist and New York Times columnist Patti R. Krugman has become a spokesman who outflanks Pres. Barack Obama on the left in this election season--no easy task, indeed. To counter the attack on the President's failed stimulus bills (yielding no appreciable change in unemployment or private sector growth despite in excess of five trillion dollars added to the national debt in less than four years), Krugman argues not that this massive Keynesian experiment has failed but, rather, that the outlays thus far are less than half of what the government should have spent to jump-start the economy.

Krugman compliments Obama for his preference for stimulus spending, but faults him for not spending enough and predicts dire consequences if Federal spending is reduced as GOP contender Mitt Romney promises (if he is elected). Krugman thus creates a new straw man helpful for the President. Krugman positions himself together with his excellent resume on the left of Obama concerning the central issue of the presidential campaign, arguing, in essence, that, if Obama is reelected and liberated from political constraints needed to win reelection, it will permit "Obama to be Obama" (paraphrasing the 1980s White House adage, "let Reagan be Reagan"). Then, gloriously, Obama could spend tens of trillions more beyond receipts. At long last, argues Krugman, the economy would rebound. anyone other than Philip Coggan remember what happened to Germany's Weimar Republic following World War I? The regime ordered the Reichsbank to print more than one trillion marks, causing a massive influx in paper currency to deluge the market. As Coggan reminds us in Paper Promises: Debt, Money, and the New World, "In 1914, the dollar was worth 4.2 marks. After the war, which Germany had financed through money-printing, the dollar was worth 65 marks. By August 1923, a dollar could buy 620,000 marks, and by November, 630 billion." As Coggan explains, by November 1923, "a kilo of butter cost 250 billion marks."

If Krugman's plan is followed, inflation will destroy us, leading not to an end of the Great Recession, but to the ruination of capital, loss of remaining confidence in the dollar, extraordinary inflation, and high unemployment--a depression not that dissimilar from the global one of the 1930s that led to the rise of Nazi Germany.

With Krugman championing the far left on stimulus spending, the spending excesses of Obama are made to look lilliputian, too small to resuscitate the economy. The problem with Krugman's thinking is its implicit acceptance that unlimited government is consistent with freedom and free markets; that government growth does not inherently bring with it 190litical corruption; and that inflation and further destruction of American capital along with a doubling of interest on the national debt is a matter of trifling significance.

Krugman suggests that, if we significantly increase the national debt, there will be an immediate upside: greater employment and economic activity that will diminish the downside of debt, inflation, and interest on the national debt. This is all so much wishful thinking not supported by history. The construct feeds into Obama's rhetoric that, if only we wait for a few more years, pumping up stimulus spending every now and again, the economy will rebound. …

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