20 October, 2010

Why I Can’t Take Paul Krugman Seriously

I’ve gotten into a little hot water recently for comments I’ve left on a couple blogs suggesting that noted economist Nobel Laureate Dr. Paul Krugman isn’t the smartest man in the universe.

Let me be more blunt. I don’t think he can count past ten without taking off his shoes.

Krugman is a fanatic regarding Keynesian economics. When I have time, I plan to do a whole series on just how dumb Keynesian economics is, but when I do, I want to document my case thoroughly, and I’m only about halfway through my research. It’s coming, though.

Anyway, in a recent article for the New York Times, he wrote (emphasis mine):

Here’s the narrative you hear everywhere: President Obama has presided over a huge expansion of government, but unemployment has remained high. And this proves that government spending can’t create jobs.

Here’s what you need to know: The whole story is a myth. There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need.

Krugman keeps saying that Obama’s biggest problem is that he hasn’t spent nearly enough. This is the crux of Keynesian economics. There’s no hole so big that you can’t spend your way out of it. Of course, this is a ludicrous proposition when the economic crisis is caused by too much debt, and the “solution” is to acquire more debt, but logic has never been a strong suit of Keynesians.

He says this later in the article:

So as I said, the big government expansion everyone talks about never happened. This fact, however, raises two questions. First, we know that Congress enacted a stimulus bill in early 2009; why didn’t that translate into a big rise in government spending? Second, if the expansion never happened, why does everyone think it did?

Answers. 1) It did. 2) They’re smarter than you are.

As rebuttal I offer the following graph:

Well, as I said. I don’t believe that math is Dr. Krugman’s strong suit.

Let me lay it out in numbers. They’re big ones, so I don’t expect Dr. Krugman to understand, but hopefully you will.

Federal spending went from 20.7% of GDP in 2008 to 25.4% this year. 25.4% is the highest percentage since WWII. But it ain’t just percentages of GDP I’m talking about. We can look at raw numbers.

2008 federal spending was $2.983 trillion. A hefty sum, to say the least. 2010 spending? $3.720 trillion. For those keeping score at home, that’s nearly a 25% increase in federal spending. In two years.

Allow me to be blunt once more. If you don’t think that a 25% increase in spending over two years is a “big government expansion”, then you’re just as dumb as he is.

And if you quote Krugman in an effort to make a point, I will continue to ridicule you.

For more info, go here.

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