Deconstructing today's Paul Krugman column

There is little doubt that Paul Krugman earned his Nobel Prize...his expertise on trade is undisputed. On government and politics, maybe not so much.

I've never tried this, but let's see how it goes...

Op-Ed Columnist
Bad Faith Economics

By PAUL KRUGMAN
Published: January 25, 2009

As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending.

Nope, we don't want to see a New Deal...it didn't work the first time around (see Amity Shlaes book "The Forgotten Man") and it won't work this time. All "New Deal" programs have one serious flaw in common...when the crisis passes, which it will, the government structures, employees, and costs remain forever.

Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”

Agreed, this is simply Boehner identifying one small detail and holding it up to ridicule. Just like the "ketchup is a vegetable" crisis during the Reagan years. Just like using a couple of nut jobs at Abu Gharab and using them indict an entire Administration. That's what politicians do from time to time, Paul. It's not right, but sometimes they do it.

But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.

First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.
It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)

The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.

If the "cost" of creating these new jobs is "as little" as $60,000, why not just send checks to individual citizens? Granted, I don't think that sending checks for $300 stimulated much of anything last spring, but $60,000? Something tells me that money would be spent, and would keep an unemployed citizen living fine for the next eighteen to twenty-four months (which is how long most economists think it will take for the economy to rebound.)

And we don't leave a legacy of more federal programs and employees behind that will have to be paid for in perpetuity.

Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.

They may not necessarily be better judges, but it is their money. I have absolutely no problem with anyone who wants to give the government more of their income, nor does the government...there is even a place to make a voluntary overpayment on a 1040. But let do start from a point at which we assume that the money belongs to the taxpayer.

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

This is as dishonest as Boehner using the family planning provision. Most conservatives favor public spending that is truly public....that is, it benefits the public as a whole, not individual citizens or small groups. The preamble to the Constitution mentions the "general welfare", not individual welfare. Air traffic control is something only the federal government can do, and something that benefits all citizens. Defense spending (which is really what pulled us out The Great Depression,) and is badly needed now is another good example. A mob museum in Las Vegas or a water park in Miami are not.

The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved.

Nobody believes that a dollar of tax cuts is always better than a dollar of spending. Agreed. No one agrees that tax cuts are always better. But 46% of the American public in the last election, and majorities of the electorate in seven out of the last eight Presidential elections did believe that government was too big and cost too much. (Remember, Clinton failed to crack 50% in either of his campaigns and I don't remember Ross Perot arguing for increased spending.) Paul, you might want to get out of Manhattan more often.

This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.

Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions.

It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.

That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse.

Just because an argument is old doesn't mean it is not valid. Conservatives are concerned that while some increased spending is needed, it is either being spent in the wrong ways (pork barrel spending rather than true infrastructure or defense spending) ... that too much of it has to wend its way through a federal bureaucracy that takes a huge cut off the top and leaves behind new federal programs and employees that have a never ending cost.

These are valid concerns and not obtuse...they are what conservatives functioning as a loyal opposition should be doing.

These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically, conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick.

But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did — and he should disregard the huffing and puffing of those who lost.

Did ya feel that way when President Bush said the same thing in 2004 when he decides to try to save Social Security? Maybe so, but I doubt it.