Let me be the first to welcome economist Paul Krugman, Ph.D. to the tea party.
Paul Krugman is a well-known Keynesian economist. He won a Nobel Prize for his work in microeconomics and his latest book was reviewed by a global group of economists recently. For the past several years, Dr. Krugman has been a champion of government spending and the Obama porkulus bill. He has called the tea party every slanderous name in the book.
Fellow SLOBs author W.C Varones brought the following video clip to my attention and it begs repeating. At the 1hr 12minute mark, Dr. Krugman explains why Keynesian policies do not necessarily lead to bigger government.
You do need to think about the political economy, very much. I thought we just had a rather dramatic refutation of the notion that fiscal stimulus leads to a permanent increase in spending. Certainly in the United States, when the original inadequate Obama Recovery Act was proposed there were many people wisely saying "Oh, that spending will never go away."Yes, thanks to the tea party, the porkulus did not become a permanent government program.
None of it remained. We had a moderate program of infrastructure spending, has not been renewed. We had moderate aid to state and local governments, it has expired. We even had a withdrawal of extended unemployment benefits despite the fact that we continue to have a record number of long term unemployed.
So there has been no hint at all of these things turning into permanent government programs. On the contrary, the actual way that the political dynamics work was that the stimulus was withdrawn much too soon. So maybe that is an exceptional story, but certainly this time around the wisdom about what always happens with government increases in spending turns out to be 100% wrong.
John Maynard Keynes theory of increased government spending during a recession and austerity during prosperity has been implemented. Politicians, who in almost every other example of Keynesian policy application in human history have used the interventionism to increase dependence on the government, were thwarted. The correct economic principle was applied thanks to the tea party and is now used as a shining example to the world by even our once venomous opponent.
YouTube.com link (#forward to 1 hour and 12 minutes).
This little nugget of truth is also evidence that when applied correctly, Keynesian policies still do not work. Sure, Dr. Krugman will say that it was not perfectly implemented. However, in the real world, this is as close to perfect application of economic theory as you will ever find.
You have to admit, even if you disagree with us, that we tea party types know our economics.