Wednesday, July 11, 2012

Paul Krugman Joins the Tea Party

Paul Krugman Joins the Tea Party

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."

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 On the contrary, the actual way that the political dynamics work was that the stimulus was withdrawn much too soon.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.
Yes, thanks to the tea party, the porkulus did not become a permanent government program.

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. 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.


EB said... don't understand economics at all. The point he was making was that the spending didn't go far enough, that it was taken away "much too soon," that if it had stayed longer, we would have had a much shorter recession. And that Keynes, while still certainly the grounding for all modern economic theory, needs to be reapplied in more modern contexts, and in extreme situations. And more specifically, he was speaking of the reactionary responses of people who opposed the stimulus, and how that thwarted a larger economic recovery.

He was taking on everything you believed in, refuting your entire philosophy and blaming you for the continuation of the recession, and that all somehow went straight past you. You know nothing about economics. You don't even know how to use that word, for example in the second sentence of your post.

Doo Doo Econ said...

1. The porkulus happened.
2. It did not work.
3. He used the fact that the tea party pulled back spending through public pressure as an example to the entire world of correct Keynesian implementation.
4. I'm Batman

Doo Doo Econ said...

I do apologize for the typo in the word economist. You found where I was wrong and I have corrected myself.

SarahB said...

"It wasn't done right" is ALWAYS the leftist excuse for the rubble of history's progressive experiements. Anything economic system that delicate is useless.

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