Krugman’s “Downhill”

Paul Krugman is not only not impressed with the Republican’s “Pledge”, he thinks there is a hidden agenda. And that is “dismantling Medicare and Social Security.”

Many programs need to be changed to put government spending on a more sustainable path to solvency. Those changes  include eliminating disincentives to work and produce.

He also thinks the “Pledge” puts the U.S. on a road to banana republic. Yes, I, too am disappointed “national security” programs were excluded.  But Krugman wants the government to continue spending on programs that have caused more problems, i.e. stimulus. Stimulus doesn’t work. It simply registers in the government’s accounting as increases in GDP while the programs are in effect. They don’t “kick start” anything, the spending is a blip in sales to firms, much as a snow storm temporarily increases the demand for snow shovels at the local hardware store.

They don’t encourage commerce, unless they allow people to connect with each other when they were not able to connect in some way before.  So, for example, a river prevented people on both side from shopping in each other’s malls.  A bridge enables people on both side to visit the other.  Similarly, import tariffs inhibit people from buying and selling across national borders.  Eliminating the tariffs lowers the cost of something and brings it into the orbit of potential customers.


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