Paul Krugman, Idol Worshipper

Belief in Big Government is a religion - and a false one.

For lo these many years, Scragged has loved to ridicule former Enron adviser and current New York Times hack Paul Krugman, as he's continually beclowned himself with increasingly ludicrous claims about the all-powerful merits of government spending.  Hard times?  Tax and spend more to get the economy going again.  Good times?  Tax and spend more to make sure it keeps going!

There is no problem but what Krugman prescribes the same poisonous dose of expensive government intervention.  Really, any public high-school student could be writing his articles: just read his first few, then cut and paste to address whatever today's crisis is.

So it's startling when this intellectually-exhausted recidivist actually comes out with something apparently sensible.  Let's take a look:

Before the crisis, U.S. 10-year inflation-protected bonds generally paid around 2 percent. Recently, however, the rate on those bonds has been minus-0.6 percent. Investors are willing to pay more to buy these bonds than the amount, adjusted for inflation, that the government will eventually pay in interest and principal.

So investors are, in a sense, offering governments free money for the next 10 years; in fact, they’re willing to pay governments a modest fee for keeping their wealth safe...

It’s simply crazy to be laying off schoolteachers and canceling infrastructure projects at a time when investors are offering zero- or negative-interest financing.

You don’t even have to make a Keynesian argument about jobs to see that. All you have to do is note that when money is cheap, that’s a good time to invest. And both education and infrastructure are investments in America’s future; we’ll eventually pay a large and completely gratuitous price for the way they’re being savaged.

Krugman is rightly noting that interest rates are at record lows and that the interest on U.S. Treasury bonds is lower than inflation.  In other words, if the government sells someone a T-bill, not only does the government not have to pay any interest for the loan, it actually gets to pay back less than the full face amount when inflation is considered.  It really, truly is money for nothing!

Therefore, Krugman says, the government ought to be taking this free money and using it to fix everything that's broken - our collapsing bridges, our decaying and overcrowded highways, our lousy schools.  He admits that we will have to pay the money back later, or most of it, but that'll be a lot easier to do with up-to-date physical plant and an educated populace rather than the potholed freeways and near-illiterates which drain our economy and hamstring our way of life.

Expecting Returns?  Or Losses?

You know what?  On his own premises, he's right!  Your humble correspondent is currently engaged in a successful and growing business venture which is quite profitable but badly hampered by the lack of available capital.  If we, too, could borrow $10,000,000 for free, we'd know exactly what to do with it.  The investment returns would be more than ample to pay back the loan and make us rich besides.

There is only one problem, and here's where Prof. Krugman reveals his absolute devotion to his religious faith in Almighty Government: He thinks that investments the American government makes will in fact produce a return.

Alas, they don't - or at least not anymore.  Krugman cites education as an example.  If our colleges were churning out computer engineers, biotechnology researches, and (dare we say it?) nuclear physicists, he'd be right: that would be an investment in research, technology, innovation, and future discoveries.

But they're not: in fact, every year fewer Americans go into STEM fields.  Instead they're graduating with so-called "soft" degrees like Sports Therapy, Gender Politics, and Diversity Studies.

Every dollar spent on that sort of "education" is a complete waste: they graduate qualified to work at Starbucks, which they could have done before they even set foot on campus.  How is that phony investment helpful?  It's just money down the drain.

The same is true of infrastructure.  We all know that America's great infrastructure projects of the past paid off massive returns.  We all know of bottlenecks and jams that waste countless hours and billions of dollars; fix those, and the returns would be enormous.

For example, the Washington DC area now has the nation's worst traffic; drivers on average waste 3 solid days per year cooling their heels in jams.  There are many specific projects that could help, from building a new outer beltway to widening the major I-66 commuter route into the District.

Are these projects planned?  Absolutely not - because local environmentalists and NIMBYs will do whatever it takes to keep roads narrow and commutes miserable.  Maryland and Virginia have been "talking about" new bridges across the Potomac for fifty years, and no doubt will still be talking fifty years from now assuming the world hasn't ended in an almighty traffic tie-up.

Instead, what do we get for "infrastructure investment"?  We get the infamous Bridge to Nowhere in Alaska, for which we were expected to spend nearly a half-billion dollars for a bridge bigger than the Golden Gate to carry less than 1% of its traffic.  We get the ludicrous Train to Nowhere in California, where construction has begun on a modern high-speed rail line connecting two towns of 80,000 people.

Yes, Paul Krugman is absolutely right that borrowing free money for useful, beneficial, profitable investments would be an excellent idea.  The problem that he refuses to recognize is that, for at least fifty years now, our government has an investment track record entirely unblemished by financial success.

Virginia has a major construction project under way at the moment, doubling the size of the Beltway.  It's taken about three years and should be done in a year or so.  This amazing progress is due to the fact that it's entirely a private investment project.  Private investors put up the money and expect to get a return by charging tolls to use their new express lanes, and the sooner they can start raking it in the better.

All drivers will benefit, of course, since every car in the express lanes is a car not in the free lanes.  Government could have done this project at any time in the past half-century and didn't because it couldn't.  It took the moxie and determination of private companies to get it done.

The Religious Zeaoltry of Prophet Paul

The Bible's Old Testament records an interesting confrontation between the Prophet Elijah and the pagan prophets of Baal.  They believed in mutually exclusive gods, so Elijah proposed what might be the very first scientific experiment regarding religion:

Let them therefore give us two bullocks; and let them choose one bullock for themselves, and cut it in pieces, and lay it on wood, and put no fire under: and I will dress the other bullock, and lay it on wood, and put no fire under:

And call ye on the name of your gods, and I will call on the name of the LORD: and the God that answereth by fire, let him be God. And all the people answered and said, It is well spoken.

 - I Kings 18:23-24

Two altars, two sets of prophets, two different gods - and whichever god rains down fire from heaven on his sacrifice, well, that must be the real god, right?  The prophets of Baal didn't shirk from their task of begging, pleading, beating and cutting themselves - all to no effect.

When the time came for Elijah's god to show his stuff, He did so in spectacular fashion.

Then the fire of the LORD fell, and consumed the burnt sacrifice, and the wood, and the stones, and the dust, and licked up the water that was in the trench.

 - I Kings 18:38

Do you think this demonstration persuaded the prophets of Baal to change sides?  Not a bit of it - they held to their disproven faith for the rest of their brief lives, the people of Israel being unamused at the scam as revealed by fire.

Paul Krugman is in exactly the same position.  More times than it is possible to count, our government has proven incapable of spending money usefully.  Mr. Obama's massive stimulus not only didn't make things better, it ended with our economy worse than his own economists predicted it would be without the stimulus!  We now know why: as even Mr. Obama himself admitted, the money was wasted on worthless crap because there are too many legal barriers to actually building anything useful anytime soon.

Yet here's Paul Krugman, doggedly worshipping the same false god of Big Government that he always has, cutting his tattered reputation to ribbons despite their being not the slightest sign of a miracle from on high.

Well, it's a free country and we don't suggest that he be torn in pieces like the Baal prophets of old; but at least we can all stop listening to him and stop pouring our money down the rathole of government.  Our economy can only be fixed the same way as Virginia's beltway: by private enterprise, and by getting government out of the way.

Read other articles by Hobbes or other articles on Economics.
Reader Comments

The left often exhibit religious tendencies - global warming!! - but never seem to see the irony in chastising theists. They advantage they have is that they can "prove" their gods exist because they control the facts.

August 2, 2012 10:08 AM

For my money you can do away with the fuel taxes, sell the interstates to private industry and use those tax dollars saved to pay the tolls. You would have better roads.

Secondly repeal the Davis-Bacon act, that would allow less expensive roads and more roads.

August 2, 2012 10:11 PM

There is no historical data to demonstrate that deficit spending inhibits gross domestic product, causes inflation or limits any other indicator of economic productivity, nor must federal debt be paid by taxpayers. President Carter oversaw modest deficits with high inflation and low economic growth. President Reagan oversaw huge deficits – the largest in American history – with low inflation and high economic growth. History shows deficits correspond with economic growth, and the larger the deficit, the healthier the economy. To date, the government has spent (essentially creating money out of thin air) well over $10 trillion that has not cost taxpayers a cent.

The federal government is monetarily sovereign. You and me, your local or state government are NOT monetarily sovereign.

Tax increases on anyone removes dollars from the economy and inhibits economic growth.

Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

Two key equations in economics:

Federal Deficits – Net Imports = Net Private Savings

Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

August 5, 2012 6:23 PM

Bambi, " To date, the government has spent (essentially creating money out of thin air) well over $10 trillion that has not cost taxpayers a cent." with that statement alone I can only hope that you are not a teacher.

August 5, 2012 8:55 PM

Bambi, " To date, the government has spent (essentially creating money out of thin air) well over $10 trillion that has not cost taxpayers a cent." with that statement alone I can only hope that you are not a teacher.

August 5, 2012 8:55 PM
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