Economics 101

Paul Krugman, Who Knows of What He Speaks

Don't know much about economics, other than what I read in the New York Times, the New Yorker and what I see on "The News Hour."

Economics is not like biology--it is not an experimental science. Oh, we do economic experiments all the time, but we cannot hold enough variables constant to call it a science. It is not clear that, for all the numbers economists throw around, you really need to understand those numbers to understand the basic economic forces and concepts.

It must mean something  that Mad Dog can now watch a discussion of economic policy and Mad Dog can finish the sentence of each participant. It must mean we are hearing the same arguments over and over again.

Last night, on the "News Hour" they had some stooge from the American Enterprise Institute in Washington, DC, and a man from some Boston institute discussing our economy. The Boston guy says, "When you have a recession, an economic slow down, that's when you do not want the government to stop spending. The national economy is not like a family budget. Sometimes deficit spending is a good thing. It's an investment in the future. You get people working, repairing the infrastructure,  paying taxes, spending and then you can back off, pay down the deficit and restore balance. But if the European experience shows anything, it is that cutting government spending at the beginning or in the middle of a recession just makes things worse." 

To which the American Enterprise Institute guy replies: "Deficits are bad. When you allow the deficit to grow to over 45% of GNP you simply run out of money to spend. This Kenseyian argument, that we should spend our way out of a recession, is a recipe for disaster." 

This very same argument has been going back and forth since at least the years when Andrew Mellon was the Secretary of the Treasury arguing that a Depression purges the system of bad blood, bad, lazy people and is just what the doctor ordered for a country which needs discipline. He was Herbert Hoover's secretary. Hoover said all along there is nothing government can or should do in hard times. Hoover lost that argument to FDR and the Republicans lost the White House for the next 4 elections.

Republicans ever since have argued the only way Roosevelt got America out of the Depression was to get into a world war and unemployment went from 20% to close to 0% in a year.  And, of course the implication of that was--war is bad, so anything associated with it must be bad.

The fact is, what that wartime government spending  demonstrated is economically, the effect of government hiring vast numbers of people was capable of pulling us out of the Great Depression and that good economy persisted for decades after the war, with deficits going down when people were working and paying taxes.  May have been we put a lot of undeserving people who were wicked and mean to their children back to work, and we rewarded an undisciplined American population, but it sure was good for the economy, and government spending did not result in disaster but relief and prosperity.

So why, Mad Dog asks, are we still debating this issue?

Do we really still need to debate whether or not the heart pumps blood to the brain?

Do we need to discuss whether or not metal airplanes can fly or whether or not metal ships will sink?

Do we really need to listen to David Stockman, people from conservative "think" tanks proffer these antediluvian ideas on national TV, radio and newspapers?

When will we get tired of listening to idiots?