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  • Krugman's Phony Government Spending Facts

    Paul Krugman blogs:

    Let’s lay out the basics here. Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.

    Krugman cites no evidence for these assertions. As if just because the government doesn’t spend money on something nothing “of value” could possibly be left behind. What the evidence does show is that Japan’s massive infrastructure spending in the 1990s did nothing to help their economy and that studies on infrastructure spending in our country show it does next to nothing in terms of net job creation.

    But don’t trust us. Just read President-elect Barack Obama’s Council of Economic Advisers chair designee Christina Romer’s 2007 paper THE MACROECONOMIC EFFECTS OF TAX CHANGES: ESTIMATES BASED ON A NEW MEASURE OF FISCAL SHOCKS, which concludes that a dollar of tax cuts raises GDP by about three dollars.

    Posted in Ongoing Priorities [slideshow_deploy]

    8 Responses to Krugman's Phony Government Spending Facts

    1. Barb -mn says:

      Again, it is government's unwillingness to grasp reality or simply learn from experience and improve on WHAT WORKS! But they're throwing away everything that works!

    2. Donald Modaro says:

      As I read these articles, I'm watching the Burris debacle play out on TV and wondering what more significant political trainwreck the dems are hiding by allowing this disgusting display of Washington soap opera? It must be a wopper!

    3. Evan from Anchorag says:

      I am a conservative because I am a fiscal conservative. On HF home page of their web-site, "fiscal responsibility" doesn't even get to be one of the top ten titles of concerns. I find that unbelieveable. Maybe even the republicans know that they blown that subject so bad that they don't even want to bring it up.

    4. Tim,MN says:

      All of the criticism I have read leaves one thing out, the dems do not want to fix the economy,they are now practicing recreational economic munchhausen to facilitate complete control over us.

    5. Spiritof76, New Hamp says:

      The government spending distorts economy. It must first siphon productivity before it reallocates to vote getting schemes. It is amazing why people like Krugman can be held in such high esteem when what he spouts defies common sense. He can only make that point putting himself as a socialist above common sense.

      Another thing- when the tax cuts are enabled, people receiving tax cuts (I mean real cuts and not Obama cuts, paying welfare payments to those not paying taxes now!)even if they save them, their savings turn into capital that is needed for productivity improvements to further grow the economy. They are not going to put the money under their mattresses.

      If you want to stimulate the economy, cut taxes-reduce corporate taxes from one of the highest in the world and eliminate capital gains taxes. And, stop bailouts and piling public debts. It has worked and it will work. On the other hand, socialism does not work and will not work.

    6. John, Mechanicsville says:

      When is the common man going to learn that allowing Congress to have total taxation power continues to allow things like this bailout process and public infrastructure investment nonsense to continue forever. We as citizens owe it to ourselves to limit Congress' power to tax by enacting an amendment to the Constitution to limit the amount they can tax (say 25% maximum total taxation) on any citizen paying the city/county first, state second and federal government last. Another amendment we need to have is a balanced budget amendment. These need to be written in "locked in stone" language so the lawyers & legislators can't find wiggle room and loop holes to crawl through.

    7. Mike Sheahen, Hickor says:

      Talk about a blatant both morally and factually bankrupt piece of Leftist/Marxist/Communist/Socialist/Government Elitist propoganda for government control and spending?!

      The overwhelming mass of both human experience and "cold, hard facts" throughout history to today, and simultaneously verified by both Americans and escapees from other such systems (including European Socialism), shows that such Socialism/Government Elitism is actually "the old idea", has already been tried, and doesn't work for any but money and power-hungry Government Elitists and their flunkies!

      About now Mr. Klugman and his ilk would be saying "Hey! Don't confuse us with such facts!"

      Yeah, well such a combination of human experience and the facts certainly can be awfully inconvenient to Government Elitists and their flunkies, but such facts sure do beat being divorced from reality and in denial, and I don't mean "a River in Egypt"!

    8. blythe says:

      The government cannot spend their/our way to prosperity. You cannot artificially initiate demand, and if the are savings to spend in the future then there is no sustainable economy.

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