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Krugman's Phony Government Spending Facts

Posted By Conn Carroll On January 5, 2009 @ 1:47 pm In Ongoing Priorities | Comments Disabled

Paul Krugman blogs [1]:

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 [2] and that studies on infrastructure spending in our country show it does next to nothing in terms of net job creation [3].

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 [4], which concludes that a dollar of tax cuts raises GDP by about three dollars.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/05/krugmans-phony-government-spending-facts/

URLs in this post:

[1] blogs: http://krugman.blogs.nytimes.com/2009/01/05/is-obama-relying-too-much-on-tax-cuts/

[2] Japan’s massive infrastructure spending in the 1990s did nothing to help their economy: http://www.heritage.org/Research/Economy/bg2222.cfm

[3] studies on infrastructure spending in our country show it does next to nothing in terms of net job creation: http://www.heritage.org/Research/Budget/bg2121.cfm

[4] THE MACROECONOMIC EFFECTS OF TAX CHANGES: ESTIMATES BASED ON A NEW MEASURE OF FISCAL SHOCKS: http://www.econ.berkeley.edu/~cromer/RomerDraft307.pdf

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