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  • Onion WPA Joke Would Be Funnier if Krugman Wasn't so Serious

    In an op-ed from last week, Paul Krugman again called for greater government control of the economy to combat unemployment writing: “A rational political system would long since have created a 21st-century version of the Works Progress Administration — we’d be putting the unemployed to work doing what needs to be done, repairing and improving our fraying infrastructure.” Well The Onion has some good news for Mr. Krugman, under the header Revamped WPA To Create 50,000 New Jobs By Disassembling, Reassembling Hoover Dam, they report:

    In an effort to boost the economy and promote job growth, representatives from the newly revived Works Progress Administration announced Thursday their plan to dismantle, piece by piece, the 3.25 million cubic yards of concrete forming the Hoover Dam, and then immediately rebuild it. “This is a vital initiative,” said WPA director Ted Doogan, who was appointed last week. “Systematically tearing down such a massive edifice will create at least 25,000 jobs over the next five years. And then reassembling it, using all the same pieces in the exact same configuration, will employ another 25,000 workers. America is back.” Other public works projects currently underway include the bulldozing of libraries, the burning of national forests, and the defacing of public murals, which will be followed by a massive plan to rebuild libraries, revive national forests, and repaint public murals.

    We wish that proposals like Krugman’s were a total joke. Unfortunately there are just too many people in Washington who still believe that paying people to do dig ditches in the name of “economic stimulus” is good public policy. It’s not:

    Keynesians believe that government spending can make up this shortfall in private demand. Their models assume that–in an underperforming economy–government spending adds money to the economy, taxes remove money from the economy, and so the increase in the budget deficit represents net new dollars injected. Therefore, it scarcely matters how the dollars are spent. Keynes is said to have famously asserted that a government program that pays people to dig and refill ditches would provide new income for those workers to spend and circulate through the economy, creating even more jobs and income.

    Economic data contradict Keynesian stimulus theory. If deficits represented “new dollars” in the economy, the record $1.2 trillion in FY 2009 deficit spending that began in October 2008–well before the stimulus added $200 billion more–would have already overheated the economy. Yet despite the historic 7 percent increase in GDP deficit spending over the previous year, the economy shrank by 2.3 percent in FY 2009. To argue that deficits represent new money injected into the economy is to argue that the economy would have contracted by 9.3 percent without this “infusion” of added deficit spending (or even more, given the Keynesian multiplier effect that was supposed to further boost the impact). That is simply not plausible, and few if any economists have claimed otherwise.

    And if the original $1.2 trillion in deficit spending failed to slow the economy’s slide, there was no reason to believe that adding $200 billion more in 2009 deficit spending from the stimulus bill would suddenly do the trick. Proponents of yet another stimulus should answer the following questions: (1) If nearly $1.4 trillion budget deficits are not enough stimulus, how much is enough? (2) If Keynesian stimulus repeatedly fails, why still rely on the theory?

    This is no longer a theoretical exercise. The idea that increased deficit spending can cure recessions has been tested repeatedly, and it has failed repeatedly. The economic models that assert that every $1 of deficit spending grows the economy by $1.50 cannot explain why $1.4 trillion in deficit spending did not create a $2.1 trillion explosion of new economic activity.

    Posted in Ongoing Priorities [slideshow_deploy]

    11 Responses to Onion WPA Joke Would Be Funnier if Krugman Wasn't so Serious

    1. PippN, Maryland says:

      I guess Krugman believes in a "Pilot" program too. Pick it up and pilot here. Then, pick it up again and pilot over there. Sounds like the army.

    2. Bill says:

      WPA for make work is very wasteful. Peoples labor must be for something of value to someone. Why would anyone in America want to be like any country in Europe?Socialism doesn't produce wealth for the people. It wastes our resources.

    3. Alex, New York says:

      "Economic data contradict Keynesian stimulus theory. If deficits represented “new dollars” in the economy, the record $1.2 trillion in FY 2009 deficit spending that began in October 2008–well before the stimulus added $200 billion more–would have already overheated the economy. Yet despite the historic 7 percent increase in GDP deficit spending over the previous year, the economy shrank by 2.3 percent in FY 2009. To argue that deficits represent new money injected into the economy is to argue that the economy would have contracted by 9.3 percent without this “infusion” of added deficit spending (or even more, given the Keynesian multiplier effect that was supposed to further boost the impact). That is simply not plausible, and few if any economists have claimed otherwise."

      This argument is nonsensical because 1) it's circular and 2) it complete ignores the revenue side of deficits. Yes, deficit spending as a proportion of GDP increased. This occurred because tax revenues decreased while GDP shrank. Even had government spending remained constant (which, realistically, it more or less did– of $800 billion in "new" stimulus spending, most went toward 1) aid for states and municipalities that are required to run balanced budgets and needed federal funds to offset decreases in tax receipts, and 2) tax cuts that were, in turn, hoarded. Which left about $150 billion in actual net stimulus over two years in a $14 trillion economy.

      Mathematically, that's literally a drop in the bucket. Posts like these betray a fundamental lack of understanding of basic macroeconomics.

    4. George Colgrove, VA says:

      "Keynesians believe that government spending can make up this shortfall in private demand."

      It is as if these people operate with a mental impediment. Their theory holds true until you ask, “Where does the money come from?” Someone has to pay the piper as the saying does. You don’t get something for nothing. If you dig a hole just to fill it up again, what do we get out of that? If you tear down the Hoover dam just to rebuild it again, we as a nation get nothing out of it. People who think this way has to have serious mental shortcomings, which should disqualify them from holding any office at any level. Value has to come out of the investment that goes into it – otherwise the venture has little point.

      Keynesian economic theory is like putting a Band-Aid on a cancerous lesion. It may stop an infection for a very short time, but if the economy has already tanked, the effect will be at best marginal in the very short term, but in reality it will end up hurting the economy in the long term more so than doing nothing.

      Here are two examples:

      You use tax dollars to build a highway. That highway becomes a means to locate factories (preferably), but also stores and residences in places that would be unreachable otherwise. This investment made it possible to provide for economic growth by allowing businesses to open. In a way we go into the a financial hole by extorting valuable financial resources from innocent people who are minding their own business with the “hope” (it is never a guarantee!) that new business would bring more to the area that what was spent.

      You use tax dollars to dig a hole, then fill it up, what do you have? The result is no different than the beginning, yet multiple layers of pointless and significantly overpaid federal managers had to sit in their offices surfing the internet while “managing” the next level below them who are in turn surfing the net and so on. Each layer scrambling once a month to have another overly paid office staff member produce a report by pasting together quick summaries that come in from significantly overly paid field managers who are directly overseeing the digging process when they themselves are not surfing the internet. This work obviously also has to include the highly overly paid EPA and OSHA and the army corps of engineers federal workers who when are taking a break – from taking a break get in the way of the hole digging to make sure environmental, safety or whatever regulations are being followed. The actual digger is also a very highly overpaid federal lawn care specialist. I wont get into the layers of overly paid federal employees that have to oversee overpaid federal contractors.

      One can see why the feds love public works – it keeps them employed at lucrative levels. In reality, the hole digging process is no different than that for building that highway. However, with the hole digging, what do we as a society get in the end? Nothing. At least after the federal sloth is finished wasting billions of taxpayers’ dollars bringing us a highway it can help us create future economic growth – so long as it is not a bridge to nowhere. However, a federal program that tears down a structure just to rebuild it will employ a few people at very high salaries, but does little to help us grow from that work once it is done. These projects provide no net change and thus no future growth to help pay for that work. Moreover, the money lost in that useless venture is consolidated to an area that is not hurting for jobs or higher incomes – namely the greater DC area. With such pointless tasks, money is extorted in the same manner as it was for the highway, but in this case, there is absolutely no promise that the outcome will provide anything. It is just a Band-Aid – a very expensive and future robbing Band-Aid. The cancer was not cured – it just got worse.

      These lame brained federal officials need to start recognizing that the best stimulus is leaving the dollars at the people’s homes. Do not take them in the first place. Do not build expensive edifices in DC – it does create DC area jobs the only place in the country that has an economy! However, we need the jobs elsewhere. Construction has a beginning and an end. Once completed, people are once again out of work. A car factory, if not taxes to oblivion will employ people indefinitely. A citizenry not tax to oblivion will buy cars from that factory. This type of economy is run by the most important leaders in that economy – the customer – not some small-minded politician or federal official in DC.

      The federal centered economies of Bill Clinton, George Bush, and Obama have proven that the federal government can only hurt the economy when they interfere. The best people to fix this economy do not need pointless degrees or highly overpaid and overly credentialized federal positions, but rather the best-qualified people are regular folks who just need a few bucks in their pocket and the desire to buy something coupled with people with an entrepreneurial spirit to provide what those people want. It is not that hard.

    5. George Colgrove, VA says:

      The only thing the current class of Federal employees and congress members know how to do is spend money. They have become pathological spenders over the last decade – of which they have greatly benefitted from – personally. Keynesian economic theory is a convenient justification for that spending. These people do not recognize that there is a bottom to a pocketbook. If they find a dollar – they spend it. If they do not find a dollar – they spend it anyway with contempt aimed at the public – who pay their extreme paychecks.

      After putting the nation into debt under one failed promise after another, they quickly put in front of themselves a new promise to make that will take us further into debt. This nation’s credit card has a debt limit of $14.3 trillion. We are hovering around $13.8 trillion right now. According to these deadbeats, they see that they have $500 billion more to spend! However, that is not good enough for them. They are asking for a credit increase! $14.3 trillion in everlasting debt is not enough for them, they want more and they will pound Keynesian theory to justify that. There are no more highways or other building projects that once built will help repay that debt. It is over.

      We need to stop spending and start paying back. We need more money in the people’s hands to start this economy. We need factories (unsubsidized) to employ people, but more importantly produce! We need people able to buy. The federal government is the premier body that is preventing this from happening. We need to stop deficit spending NOW! We need to start paying back the debt NOW! This means the federal government has to dramatically shrink NOW! It needs to shrink in every possible way.

    6. Brad, Chicago says:

      The real argument to make here, is that spending money strictly on salaries wastes the potential of that money. Yes, you could pay people to dig and refill holes, but if they're repairing a road, instead, there is additional value gained for spending that money. If you're going to have people dig and refill holes, you might as well just send them checks to sit at home. Repairing roads isn't even a great use, because, just like Cash for Clunkers, the roads are going to be repaired in time, anyway. It's not really adding new jobs, just pulling them forward in time (although it does give people money they would have had to wait for).

      Further, what is a federal payment, other than returning your money to you? If the government is concerned about how much money people have, they could lower taxes and simply take less in the first place.

    7. Tim AZ says:

      Liberalism and all its relatives are truly a mental disorder. It's just this simple in order for govt. to pay for make work projects it must first take wealth from others. Yes they can print money and doing so takes money from everyone including those who can least afford it through inflation. The only thing Govt. can produce is pain heaped upon the citizenry.

    8. Spiritof76, NH says:

      I think we should start a project to re-do the Erie Canal except this time, we should give spoons instead of shovels to dig it. Can you imaging how many more man-years it would take to complete it? Why, it would probably employ all those that are currently unemployed!

      How have we become a society that elevates stupidity?

    9. Steven Conn says:

      It might be of greater benefit to remove the retiree obligations off the back of the economy by activating this growing retiree bench. I believe a significant portion of this populations energy could be plowed back into the economy at the most efficient grass roots level. It makes more sense than 20 plus years of terminal consumption.

    10. Leon Lundquist, Dura says:

      I call it Junk Science, it is Junk Economic Science. It is so clearly Junk, it has never worked. What works is Free Markets! Oh! Let the People have some Captial, and that would mean no Income Tax, it taxes the wrong side of money, before it is money at all! But hey! We have Junk Science all over the place. Big goofy Al Gore and his Global Warming scam! But it is Junk Police Science! Junk Administrative Management Science! We have Junk Statistics and Junk Analysis. I sick of it.

      America? You have been played!

    11. Gary Charlotte says:

      How can anyone take Krugman serious ? He has proven time and time again that he is very narrow minded and extremely liberal and in his way of thinking the majority of the american people are very stupid and incapiable of taking care of themselfs.

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