And, he demonstrates a fundamental lack of economic knowledge. But, first let’s get to his delusion. Paul Krugman is a Nobel winning economist.
Throughout his appearance, the Nobel Prize-winning economist proffered a philosophy familiar to readers of his column: Governments should spend more, not less, during tough times. He called the austerity programs that have been put into place in Europe and the U.S. a “massive unethical human experiment,” and argued that “even if you don’t care at all about the people…cutting spending right now now is a way to make the budget, too.”
Okay, I won’t address his nonsensical last phrase, I’ll assume the reporter screwed that part up.
Krugman also called lawmakers who think austerity programs will jumpstart the economy “completely deluded.”
Lol, okay, that’s all we need for now. First of all, he thinks the U.S. has imposed some sort of austerity program. For those not familiar, that means to cut back on spending. I can’t speak toward the other economies, but I can assure you that the U.S. has implemented no such program.
Obviously, we haven’t cut spending since we first decided to bail out the banks. (A note: U.S. fiscal year starts in October) Figures 2012 and on are estimates. I’d call you attention to 2011. We didn’t have a bailout program nor did we have a stimulus package allocated. We’re spending a $trillion/year more now than what we did in 2006. I don’t know what world Mr. Krugman is living in, but, that isn’t an austerity program. That delusional jackass thinks we’ve been mean to people by not spending enough and that our lack of spending has somehow harmed our economy. As if we just printed more money, everything would be okay. They hand out Nobel prizes for that line of thinking.
Next, he utters complete nonsense when he states people who believe cuts in federal spending will jump-start an economy. No one is stating that. He’s either intentionally mischaracterizing people or he’s suffering from the same delusional madness his fellow Keynesians suffer from.
Without getting too lengthy in this post, I’ll simply make a couple of points about why governments need to curb their spending. Interest on debt needs to be paid or no one will extend credit. Would you buy a bond if it paid no interest and didn’t pay back on its principle? This is why Greece is in trouble. They can’t even make their interest payments, much less pay down their principle. As we recall, the U.S.’ credit rating was downgraded for the first time in the history of this nation under Obama. This means we’re paying a higher interest rate than what we would have if our rating hadn’t been downgraded. And this is the problem. As our debt increases, so does our interest payments (depending upon the rates).
So, our debt significantly decreases our ability to do other things…… like run our government, maintain a defense, and promote general welfare among the states. Austerity programs aren’t designed to stimulate economies, they are designed to ensure governments can maintain an economy.
I’ll present a graph which illustrates the horrible effect the interest payments will have on the U.S. economy. The pink columns are estimates of federal welfare expenses. Now these are a bit fantastic in that they estimate they will actually decrease. I see no reason for such prognostication. See our incredible increase on food-stamp payments to know this isn’t reality. I think they will continue to spiral out of control until some significant reform is taken up.
But, look what is expected in 2015. Our interest payments will exceed even the fantasy of decreasing welfare payments. In just 5 years we will have paid over $2 trillion in interest payments. And that’s a conservative estimate. That is contingent upon low interest rates and our rating not being further downgraded. More likely, if the global economy ever picks up again, the amount will exceed $3trillion.
Now tell me Mr. Krugman, what could we have done with that $3 trillion if it wasn’t sucked down the money hole on interest payments? What positive economic or social good does it do to continue in this manner? The incredible wastefulness and behavioral reinforcement of non-production by our government will very soon have a direct impact on our ability to care for the truly needy.
Like Marxist economics, Keynesian economics will soon be shown as a total abject failure. You can’t tax your way to prosperity and you can’t spend your way out of debt.
Read more of Krugman’s delusional rant here.