Krugman, Unstimulated

In this NYT op-ed, Paul Krugman recites some powerful facts about the unemployed in America. I could not agree more: joblessness is appalling, the policy response is pathetic. But then he points the Nobelist finger at a complete phantom:

The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.

Welcome to the Macro Reality Distortion Field!  Are we really “cutting government spending” over the last five years? No. Historical U.S. budget data is here at the Congressional Budget Office, available for any modern human to access in about 2 clicks: http://www.cbo.gov/topics/budget/historical-budget-data

Discretionary outlays were $1,041.6 billion in FY2007, $1,134.9 b in 2008, and  1,285.2 b in FY2012.  That’s $240 b per year higher spending, but it pales next to mandatory spending. Again, CBO records this in $billions as:

2007 1,627.8
2008 1,780.3
2009 2,282.7
2010 2,096.7
2011 2,214.3
2012 2,239.9

Counting all outlays, CBO says that federal spending in 2012 was eight hundred billion dollars higher than five years prior.

So was he counting expenditure in some other way, perhaps outlays as a percentage of GDP?  No.  According to CBO, federal outlays as a percentage of GDP rose from 19.7 to 22.8 during this time, of which the discretionary piece went from 7.5 to 8.3.

One response to “Krugman, Unstimulated

  1. I would think a devout Keynsian, such as Krugman, might also ask if the permenant technological displacement predicted by the great man is coming to pass. It is rather interesting that we are about 85 years out from publication of “Economic Possibilities For Our Grandchildren” and labor force participation among low skilled workers and extreme poverty across the golbe are both in freefall. The IMF now projects the elimination of the latter by 2030. It seems doubtful any amount of increased government spending would be sufficient to reverse this trend. We may want to spend more time considering how society should deal with the new economic reality than how to preserve the old.

    And while permenant technological unemployement is certainly painful in the short term; if the trade off is permenant elimination of extreme poverty, future generations may be getting a bargain.

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