Here is Krugman at his best. Here is more.
UPDATE: Tyler Cowen links to this interesting Krugman post and points out this question:
And if states and localities can borrow freely, how do you explain the drastic fall in their spending I have been documenting?
To answer his question directly, I’d argue that people want to spend less and they have far more influence at the state and local level than at the federal level. I would take (I think) a one trillion dollar swap of federal spending reductions for local spending increases, conditional on those local spending increases NOT going to the public school system. Would Mr. Krugman at least agree to the unconditional swap? Of course not. And the reason I linked to the post is that his question is infuriating. It assumes that increased state spending is ipso facto desirable and good. As I’ve pointed out elsewhere, I’ll take him and anyone like him more seriously when they propose a world where there is ever a time to reduce the role (scope and size) of government. And if he is truly the committed Keynesian he claims to be, then surely we can expect to see him write a column during Obama’s second term when the economy is humming that Keynesian orthodoxy requires a slowdown in government spending to cool down the economy. I won’t hold my breath.
The point again is that it is incredibly frustrating trying to argue policy ideas when really what is happening is that some folks want to have an orgy of state activity and others an orgy of austerity. I am not a utilitarian. I find the state to be morally bankrupt. And so I don’t even care if having a big government would make “us” richer. I really don’t. But I don’t hide that view.
Did you ever read this? From Russ Roberts. It takes something that was probably obvious to you, and explained it I think very well in layman’s terms to the non-economist like me.
InvisibleHeart.com. Books and writings by Russell Roberts.
http://www.invisibleheart.com/Iheart/PolicySirloin.html
The higher the marginal rates, the more attractive it is for tax-free borrowing, and the greater is the incentive for governments to finance their stupid projects. Thus the redistributionist crowd is allied with the crowd that wants to provide public amenities.
That was a good link, Speedmaster.
Our local officials actually decided not to take $350,000 (which they had extorted in a development deal) to spend on a pavilion at a local park. That’s the good news. The bad news is they built a $75,000 pavilion, so the families would be shaded watching their children playing. This is called austerity.
The alternative would be to take the $75,000, plus the other $3.7 million they have in the bank and invest it in treasurys, except treasurys have negative rates of return, thanks to the government’s commitment to the California and Florida real estate markets, the big banks, and debtors in general. It takes a lot of restraint not to spend that cash, say, on a mini light raid demo project.