I always am grateful for Mondays and Fridays, as that is when Paul Krugman’s Semi-Weekly Howler appears on the New York Slimes editorial page. It seems to me that those who write for the Slimes are able to interpret economic events about as well as the Slimes was able to interpret the DNA evidence in the Duke Lacrosse Case. (The Slimes was the biggest shill for the prosecution, but remains “proud” of its coverage, according to its sports editor, Tom Jolly — who was two years behind me at Baylor School in Chattanooga.)
In the earlier years of this decade, Krugman insisted that the recession came about because the Bush administration convinced Congress to slightly cut some tax rates. Today, however, he now insists that cutting tax rates is an effective way to stop an economic downturn. Yes, I know that “consistency is the hobgoblin of little minds,” but nonetheless I would prefer at least some consistency when a Nobel Prize winning economist speaks.
What has sparked the ire of The Great One today is the German finance minister’s dissing of Krugman’s idol, John Maynard Keynes:
As in the United States, monetary policy — cutting interest rates in an effort to perk up the economy — is rapidly reaching its limit. That leaves, as the only way to avert the worst slump since the Great Depression, the aggressive use of fiscal policy: increasing spending or cutting taxes to boost demand. Right now everyone sees the need for a large, pan-European fiscal stimulus.
Everyone, that is, except the Germans. Mrs. Merkel has become Frau Nein: if there is to be a rescue of the European economy, she wants no part of it, telling a party meeting that “we’re not going to participate in this senseless race for billions.”
Last week Peer Steinbrück, Mrs. Merkel’s finance minister, went even further. Not content with refusing to develop a serious stimulus plan for his own country, he denounced the plans of other European nations. He accused Britain, in particular, of engaging in “crass Keynesianism.”
Germany’s leaders seem to believe that their own economy is in good shape, and in no need of major help. They’re almost certainly wrong about that. The really bad thing, however, isn’t their misjudgment of their own situation; it’s the way Germany’s opposition is preventing a common European approach to the economic crisis.
To understand the problem, think of what would happen if, say, New Jersey were to attempt to boost its economy through tax cuts or public works, without this state-level stimulus being part of a nationwide program. Clearly, much of the stimulus would “leak” away to neighboring states, so that New Jersey would end up with all of the debt while other states got many if not most of the jobs.
Individual European countries are in much the same situation. Any one government acting unilaterally faces the strong possibility that it will run up a lot of debt without creating much domestic employment.
People, it does not get much better than this. While the economic downturn is a serious thing and for many people, it will be a matter of life and death, but nonetheless I always am grateful for some levity in the midst of the tragedy. Thanks, as always, Professor Krugman, for being the funny guy!6:36 am on December 15, 2008 Email Bill Anderson