Monday, May 30, 2011

Some Sanity in the White House?

In an insane column, even by Paul Krugman standards, Krugman calls for responding to the high unemployment in the country by implementing:
...W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads.
As per usual, he does not explain where the money will come from for such make-work projects. Since the money will come as a result of taxes, increased debt or money printing, it means those taxed will have less of their own money to spend (or invest), borrowing will crowd out the private sector and inflation will hurt those that are last in line to get the money. It is hard to understand how Krugman doesn't understand that a WPA-program is just wealth transfer via theft.

Curiously though, it does not appear that this Krugman prescription will have any traction in the Obama Administration.  Jared Bernstein, who until recently was Vice-President Biden's top economic adviser, responds to Krugman:
There will be no WPA-type programs in our near future. There was no appetite for them in the Obama admin in the midst of the worst recession since the Great Depression and there’s a lot less now. The reasons for that are interesting and I’ll speak to them another day. But it ain’t happening.
Could there be some voices of sanity at the White House? Let's hope Bernstein follows through on his promise to lift the curtain a bit more and fill us in on the great impediment blocking a WPA-economic distortion type program.

But, don't think for a minute that Bernstein is one of those voices of sanity. Here's Bernstein on Krugman:
Don’t you get a little bummed out when you open the paper on a Krugman day and he’s not there, or when he says he won’t be adding to his blog for a few days because of travel? What’s more, I could be wrong, but seems to me that when Paul is away, the Very Serious People he worries about say crazier stuff. It’s as if up on Capitol Hill, they’re going, “Krugman’s on vacation! It’s the perfect time to launch our bill to do away with social insurance once and for all!! Mwahahaha!!!”


  1. Optics. The optics of WPA type programs have the stench of Great Depression II. Things are much more hopeless, the government is much less effective, we are all up a creek, if we need CCP camps and WPA so that people can eat.

    In eality, of course, you are tight. The programs would drain money from productive uses to government handouts (consumption without production) making us all porrer.

  2. In the 1930s, the people employed by the WPA coined a great slogan for what "WPA" stood for...

    We Piddle Around

  3. There is nothing curious about the Obama administration's refusal to consider W.P.A.-type programs. Repairing roads, sweeping streets, etc. are all good union jobs.

  4. krugman suggests printing money to pay for these WPA stuff, i think. While $ is the world reserve, i guess lets take full advantage it?

    Nothing is going to happen to $ based on whats going elsewhere in the world (Japan, EU, mideast, africa etc)...Its the best among the worse.

  5. "But if we have trained
    ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself." - Chapter: Public Work means Taxes, Economics in one lesson, Henry Hazlitt.

  6. Will someone PLEASE by this clown a copy of Henry Hazlitt's "Economics In One Lesson" ??

    Government "Make-Work" programs didn't work in the 1930's, they won't work now, and they never will, and Hazlitt explains in language EVEN KRUGEMAN CAN UNDERSTAND!!

  7. Is crowding out a legitimate concern when t-bill rates are so low?

    Your argument doesn't jive with a reality where inflation expectations are very low (as measured by TIPS spreads) and a relatively stable financial environment with very low treasury rates.

    There are other arguments against make-work programs, but crowding out is a large stretch.

  8. We can't forget the genius of politics, however. Bernstein goes on public record "it ain't happening" --but that means it IS happening (under a different name, guise, etc.) Just wait!

  9. The fact that this guy actually thinks that a political economic hack like Krugman is some sort of bastion of reasonable economic thinking says all I need to know about his thinking abilities. An economist looking up to Krugman is like a medical Dr. looking up to a fictional medical Dr. in a TV series. Obama sure surrounds himself with some real winners.