A Krugmanian Slasher Flick

1 August 2011 at 12:14 pm 2 comments

| Peter Klein |

Paul Krugman is furious about the deficit-reduction plan reportedly agreed to yesterday, which Krugman says will “slash government spending,” introducing “big spending cuts” that “will depress the economy even further.” And yet, the deal apparently does not cut one penny of government expenditures, but simply increases them at a slower pace (over ten years) than originally projected by the CBO. Remember, in Washington-speak, “cut” means “reduction in the planned rate of increase.”

Imagine a scene from a Krugman-style slasher flick: the villain approaches the victim, and gives him a smaller hug than the victim was expecting! The audience gasps as the victim screams in terror and flees from the vicious attack.

Entry filed under: - Foss -, Jargon Watch, People, Public Policy / Political Economy. Tags: .

Confronting Convenient Historical Distortions Rogoff on Leverage

2 Comments Add your own

  • 1. David Hoopes  |  1 August 2011 at 1:46 pm

    I remain perplexed as to why Krugmen and his friends seem so certain that stimulus and more stimulus will work. There seems to be little evidence to support their claims. Although Barro’s work examining WWII spending is often criticized it seems an honest attempt and shows government spending to have a weak multiplier.

  • 2. Michael E. Marotta  |  2 August 2011 at 8:00 am

    … a weak multiplier.

    But a strong subtractor. By definition government – as force (even as admittedly necessary in a Hobbes-Locke theory of society) – acts contrary to the preferences of individuals. Government spending is malinvestment. Thus, we keep it as small as possible: police, courts, ports and harbors, a few other things maybe. The more the government does, the worse everything gets. This is demonstrably true by both rational and empirical means.

    Even if government spending visibly multiplies its way through some people and businesses, the unseen subtraction is greater. It is the problem of the broken window.

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