Paul Krugman says a lot in his latest NY Times
column The Mutilated Economy
. I've honestly been trying not to pick on the poor professor quite as much lately. In fact, this morning, until I got to the part where he writes "Anyone who talks about how we’re borrowing from our children just hasn’t done the math", I was just going to take in his message and move on to better things. But, dang it!, I just can't.
So, now that I've decided to blow a few minutes on attempting to blow Krugman's tired "we're no poorer because we owe it to ourselves" assertion out of the water, I figure I might as well pick a piece of low-hanging fruit along the way. He writes:
Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.
Of course, to Krugman, this is the result of insufficient government spending.
The other day, I met with a client who farms grapes. He has a problem, he can't find enough people to pick them. He says "another season like this and we're going mechanical". Hmm? Four times as many people on unemployment than before the recession, and a farmer can't find anyone to pick the crop? While I suspect that intense analysis would uncover some complex mix of factors leading to the 4-fold increase in the unemployed-over-6-months number, there is one very simple thing I know for sure; California is one of 49
states that now pays at least 10 months of unemployment benefits. Not to mention the state's comparatively (to other states) strong social "safety net"
. Just sayin
Now let's dig a little beneath Krugman's ever-persistent claim that government debt doesn't make the nation poorer because it's money we owe to ourselves. For one, "we" owe a bunch of it to other nations, but, frankly, it matters little either way. Here's the simple basis of Krugman's position:
A lends to government (buys a treasury bond).
A, and perhaps A's offspring, receives interest payments for the term and the principal at maturity.
B, and perhaps B's offspring, pays taxes to cover the payback to A.
A/A's offspring and B/B's offspring are US citizens.
What B/B's offspring pays, A/A's offspring receives. Therefore: (-$) + $ = a wash to the community.
K says "see, the math says we can't lose when we owe it to ourselves".
If government operated within its means, there'd be no borrowing from A.
A, therefore, would be left to invest his wealth in the private sector.
And B/B's offspring, therefore, would be left with their wealth.
Therefore, comparing to the government debt scenario, we have: $ + $ = a gain to the community.
I says "K just hasn't done the math".
"Yeah, BUT!" says K:
"We have to account for the benefits to the community resulting from the Government projects funded by A's loan. B/B's offspring's higher taxes would pay for benefits they received."
"Hmm" says I:
"I guess, therefore, we need to consider under whose command of resources the community would receive the greater benefit: bureaucrats competing in elections or private sector actors competing in the marketplace?"
We can stop there.