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Monday, October 31, 2011

Paul Krugman: Bombs, Bridges and Jobs

Apparently, Keynesian economics works for policies that Republicans favor:

Bombs, Bridges and Jobs, by Paul Krugman, Commentary, NY Times: A few years back Representative Barney Frank coined an apt phrase for many of his colleagues: weaponized Keynesians, defined as those who believe “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”
Right now the weaponized Keynesians are out in full force... What’s bringing out the military big spenders is the approaching deadline for the so-called supercommittee to agree on a plan for deficit reduction. If no agreement is reached, this failure is supposed to trigger cuts in the defense budget.
Faced with this prospect, Republicans — who normally insist that the government can’t create jobs, and who have argued that lower, not higher, federal spending is the key to recovery — have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs. ...
First things first: Military spending does create jobs when the economy is depressed. ... Some liberals dislike this conclusion, but economics isn’t a morality play... But why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges? ...
But there are also darker motives behind weaponized Keynesianism.
For one thing, to admit that public spending on useful projects can create jobs is to admit that ... sometimes government is the solution, not the problem. ...
Beyond that, there’s a point made long ago by the Polish economist Michael Kalecki: to admit that the government can create jobs is to reduce the perceived importance of business confidence.
Appeals to confidence have always been a key debating point for opponents of taxes and regulation; Wall Street’s whining about President Obama is part of a long tradition in which wealthy businessmen and their flacks argue that any hint of populism on the part of politicians will upset people like them, and that this is bad for the economy. Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power — so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts.
So I welcome the sudden upsurge in weaponized Keynesianism... At a fundamental level, the opponents of any serious job-creation program know perfectly well that such a program would probably work... But they don’t want voters to know what they know, because that would hurt their larger agenda — keeping regulation and taxes on the wealthy at bay.

    Posted by on Monday, October 31, 2011 at 12:24 AM in Economics, Fiscal Policy | Permalink  Comments (134)


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