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Friday, June 12, 2015

Paul Krugman: Seriously Bad Ideas

Why do bad ideas prevail?:

Seriously Bad Ideas, by Paul Krugman, Commentary, NY Times: One thing we’ve learned in the years since the financial crisis is that seriously bad ideas — by which I mean bad ideas that appeal to the prejudices of Very Serious People — have remarkable staying power. ...
What makes something qualify as a seriously bad idea? In general, to sound serious it must invoke big causes to explain big events... It must also absolve corporate interests and the wealthy from responsibility for what went wrong, and call for hard choices and sacrifice on the part of the little people. ...
And the ultimate example of a seriously bad idea is the determination, in the teeth of all the evidence, to declare government spending that helps the less fortunate a crucial cause of our economic problems. In the United States, I’m happy to say, this idea seems to be on the ropes... Here in Britain, however, it still reigns supreme. In particular, one important factor in the recent Conservative election triumph was the way Britain’s news media told voters, again and again, that excessive government spending under Labour caused the financial crisis. It takes almost no homework to show that this claim is absurd...
The ... really bad news is that Britain’s leaders seem to believe their own propaganda. On Wednesday, George Osborne, the chancellor of the Exchequer and the architect of the government’s austerity policies, announced his intention to make these policies permanent. Britain, he said, should have a law requiring that the government run a budget surplus ... when the economy is growing.
It’s a remarkable proposal, and I mean that in the worst way. ... For Britain does not have a public debt problem. ... Meanwhile, Britain’s real economy is still ailing..., surely the combination of a still-weak economy, terrible productivity performance and negative borrowing costs says that this is a time to increase investment in things like infrastructure. ... Yet the Osborne proposal would kill any such initiative.
But Mr. Osborne sounds very serious, and, if history is any guide, the Labour Party won’t make any effective counterarguments.
Now, some readers are probably thinking that I’m giving the likes of Mr. Osborne too much credit for sincerity. Isn’t all this deficit obsession just an excuse to slash social programs? And I’m sure that’s part of it. But I don’t think that’s the whole story. Seriously bad ideas, I’d argue, have a life of their own. And they rule our world.

    Posted by on Friday, June 12, 2015 at 09:08 AM in Economics, Fiscal Policy, Politics | Permalink  Comments (43)


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