For winning the Nobel Prize in economist, we find Paul Krugman, um, not very smart when it comes to economics. His answer to the disaster that Bush’s economic and regulatory policies have put us in is for the government to spend more money on infrastructure. In the process he demonstrates that he has not read Henry Hazlitt’s book Economics in One Lesson. Krugman makes the fatal error of not considering anything other than the immediate issue when he studies an economic plan. He appears to have given no thought, and has absolutely no plan for what to do with 1.2 trillion dollar deficits, other than to say, “we will worry about that later.”
Kevin Hassett in Bloomberg worries about it now, and rightfully so. He says that the government will have only two options as an end game: print or tax. If we print we will end up like the Weimar Republic in Germany, with hyper-inflation. How about if we tax?
While advocates of Keynesian-style stimulus [Paul Krugman is one] are correct that this economy is terrible enough to warrant dramatic action, it is hard to understand how such a fiscal path might help. So what if second-quarter gross domestic product blips up a little bit? What business is going to expand its operations with the mother of all tax hikes peeking over the horizon? If government spending provided such a wonderful boost to the economy, we would be in Nirvana already.