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Hugh Hewitt Book Club

In Praise of Paul Krugman

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No, I haven’t lost my mind. Those in need of reassurance can consult my Monday column in the Washington Examiner, “The Clueless President.”
That said, I think you should read Paul Krugman’s new book End This Depression Now.

After listening to the New York Times’ columnist and Nobel laureate’s interview on BBC Friday, I picked up a copy of the book at Dulles this morning and read most of it on the flight to California, finishing it this afternoon.

End This Depression Now! (Hardcover) ~ Paul Krugman Cover Art

It is an engrossing read, which shouldn’t surprise given Krugman’s long record of provocative punditry. He can push a noun against a verb with style and wit, though a few passages guarantee that his reputation for abrasiveness won’t suffer a bit

What does surprise is that the book left me wondering if he really does have a prescription worth pondering at length. I went looking for reviews of the book by economists I would trust –e.g. Stanford’s John Taylor, AEI’s Arthur Brooks– and found none. Send me a link if you know of one that is detailed and not merely conclusory.

Krugman’s thesis is that we need a massive fiscal stimulus in order to engage the capacity of the economy. This is a proposition I and almost everyone else I read and respect have dismissed as insanity for the past many years.

Krugman builds his case on some obvious statements of fact, including the not-debatable propositions that orthodox center-right economists did not see the panic of 2008 coming and in fact counseled that such a thing wasn’t at all likely and could very nearly have been impossible.

He also mows down the inflation doom-sayers and rebukes those who fear the arrival of the bond vigilantes, using their own words and predictions against them in effective call-and-response fashion. Well played, Mr. Krugman.

At then end I found myself wondering if Krugman isn’t in a position very similar to that of the climate change skeptics he almost certainly scorns.

Like those skeptics, Krugman is holding out a theory that he says is not being given a fair hearing because the legions of the powerfully-placed, orthodox “austerians” refuse to even entertain the possibility of the error of their demands. If the vast majority of orthodox economists are in fact wrong –just as the climate change skeptics assert that the warming enthusiasts are not only wrong but disingenuous and sometimes even deceitful– then Krugman’s prescription isn’t getting considered not because his arguments are wrong but because they are inconvenient to the point of ruinous when it comes to reputation and position.

He is hobbled, of course, not only because the Stimulus is regarded as a big bust and because of the president’s ill-fated and transparently political appeal for a second stimulus last September. (The president’s Friday pratfall may have been induced in part by Krugman’s urgings on the need to rehire hundreds of thousands of displaced government workers.)

But if –big enormous “if”– he is correct about the need for a massive stimulus, would the center-right be willing to embrace it even if persuaded of its effectiveness?

When I finished End This Depression Now, I thought that Krugman had made a very good case for a very big tax cut, and perhaps one of my favorite ideas, the release of some portion of Americans’ retirement savings from the land of the stranded, tax sheltered 401(k) and IRA, without penalty and at a rate of taxation significantly lower than the tables would apply upon standard withdrawal –a self-financing stimulus.

He did not persuade me that government would have a clue how to effectively disburse a new round of fiscal stimulus, or that state and local governments would do other than they did last time which was to postpone their right-sizing and their long-overdue reckoning with the public employee unions.

He did, perhaps unintentionally, make a very good case for stopping the sequestration of defense spending and instead upping the outlays for hardware of the lasting sort –ships, F-35s etc.

And he does leave a fair reader wondering whether the answer to these ruinous Obamanomics-induced years of exhausting running-in-place is in the big, bold stimulus in the form of a higher short-term deficit brought about by leaving people with much more of their hard-earned cash instead of shipping it off to the IRS.

If Mitt Romney needs more authority for tax reform even if it leads to immediate increases in red ink, he can now cite Krugman.

I’ve sent off a couple of requests for Professor Krugman to join me on air this week. Fingers crossed.


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