In this week’s New York Times economist Paul Krugman writes that more government spending is needed to avert a third depression. Krugman thinks the government injecting money into the economy will stimulate it. The logic of his analysis escapes me.
How does taking money from one person and giving it to another person stimulate anything? In Krugman’s world, it is the evil rich from who the money is taken. After all the rich don’t spend all of their money. They save and invest instead. When it is taken from them and redistributed to the noble poor it is spent immediately, thus stimulating the economy.
The illogic of this outlook is stunning. Since when has saving and investing become a drag on the economy?
Krugman also endorses the government borrowing money and giving it away to those it deems deserve it. Just look at Greece to see the long term results of government over-borrowing.
A problem I have observed in the recent $800 billion stimulus bill, is that most of the recipients were politically connected groups. Who actually would put the money to immediate use was secondary to political considerations. That explains why we still have unemployment close to 10%. There is no reason to believe more stimulus money would be spent any better.
The government gets 100% of its money by taking it from people who earned it. It is done by taxes, fees, fines, and countless other methods. Most are designed to be well disguised. The government knows that if the people understood exactly how much of their income is confiscated by governments on all levels, there surely would be a revolt.
It seems obvious to me that allowing people to keep the fruits of their labors is a much better way to stimulate the economy. The people who earned the money can spend it much more successfully than a bureaucrats or politicians in Washington.