Oh those whacky liberals.
On Sunday's "Fareed Zakaria GPS," New York Times columnist - and, ahem, Nobel laureate - Paul Krugman actually advocated space aliens attack earth thereby requiring a massive defense buildup by the United States that would stimulate the economy (video follows with transcript and commentary):
KENNETH ROGOFF, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: Infrastructure spending, if it were well-spent, that's great. I'm all for that. I'd borrow for that, assuming we're not paying Boston Big Dig kind of prices for the infrastructure.
FAREED ZAKARIA, HOST: But even if you were, wouldn't John Maynard Keynes say that if you could employ people to dig a ditch and then fill it up again, that's fine, they're being productively employed, they'd pay taxes, so maybe Boston's Big Dig was just fine after all.
Oh those whacky liberals.
So in Zakaria's view, the government employing people to do absolutely nothing of value would fix the economy.
If this is the case, why doesn't the government just give money to everyone? The economy, in Zakaria's opinion, would therefore grow at a record pace.
Of course, anyone with even a rudimentary understanding of arithmetic could figure out that the amount received in tax receipts would be far less than what was distributed thereby exploding the nation's debt level in a never-ending spiral that would eventually lead to default.
Surely, the credit rating agencies wouldn't be pleased with this.
On the other hand, isn't it fascinating that a man that is always opposed to tax cuts - which is government allowing people to keep more of THEIR money - and doesn't think that stimulates the economy believes it would be economically stimulative to give people someone else's money to do absolutely nothing?
Only a liberal could think this way.
But hold on to your seats, because a man possessing a Nobel prize in economics was cued up to say something even more absurd:
PAUL KRUGMAN, NEW YORK TIMES: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.
I mean, probably because you want to put these things together, if we say, "Look, we could use some inflation." Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what fhe basic logic says.
It's very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish, you know, a great deal.
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better –
ROGOFF: And we need Orson Welles, is what you're saying.
KRUGMAN
Oh those whacky liberals.
There's so much in this that it's tough to know where to begin, so let's start with this being another admission by Krugman that it wasn't Franklin Delano Roosevelt's massive New Deal spending that ended the Depression.
Much as he did on ABC's "This Week" in November 2008, the Nobel laureate once again dispelled that liberal myth.
I wonder if the Keynes-loving Zakaria was paying attention.
But more importantly, let's look at the numbers involved to really get a sense of what Krugman advocated here.
The money unsuccessfully thrown at the Depression prior to World War II was staggering. From 1929 to 1939, government spending tripled from $3 billion a year to $9 billion.
And yet unemployment at the end of 1939 was still 17.2 percent.
Not a very good advertisement for Keynesian economics, is it?
Now imagine that kind of "stimulus" today. That would mean the current $3.8 trillion budget would have to rise to $11.4 trillion which would generate about $9 trillion of debt a year.
What do you think would happen to our credit rating and our dollar then? Wouldn't be pretty, would it?
Yet that didn't work in the '30s - a fact that most liberals other than Krugman still contest - so the Nobel laureate is advocating that we spend like we're being attacked by space aliens in order to get to the level of outlays during World War II.
Total federal spending in 1940 was $9.5 billion. By 1945, this had risen almost tenfold to $93 billion.
Such an increase in today's budget would create a deficit greater than $30 trillion per year making our dollar and our Treasuries totally worthless.
Did I mention Krugman once won a Nobel prize in economics?
Consider too that the lasting stimulative quality of even the World War II spending is up for debate.
The National Bureau of Economic Research lists a recession that began in February 1945 that lasted until October of that year. This recession happened despite the federal government spending almost ten times as much as it had only five years prior and 30 times more than in 1929.
Once again, not a very good advertisement for Keynesian economics.
But let's take this a step further, for NBER's recession numbers might be too conservative. According to the Bureau of Economic Analysis, the Gross Domestic Product shrank by 1.1 percent in 1945, a staggering 10.9 percent in 1946, and 0.9 percent in 1947.
Again, this was after the largest explosion in federal spending in our nation's history, and this is what Krugman is advocating we repeat.
Makes you wonder if space aliens have already arrived and they're residing inside this liberal Nobel laureate's head.
