Paul Krugman takes to his New York Times column to urge more federal spending:
Let’s get one thing straight: America is not facing a fiscal crisis. It is, however, still very much experiencing a job crisis.
It’s easy to get confused about the fiscal thing, since everyone’s talking about the “fiscal cliff.” Indeed, one recent poll suggests that a large plurality of the public believes that the budget deficit will go up if we go off that cliff.
In fact, of course, it’s just the opposite: The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.
I fully endorse Dr. Krugman’s concern about the lack of jobs. We are experiencing the sad fruit of a grab bag of economically inefficient policies imposed by a triumphant Democratic Congress in 2009.
Over the period of the last 60 years we have never paid down debt. We have grown past it. We have rarely cut real spending. We have relied on growth to buoy us. What policies will produce the level of growth necessary to grow past the level of debt we’ve incurred over the last several years? As a consequence of feckless policies over the period of generations we have a jobs crisis and a fiscal crisis.
Dr. Krugman gives a nod to the Chartalists:
Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.
How fast can the dollar fall without a loss of confidence in it? That’s a question not an answer. Isn’t there some level? What is it? If you don’t know, I think that caution is advised. I think it’s also worth mentioning that rising prices hurts the poor most. The worst case scenario is no jobs with rising prices and without great care that’s exactly what Dr. Krugman is proposing.
Here’s my proposal: stop doing things that are inefficient in favor of doing things that are more efficient. Examples: Davis-Bacon rules, agricultural subsidies.