Disagreeing with Paul Krugman?
by Tom on August 11, 2009
in Market Musings
I believe I’ve said before that arguing with a Nobel Prize winner in economics like Paul Krugman is not a smart thing. Well, I’m going to pick a few things to disagree with on this article.
First, what I do agree with:
- We appear, for now, to have averted the worst. The economy is at least slowing down it’s pace rather than hurtling towards the cliff at an accelerating speed.
- I do believe, as he does, that the unemployment rate is going to remain high for a substantial length of time and it’s not going to be easy or fast to pull out of this.
What I don’t agree with:
- I don’t agree that Big Government is the reason why we’ve backed up from the edge of the precipice. Yes, government did play a very important role in “plugging the holes” to keep the ship from sinking, but I’m not sure that history will show that Big Government did us any favors in the long run.
- Many people (present company included) have used the “patient” analogy in describing what is happening. After reading Paul Krugman’s column, let me offer a new variation on the patient theme:
- Patient is in an awful car crash, is pinned in the vehicle and is bleeding profusely. Death is approaching quite quickly and action is needed soon. Fire Department and EMS answer the call, rush in, amputate the patient’s leg and pull him to safety. He’s safe, but he’s never going to walk again. OR – Patient is in awful car crash……. Fire Department and EMS answer the call, rush in, take 30 seconds to assess the situation, determine that the jaws of life could save the patient, get the jaws of life and is able to free the patient and a full recovery is ahead.
In both situations, the patient is saved, but in the first situation, the heavy handed, rushing approach cost the patient severe damage and long term problems.
That’s the difference between Big Government and smaller government and that’s where I don’t agree with Paul Krugman.
Tom Vanderwell
Op-Ed Columnist – Averting the Worst – NYTimes.com
So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find employment for a growing working-age population, we’re probably around nine million jobs short of where we should be.
And the job market still hasn’t turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.
For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss……..
I’m still very worried about the economy. There’s still, I fear, a substantial chance that unemployment will remain high for a very long time. But we appear to have averted the worst: utter catastrophe no longer seems likely.
And Big Government, run by people who understand its virtues, is the reason why.
Hey Paul Krugman (A song, A plea)
