Nobel prize winning economist Krugman tells us we need stimulus, that is to say, more deficit spending. Government needs to spend more to stimulate the economy, he tells us.
Government spending puts money in peoples pockets. Then they spend stuff, so people get hired to produce stuff, so the newly employed get money too. Being employed rather than unemployed, they will produce and spend. So when the economy is in recession, government spending on pretty much anything is the best investment there can be – or so Keynesians tell us, so Nobel Prize winning economist Krugman tells us.
Despite the government vigorously applying the remedy that Krugman so enthusiastically recommended, the US economy is still in obviously in recession, not withstanding official government statistics that assure us that everything is coming up roses. Krugman tells us this is because the government did not spend enough. It needed to spend more. Spending cuts are destructive, they are economic illiteracy. That some republicans suggest spending cuts when unemployment is so high shows us that they are ignorant cavemen, unlike the highly sophisticated and knowledgeable Nobel Prize winning economist Krugman
But if a Keynesian believes in Keynesianism, should not he believe that tax cuts are better than spending increases? There is after all no such thing as a shovel ready project. Government spending programs take many years to get moving, and once moving tend to grow unstoppably. If the government has to manage the total level of demand, stimulating it in recession, cutting in booms (though somehow Keynesians never seem to think that a cut is necessary in booms) then taxes, which can be swiftly and easily raised and lowered, are the instrument to do it, rather than spending which cannot be quickly increased, and once increased, can never be cut.
If spending cuts in times of high unemployment are economic illiteracy, should not tax rises in times of high unemployment also be economic illiteracy?
Apparently not. According to Nobel Prize winning economist Krugman Republicans are economic illiterates for proposing cuts and they are economic illiterates for opposing tax rises.
If Keynesians actually believed Keynesianism was true, they would advocate tax cuts whenever unemployment was too high – and since a Keynesian never thinks unemployment is too low, they would advocate tax cuts day in and day out.