Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending.
There may be an element of truth in this claim. The spending orgy by Republicans over the last eight years has amply demonstrated that they are not opposed--as a matter of principle--to increased government spending. Having rejected principles themselves, Republicans have been reduced to "me tooing" the Democrats and then quibbling over details. In that context, there is some justification for dismissing the Republicans.
But Krugman isn't just dismissing Republicans--he is dismissing principles. He cites critics who claim that taxpayers are a better judge of how to spend their money than bureaucrats, and then presents a straw man rebuttal:
Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.
It is true that the air traffic control system is not a proper government function. But this does not mean that it should be abolished, nor does it mean that the private sector cannot and would not develop such a system. Krugman implies that without government, private businesses would take no actions to protect their property or their customers.
Krugman presents us with the false alternative of massive government spending or destruction and death. He concludes that no reasonable person could be in favor of destruction and death, and therefore anyone who argues against government spending is simply being dishonest.
The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts ... because a large fraction of any tax cut will simply be saved.
For a Nobel Prize winning economist, Krugman seems rather clueless about the role of savings. Unless an individual saves his money by putting it under the mattress, his savings are invested in productive endeavors through bank loans. But Krugman doesn't like individuals making such decisions, and prefers that politicians and bureaucrats dictate such matters.
Further, if public spending is the road to Shangri-La, then why not allow the government to control all spending? If, in principle, public spending "provides much more bang for the buck" then why limit government spending at all? Why not emulate the Soviet Union, Cuba, or other totalitarian regimes, since they have taken public spending to new heights? Not surprisingly, while Krugman can cite false implications regarding the opponents of massive government spending, he ignores the implications of his own position.
To make such a connection, Krugman would have to think in principles. But thinking in principles, he makes clear, is either ignorant or dishonest.
It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.
That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse.
Krugman acknowledges that under "normal" circumstances, the Fed would follow certain "principles" to get us out of a recession. But these aren't normal circumstances, and therefore we should abandon such ideas. More to the point, he argues that anyone who clings to those old "principles"--which clearly haven't worked--is simply a fool.
Though he shuns principles, Krugman cannot avoid their consequences. The massive government intervention that he advocates will have specific consequences, and those consequences will be destructive. He may think that election winners get the political power to implement their plans, but reality cannot be manipulated like voters. Reality is not malleable, no matter how many tax dollars you throw at it.
If Republicans wish to stop this onslaught, then they must reject the sacrificial morality of altruism. They must discover and embrace the only weapon they need--a rational, objective, and egoistic morality. They must defend the moral right of each individual to pursue his own values according to his own judgment, so long as he respects the mutual rights of others. Without such a consistent, principled argument they will continue to be irrelevant.