Where Were Krugman And The Keynesians In The Good Times

It is irrelevant whether Krugman knows the correct amount of stimulus to undo the decline in economic output or whether Obama could politically request a stimulus package for more than $787 million.

A medical system with a physician who diagnoses a patient's infectious disease that then has to ask a pharmaceutical company to begin manufacturing the antibiotic and wait for delivery is completely dysfunctional. Likewise, a fire department that knows the amount of water needed to put out a house fire but has no effective way to deliver the water to a burning house is also useless. The technical training and expertise of the professionals is useless if there are no effective means to implement the needed remedies. Keynesian economics is similar.

The theoretical issue argued by economists and the media prior to the passage of the stimulus package was whether government spending will lower unemployment and add to economic growth. However, the practical issue about Keynesian deficit spending is whether there are any existing pipelines to deliver the reservoir of government spending and debt financing in a timely and targeted manner.

In our current political environment, compromises on spending and arguments about deficits always occur, which results in monies spent in total useless and inappropriate manners in amounts that reflect political power instead of investment and economic need. Using our existing large bloated federal bureaucracy to dispense the funds to federal projects, other federal agencies, state governments, state agencies and state projects will always result in significant delays with inappropriate and inefficient spending.

Our current system for responding to economic downturns is backwards. It relies on reaction and then program planning and implementation to jumpstart our economy in a downturn.

What our country needed was for economists, such as Krugman and the other Keynesian pundits, to push for legislative passage, in good economic times, of automatic economic stabilizers instead of waiting for a downturn. In good times, their costs are almost zero and would have little deficit hawk opposition, and in bad times, they kick in without economic debate and politics. Additionally, in good times, there is the luxury to argue about effective methods of spending delivery.

However, where were our planners? A good fire code and a good sprinkler system are better than a good firefighter. Unfortunately, Krugman and the other pro Keynesian economists let us down. If they were in my employ in my company, I would have fired them for not having a good contingency plan in place for bad times.

No economist honestly believed that we would not have another recession or another bout of high unemployment. They might disagree about the when or the severity, but economic cycles, recessions, asset bubbles and bursts are very much a part of all capitalistic economies. However, the high profile and high visibility economists, such as Krugman, were silent. That this downturn is worse than we have seen in a long time does not excuse our legislators and economists from having put any contingency plan in place.