There’s an ongoing debate about Keynesian economics, stimulus spending, and various versions of fiscal austerity, and regular readers know I do everything possible to explain that you can promote added prosperity by reducing the burden of government spending.
Simply stated, we get more jobs, output, and growth when resources are allocated by competitive markets. But when resources are allocated by political forces, cronyism and pork cause inefficiency and waste.
Paul Krugman has a different perspective on these issues, which is hardly a revelation. But I am surprised that he often times doesn’t get the numbers quite right when he delves into specific case studies.
He claimed that spending cuts caused an Estonian economic downturn in 2008, but the government’s budget actually skyrocketed by 18 percent that year.
He complained about a “government pullback” in the United Kingdom even though the data show that government spending was climbing faster than inflation.
He even claimed that Hollande’s election in France was a revolt against austerity, notwithstanding the fact that the burden of government spending rose during the Sarkozy years.
My colleague Alan Reynolds pointed out that Krugman mischaracterized the supposed austerity in the PIIGS nations such as Portugal, Ireland, Italy, Greece, and Spain.
We have another example to add to the list.
He now wants us to believe that Germany has been a good Keynesian nation.