That image coming into view with David Stockman’s latest barrage against spendthrift government policy is the sight of New York Times columnist Paul Krugman in the crosshairs.
In a posting on his
blog, Stockman, former U.S. budget chief in the Reagan White House, says
a column by Krugman calling for a reversal of fiscal austerity measures is like asking the U.S. to "double down on the lunacy" of money printing that has already bankrupted the nation.
Apparently wanting to be direct, Stockman identifies Krugman, a Nobel Prize-winning economist, in the headline of his blog posting as the “Laureate of Keynesian Babble,” referring to the late British economist John Maynard Keynes, who advocated government intervention to prop up free markets.
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Stockman noted the Federal Reserve’s balance sheet amounted to only $900 billion in September, 2008, when the Fed started a huge wave of fiscal stimulus via asset purchases, and will amount to about $4.7 trillion later this year, even with tapering.
Meanwhile, the public debt, which was $9 trillion at the outset of fiscal stimulus in 2008, “will be $18 trillion by the time the current ‘un-ceiling’ on the Federal debt completes its election year leave of absence next March,” Stockman wrote.
Krugman, who teaches at Princeton University, has advocated getting government at all levels to spend about 3 percent more of GDP each year to boost demand, and for the government to raise target inflation from 2 percent to 4 percent.
But according to Stockman, “wantonly adding another $1 trillion to the national debt over the next two years, as Krugman has also prescribed, amounts to carrying ‘bathtub economics’ to a downright absurd extreme.
He says in his blog that government fiscal policy can no longer produce “escape velocity” for the American economy to recover because maximum federal credit has already been used up.
Stockman’s conclusion: “Professor Krugman’s destructive recipes are entirely the product of a countrafactual economic universe that does not actually exist. He wants us to borrow and print even more because our macro-economic bathtub is not yet full. And that part is true. It doesn’t even exist.”
The New York Times reported recently that the federal deficit fell in 2013 to the lowest level since 2008, mostly from higher revenues from taxes and other measures, while the level of government spending grew only slightly.
“The budget deficit is expected to continue to fall over the next few years, to under 3 percent of economic output,” the Times said.
“But it is projected to start rising again during the next decade under current policies, as health care spending and the retirement of the baby boomers add to the demands on the government to help finance the needs of an aging population.”
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