Rescuing the Stimulus

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

Paul Krugman has a column out about how President Obama’s economic program was a political disaster because of the “perception that stimulus failed.” It reminds us of Mark Twain’s jibe about Wagner’s music being “better than it sounds.” At least Twain was aware of the circularity of his famous wise crack.* Professor Krugman seems oblivious to the fact that, in the stimulus racket, success is nothing if it’s not perceived.

Mr. Krugman reckons the aim of the stimulus was to “provide a temporary boost” to the economy “both by having the government directly spend more and by using tax cuts and public aid to boost family incomes, inducing more private spending.” That may have been his logic. But it wasn’t the New York Sun’s. We comprehend he wasn’t addressing the Sun, but the stimulus we favored was tax cuts, deregulation, lowering restrictions on trade and immigration, and honest money.

Opponents of the stimulus, Mr. Krugman insists, “argued vociferously” that outlays in excess of revenues “would send interest rates skyrocketing, ‘crowding out’ private spending.” If that argument was made, it wasn’t made by conservatives of the ilk we favor. What we’ve been arguing for was a return to constitutional money. Then lenders would know what value they would get when loans were repaid.

We have, in any event, been opposed to lifting the debt ceiling at any stage of the current crisis, preferring instead that the government try as a strategy for staying within legislated debt limits the novel idea of reducing spending. It is not, by our lights, the government’s moral responsibility to provide work. Its responsibility is to use logic in its tax policies, prudent in its outlays, and integrity — specie — in its monetary policy.

Mr. Krugman trans-supposes that the travail of the European austerity economies demolishes the case against the stimulus. He forgets to factor all the socialism in Europe. How can one have austerity in a socialist economy? Once you have socialism, spending cutbacks by the government merely ensure socialism’s sadness. That’s the problem in Greece and the other European regimes. And here all too much of late.

Which brings us back to the problem of perception. The problem of perception goes back to legal tender fiat money. Feature our favorite example, which was when the president gave his radio address on the high price of gasoline. The actual value of gasoline, measured in gold, was less than half of what it had been but four years earlier. It wasn’t the gas that was up, but the dollar that was down.

There’s Mr. Krugman’s perception problem. We comprehend that our greenbacks have gained something in value in the past year or so, but the value of the dollar began sagging again within minutes of Chairman Yellen delivering her first testimony has head of the Federal Reserve, and, in any event, the value of the dollar is little more than half of what it was when the stimulus program began.

Mr. Krugman’s column is but one of a raft of pieces we can expect trying to rescue the reputation of the stimulus program. The next day the Times issued a long editorial called “What the Stimulus Accomplished,” ruing how “Republicans were successful in discrediting the very idea that federal spending can boost the economy and raise employment.” It’s tied to the release by the White House of the impact five years on of the American Recovery and Reinvestment Act. The basic idea is that it’s better than it sounds.

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* Twain appropriated it from a humorist named Edgar Wilson Nye.


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