Sunday, June 03, 2012

Krugman's stimulus ideas are good, but there are some problems with stimulus as well

Lots of liberals, like myself, praise Paul Krugman's economic analysis calling for more generous government spending in time of depression to help stimulate the economy. Still, there are some problems with this idea.

Krugman says the time to stimulate is now, during depression, and the time to cut back for reducing the deficit is during times of prosperity. Problem is, even during prosperity, there often isn't enough for everyone since poverty remains even in prosperous times. This makes it hard to cut back at anytime as we become accustom to a certain level of spending.

Here is an interesting aside. I heard a conservative talk show host criticize Krugman using the nation of Germany as an example. He said that Germany is calling for austerity during the European financial crisis yet it still has only 5% unemployment. He says, look, Germany is for austerity and it has low unemployment.

Problem with that talk show host's logic is that he is really comparing apples and oranges. Germany does not have our big military to support. Germany has a more affordable health care system than USA. I hear that Germany encourages people to go to part time work schedules when business slows down. This really helps keep the unemployment figures lower as people are still technically employed even while working part time. I've been an advocate of more acceptance for job sharing here in USA.

Also, I'm sure Germany is a bit more socialist than we are anyway. More expensive gasoline due to a tax. More expensive electricity, so I read, and a big percent of their electricity comes from solar. Americans would probably grumble loudly if we lived like the Germans. Our sprawling suburban style development would choke on their high gas prices.

It does work in Germany, but what about USA? Basically our people and our culture are too obese to make that kind of argument for austerity. Even conservatives here in USA are not serious about real austerity. Our military is too large, the paychecks for our corporate executives are too fat, we are too addicted to sprawling cities, cheap oil and expensive health care.

Maybe we can change, tho, and be more like the Germans.

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