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Friday, October 24, 2003

Posted by Tanstaafl
Krugman ignores tax cut stimulus effects:

"If that $300 billion had been used to employ workers directly — a new W.P.A., anyone? — it would have created six million jobs."

Sure, at $50K a year, $300 billion leads to $6 million jobs. But is it efficient job creation? Are they jobs we need? If you want to employ people to add to public goods like building highways, that's fine, but I doubt that would keep $6 million people busy. I wasn't there in the 1930s, but my understanding is that the WPA had a lot of people just digging ditches. By forcing the people to give less money to the government in the form of taxes, you give them the ability to spend it on things that they truly want or need, and that $300 billion still makes it back into the economy. Sure some of it people will save. But what happens to money when people save it? In America, we typically open a bank account and deposit the money. The bank then takes that money and either invests it or lends it to someone who needs it to say start a company (employing people) or to build a new house (employing people). I thought Krugman was a noted economist; he never seems to follow the money.

UPDATE: Econopundit has a more technical critique of Krugman.


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