Krugman: Expansion of gov't spending a 'myth

New York Times columnist and Nobel prize winner Paul Krugman is on a mission to debunk a commonly-held idea: we have had an expansion of government spending under President Obama. In fact, in his column today he calls the idea a "myth." You can read the most relevant parts below, and then see a very passionate response from Anthony Randazzo of Reason.

According to Krugman, the idea that there has been an expansion of government spending recently is flat wrong:

There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need.

Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened.

Krugman, however, offers some caveats to his statement, a practice repeated throughout the piece:

To be fair, spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen — because, in case you haven’t noticed, there has been a surge in the number of Americans without jobs and badly in need of help. And there were also substantial outlays to rescue troubled financial institutions, although it appears that the government will get most of its money back. But when people denounce big government, they usually have in mind the creation of big bureaucracies and major new programs. And that just hasn’t taken place.

He then says that "The total number of government workers in America has been falling, not rising, under Mr. Obama," but turns around and qualifies the statement in the next paragraph: "Now, direct employment isn’t a perfect measure of the government’s size ... [a]nd government purchases of goods and services have gone up."

But, he adds, that spending has risen "only 3 percent over the last two years — a pace slower than that of the previous two years, and slower than the economy’s normal rate of growth."

So why do people believe there's been an increase in spending? "[A] disinformation campaign from the right, based on the usual combination of fact-free assertions and cooked numbers."

"[I]f job-creating government spending has failed to bring down unemployment in the Obama era, it’s not because it doesn’t work; it’s because it wasn’t tried," he concludes.

So is the picture as rosy as Krugman paints? Not exactly. I asked Anthony Randazzo of Reason to weigh in. He got fired up and e-mailed a dinner-sized critique.

The main course:

A couple of problems he doesn’t address, first is that no matter how he wants to say spending has worked, we’re running multi-trillion deficits, that’s a fact hard to get away with, and second we have serious deficits projected over the next 10 years, THAT is what people are complaining about. Second is that people complain about government spending to create jobs because it has never worked in a sustainable way anywhere, excuse us for pre-empting the failed stimulus with pronouncements of its failure in 2008. Third it is all a matter of scale with Krugman here, because I think the $400 billion or so already out the door on spending projects and tax cuts is a [crap load of] cash, even it if isn’t “that big” relative to the size of the economy.

With a side of this:

Krugman is complaining about cooked numbers? Seriously? Krugman. In a hyper-partisan column space he is complaining about others who interpret data to meet their own political ends? Really?

This:

Krugman, if gov’t can create jobs so well, then why not just have the government employ everyone?

And this:

The number of governmnet jobs and percentage of union labor in public unions HAVE both been on the rise. Heritage and Cato have documented it well.

Finally, dessert:

Krugman has been talking like this for the past 18 months, its the same thing over and over again: we just didn’t spend enough. Japan tried that 10 times with 10 different stimulus packages under the same logic—and they still got a lost decade.

Keep up with all of Randazzo's thoughts over at his blog.