How did we end up in this mess? Is it a failure of capitalism produced by irresponsible deregulation? Did the unbridled market trip because blind forces guided it? Or did its benevolent overseers push the economy over a banana peel? Whatever the cause, Dr. Krugman has the cure. His 75-year-old snake oil helped our grandfathers through the Great Depression and built our fathers a Great Society. Active ingredients? The aspiring spin-doctor behind "the Obama people" offers Spending. Manufacturer? Free recovery from Uncle Sam "by issuing lots of debt"! Side effects? None-the ad says there's "no trade-off" between the now and the morrow. Directions? Take unlimited amounts of the potion for as long as it takes to reach a bubble-free Utopia.
"Blessed are the young," said Herbert Hoover, "for they shall inherit the national debt." Cunningly misusing two historical examples, Krugman glorifies the merits of Keynesian economics. FDR in 1937 and the Japanese 60 years later made identical mistakes. Both governments were bullied by "deficit hawks" to balance their budgets. The fact that both economies deteriorated soon thereafter is used as an illustration how "tight fiscal policy when the economy is depressed actually reduces private investment." So far so good. What is not clear from these or any other historical examples is that more deficit spending ever has been among the causes of higher living standards for the next generation.
Central planning of investment may appeal to those who value safety and equality above responsibility and freedom, but it produces inferior results in innovation. Ayn Rand observed, "America's abundance was not created by public sacrifices to the common good, but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes." It is time to learn the fundamental lesson of the last two centuries. Ordinary working people have done much better where entrepreneurs were allowed to take chances and get messy, to make mistakes and learn from failures, to succeed and reap the rewards of serving the consumers-all in the highly organized chaos of the market.