Paul Krugman was a guest on ABC’s “This Week” on Sunday as part of the roundtable with conservative columnist George Will and the senior campaign managers for both the Barack Obama and Mitt Romney campaigns. He had some strong words on what he’s seen as the largest-scale government austerity in 60 years.
Krugman argued that in reality, the Ronald Reagan practiced Keynesian economics more than the liberal Barack Obama. He added that although Obama has been “constrained” by a “do-nothing” Congress, we’ve seen some of the biggest cuts in government spending since the demobilization of the Korean War.
“If you actually look at the actual track record of government spending [and] government employment, Reagan is the Keynesian and Obama — mostly because of political constraints, although a little bit of lack of conviction on the part of his own people — has been the anti-Keynesian,” Krugman said. “He’s been the one who’s been doing what Republicans say is the right answer.”
Krugman outlined in a March 4 column how government employment in the Reagan recovery had grown by 3.1 per cent by this stage — compared with Obama, who has actually shrunk government employment by 2.7 per cent. He estimated that if Obama’s growth in government employment had mirrored Reagan’s, there would be 1.3 million more government jobs.
Krugman followed this up with a post later in the afternoon, complete with a chart from the FRED.
The first line shows the total rise in government spending. The second removes unemployment benefits, which are expected to rise in a recession. Breaking it down further, Krugman surmises there’s about a 1 percentage point of GDP increase.
Overall, then, government’s role has not increased. The whole Obama/socialist thing never happened.
And here’s the thing: government’s role should have increased, at least for now. We still have a private sector in the throes of deleveraging, which means that this is a time for the government — which can borrow at negative real interest rates! — to be spending more. Instead, the entire brief increase in government’s role during 2009-2010 has now been unwound, with more cuts to come.
“We’re actually practicing government austerity on a scale that we haven’t seen in 60 years,” Krugman said on “This Week. “… In effect, we’ve already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.”
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