In a piece in the New York Times, columnist and Nobel Prize laureate, Paul Krugman continues to seek out support for his latest crusade: encouraging governments around the world to spend more during poor economic conditions and tighten their belts when times are better. Krugman’s one-sided spending proclamations, alone, will not help the U.S. or any other country dig its way out of recession without severe long-term consequences. And, to think there will be belt tightening during good times is almost humorous coming from a man of Krugman’s letters.
I agree that the U.S. government needs to stimulate the economy and create new jobs. Obviously, this is what is what is needed for a return prosperity. But, this measure, by itself, will increase national debt and may prove to be unaffordable if rates increase in the near future. Not once does Krugman recommend a simultaneous effort to cut entitlements, an essential part of any long-term recovery strategy.
The European Union is suffering through an even greater economic malaise than the U.S. The leaders throughout the continent are debating furiously about the right elixir to stabilize the situation. The northern Europeans led by Germany are demanding that the countries under duress, specifically Greece, Spain and Italy, adopt austerity.
The latter are in popular upheaval as austerity threatens to dampen the lifestyles of their citizens. Ironically, it is the masses that have exacerbated conditions. Unions have taken advantage of weak governments and, for all intents and purposes, have bankrupted a number of European countries. Debt has always been the answer as certain nations borrow assuming there is no limit to their credit availability.
Europe is a union with a common currency and must address economic issues as one entity. The strongest in the union are balking when the weakest come begging for support. Germany has indicated it will help its weaker sisters, but only if they stop spending with abandon and impose stringent cost cutting measures. The response throughout the European Union is to change the governments in those countries that were willing to accommodate German demands. Socialists are gaining control and demanding financial support to feed the masses' insatiable appetite. I am afraid this is a recipe for disaster, just as are Krugman’s proposals.
Contrary to liberal doctrine, fiscal conservatives in this country are not assaulting poorer Americans when they propose cutting entitlements. As an aside, there are no “real” entitlements in the U.S. with the exception of Social Security, into which we all pay. Reducing entitlements, unfair entitlements, unproductive entitlements that make people totally dependent on the state are critical and our only salvation.
Austerity and wise spending are the answers; they should be instituted hand in hand. National debt must be paid back as it continues to generate higher and higher interest payments every day. When interest rate increase in the coming years, the burden of our national debt will smother future economic gains. All entitlement programs must be streamlined. Unproductive programs must be ended. There will be cries of injustice, but they are unwarranted.
Simultaneously, with these savings, job creation must begin. This aspect of the process will take longer to achieve than spending cuts. However, we can effectively stop the bleeding and even begin to amortize debt. As an accommodation, certain tax benefits such as capital gains and tax free health plans should be tempered, if not eliminated.
Adding to the national debt is the worst thing we can do for our economy in the long run. Further decreases in our national credit rating along with fewer sources of new funding will ultimately hurt our country.
Mr. Krugman is not going to give up his proposed death march to national bankruptcy. You would think that he could do the arithmetic and see that deficits will increase with spending without offsetting cuts. But, he is blinded by his misguided and naive efforts to create a more populist society in America.