I'm guessing that Paul Krugman and David Brooks don't hang out that much together. So when both turn up on the New York Times op-ed page this morning with columns calling for massive government spending, I'm assuming they came to their conclusions independently. My working hypothesis: if Krugman and Brooks agree on something this important, they must be wrong.
[W]hat the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.
Let’s hope, then, that Congress gets to work on a package to rescue the economy as soon as the election is behind us.
In times like these, the best a sensible leader can do is to take the short-term panic and channel it into a program that is good on its own merits even if it does nothing to stimulate the economy over the next year. That’s why I’m hoping the next president takes the general resolve to spend gobs of money, and channels it into a National Mobility Project, a long-term investment in the country’s infrastructure . . . A major infrastructure initiative would create jobs for the less-educated workers who have been hit hardest by the transition to an information economy. It would allow the U.S. to return to the fundamentals.
So Krugman wants the feds to spend because he thinks it will stimulate the economy, while Brooks urges similar action while admitting it might not work. But both share the same bottom line: our betters in DC should spend, as Brooks puts it in a rush of colloquialism, "gobs of money."
This is of course classic Keynesian economics, and as such, subject to the classic critique thereof. Washington can't find the money it would spend under a tree somewhere. Ultimately, public spending takes dollars from the private sector, and substitutes the judgment of politicians for that of the market. In doing so, it by definition allocates capital inefficiently. Sure, some jobs and some stimulus might be created in the short run. And yes, I know that Keynes said that in the long run we're all dead. But in a long run that wouldn't be so long off, such misapplied spending would ultimately produce less economic activity and fewer jobs than would the market, left to its own devices.
Between their shared scorn for Sarah Palin, and now their similar nostrums for the economy, this could be the beginning of a beautiful friendship between Paul and David. But that doesn't mean we should pay the price as they stroll off into the gathering gloom.