Krugman on Taxes

Ace chortles that Paul Krugman now opposes increasing taxes. But to interpret this as "going off the reservation" would require the Democrats to be actively seeking those tax increases, which they are most assuredly not. Their goal is to establish the now-doubled Federal budget as the new baseline and then let Republicans take the political heat for insisting that it be actually paid for. In the mean time, they seem perfectly content to drown our country in red ink.

Krugman's thumbnail sketch of fiscal policy in the 1930s isn't necessarily wrong, but he misses the lesson. It is true that FDR's decision to balance the budget after the 1936 election drove the unemployment rate back up to 20%. But the lesson from this is that FDR's New Deal deficit spending had utterly failed to actually "solve" the Depression, by which I mean it failed to grow the real economy to the point that it could actually support government expenditures at full employment. Obama's program will similarly fail, and at the end of it we'll be saddled with 3x the debt we had a year ago.