Paul Krugman Keeps It Simple For Stupid People

I’m going to borrow a phrase from Paul Krugman’s excellent book. “End This Depression Now!”: “Your spending is my income and my spending is your income.”

Yes, it’s that simple.  So when John Boehner claims “We’re broke” and insists on cutting federal government spending, when President Obama buys into this, when the banks refuse to lend out money, when  the Irish and British governments but themselves on an austerity diet, when Angela Merkel of Germany puts the monetary  screws to Greece, Italy, Spain, Portugal, etc., they’re all missing that obvious, simple point.  In order for people to spend money, they have to have money.

So with this simple logic, how illogical is it for Boehner and the Republicans to insist on cutting unemployment benefits, food stamps, cash aid, Social Security, government spending on infrastructure repair, public works projects, light rail and high speed rail projects, and for Republican governors to refuse to accept federal funds for these projects? The answer is incredibly as well as stupid as well as venal.  Boehner’s and the Republicans’ only objective in cutting spending (and the deficit) is to keep unemployment high and GDP low so that Obama is held to a mere four years in office.  Yes, it’s that simple.

In any recession or all-out depression, the only way out is to put money into people’s pockets so they can go out spending—and saving—thus infusing cash into the economic system, which is like filling up a car’s gas tank with fuel so that it can run at top speed for another several hundred miles (or charging up your Chevy Volt to get another 50 miles down the road).  The only reason why the 2009 $787 billion Obama stimulus package was not nearly as successful as it would have been is that it was substantially lower  than the $1.8 trillion that his former chairperson of the Council of Economic Advisors Christine Romer insisted that it should have been—at a minimum.  Think of it this way: if someone hands you $50 or $150, which amount will enable you to buy more stuff?

It’s in vogue for right wing economists to denigrate John Maynard Keynes. That’s because his theories work and theirs don’t, and those right wing economists aren’t working for people, they’re working for corporations who are people too, my friend. They’re working for the Kochs, for the Murdochs, for the Adelsons, for any filthy lucre-rich old white guys you’ve got.

“Your spending is my income and my spending is your income.”  The simple, basic truths in life have a beautiful symmetry to them.  Boehner and Merkel can probably not be taught that the less money government infuses into its economic system, the less money people will plow back into it.  This notion of austerity totally forgets the concept of profits, which is what helps a market grow.  You grow or make something for $5 and sell it for $10, you’ve got $5 more to re-invest in your business or perhaps you take that profit and spend it at someone else’s business, which means they need to buy more product and hire more people to sell it, and more people are hired to deliver the products and more money flows on down the line. And this is what Obama was saying if you look at his complete, in context statement about small businesses not growing by themselves. There’s a whole bunch of interdependencies going on, and infrastructure, security, utilities, and what I’ve already mentioned are all part of it.

I know that people who watch and listen to Fox will never get economic theory but this is a simplified as I can make it. The Republicans and right wing economists, heads of state like Merkel all want to protect a small, wealthy class by keeping as large a class of other people poor.  Poor people do what they’re told so that they don’t lose what little they have.  Poor people look up to wealthy people because they have to be touched by the hand of God to have become so rich. Poor people worship rich people, until that worship turns to envy, which turns to resentment, which turns to anger, which turns to revolution, which results in the overthrow of the ruling class and the redistribution of wealth. Well, mostly anyway.

But we don’t need to take it as far as all that.  Just repeat the simple, friendly mantra to your Fox fan friends and maybe they’ll get it along with all of you: “Your spending is my income and my spending is your income.” Thank you, Paul Krugman.

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4 thoughts on “Paul Krugman Keeps It Simple For Stupid People

  1. marc says:

    if it’s all about putting money in people’s pockets, wouldn’t it be easier, and fairer, to simply let people keep more of their own money?

    • farlefty says:

      Depends on which “people” you’re talking about. It’s a proven fact, proven among liberals and other thinking people anyway, that when corporate and upper income marginal tax rates were higher, the economy greatly improved. But if you’re talking letting middle class people keep more of their own money, then the answer to your question is yes.

  2. marc says:

    i’d like your source for the statement “it’s a proven fact…that when corporate and upper income marginal tax rates were higher, the economy greatly improved.”

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