The Kroog Versus Morning In America

Paul Krugman shrilly points out the reason why St. Ronaldus got his Morning in America:  his government spent his friggin' way out of the recession.

Let’s look at real government consumption and investment spending — basically purchases of goods and services — from all levels of government during three recoveries: the current expansion, the Bush Boom (such as it was), and Morning in America. Here’s what you get:

Which one is different?

Instead under the GOP Austerians at the state level, we're not only not using state and local governments as engines of recovery like Reagan and Bush 43 did, we're actually cutting government investment and spending.  Bush 43 grew government.  Reagan completely grew government.  Obama, not so much.

But we're told that the reason why the recovery hasn't been fast enough is that we're spending too much and that only the private sector can save us.  We've been exactly doing that and it's not working.  Surprise!

Oh, and let's not pretend the current crop of GOP contenders are any better, either.

The nonpartisan Committee for a Responsible Federal Budget recently published an overview of the budget proposals of the four “major” Republican candidates and, in a separate report, examined the latest Obama budget. I am not, by the way, a big fan of the committee’s general role in our policy discourse; I think it has been pushing premature deficit reduction and diverting attention from the more immediately urgent task of reducing unemployment. But the group is honest and technically competent, so its evaluation provides a very useful reference point. 

And here’s what it tells us: According to an “intermediate debt scenario,” the budget proposals of Newt Gingrich, Rick Santorum, and Mitt Romney would all lead to much higher debt a decade from now than the proposals in the 2013 Obama budget. Ron Paul would do better, roughly matching Mr. Obama. But if you look at the details, it turns out that Mr. Paul is assuming trillions of dollars in unspecified and implausible spending cuts. So, in the end, he’s really a spendthrift, too. 

Is there any way to make the G.O.P. proposals seem fiscally responsible? Well, no — not unless you believe in magic. Sure enough, voodoo economics is making a big comeback, with Mr. Romney, in particular, asserting that his tax cuts wouldn’t actually explode the deficit because they would promote faster economic growth and this would raise revenue. 

And you might find this plausible if you spent the past two decades sleeping in a cave somewhere. If you didn’t, you probably remember that the same people now telling us what great things tax cuts would do for growth assured us that Bill Clinton’s tax increase in 1993 would lead to economic disaster, while George W. Bush’s tax cuts in 2001 would create vast prosperity. Somehow, neither of those predictions worked out. 

And yet it's axiomatic in Washington that tax cuts increase tax revenue through explosive growth, when what creates growth is investment in the economy.  Amazing.