Paul Krugman is angry today, Ideology and Investment. He is never better than when he is angry. I think it is just that one so rarely hears a major commentator speak the truth about politics. There is so much mincing of words. And that is especially true when it comes partisan issues where no one can ever criticize one side without adding, “On the other hand…” And this is a very big problem when one of the two major political parties acts like an extremist third party where purity to their extremist ideology is all that matters. The Peace and Freedom Party is an extreme group on the left, but they are still more reasonable than the modern Republican Party. Yet still all mainstream pundits are supposed to pretend that the Republicans are no more extreme than the moderate and nonthreatening Democrats. Krugman is one of the few big name people who will actually admit that this isn’t the case.
His column is about something that readers here will be very familiar with: government investment. There is currently far too much savings and too little demand for it. So corporations are sitting on trillions of dollars. This isn’t supposed to be the case according to classical economics, right? The corporations would have to invest it. But they aren’t. Instead, they are using that money to buy back publicly traded stock to goose their stock prices. Bonuses for top level management and layoffs for workers. Hooray! Ain’t capitalism grand when you are on top?!
The government ought to be taking all that excess savings to invest in roads, bridges, the electrical grid, whatever. Currently, the federal government can borrow money at a real rate of 0.38%. But through most of 2012 and 2013, it could borrow money at negative real interest rates. You heard that right: people were paying the federal government to hold onto their money for a decade. Did we use this as an excuse to invest? Of course not! And who is to blame? Well, you already know unless you are a mainstream pundit. But Paul Krugman knows:
Reading that earlier felt like a hug from mom. I understand political realities. The Republicans have been shockingly good at getting people to vote against their economic interests and vote based upon fear and resentment. But that doesn’t mean we have to pretend that the Republican Party is acting reasonably. We also know, for example, that if a Republican were in the White House, they wouldn’t give a thought to the debt and they would be doing their normal thing (Tax cuts for the rich!) to stimulate the economy. And along with that would doubtless be infrastructure spending. And this only makes it worse. It means that not only is the Republican Party’s extreme policy hurting the country, it is an intentional and disingenuous tactic meant to give them more power.
Let’s think about the “dysfunction” claim. That implies that there is some kind of deal that the Republicans would take. For example, the Republicans might take cuts to Social Security (through chained-CPI) in exchange for infrastructure spending. But we know they wouldn’t. They have been offered similar deals and they’ve run for the hills. This is the Heritage Uncertainty Principle writ large. Every idea that Republicans have only exists as long as they are not agreed to by the Democrats. The moment it becomes a political reality, the Republicans run for the hills.
There is no “Washington dysfunction”; it is “Republican dysfunction.”