In his op-ed column yesterday, Professor Krugman expressed his disappointment that President Obama, in his Inaugural Address, did not clearly address solutions for the economic collapse in the U.S. and the world. Dr. Krugman lamented that President Obama offered nothing more than conventional political boilerplate and platitudes about making tough decisions.
But then in a leap of faith that defies comprehension, the Nobel-prize winning economist assured us that all is well:
Still, a speech is just a speech. The members of Mr. Obama’s economic team certainly understand the extraordinary nature of the mess we’re in. So the tone of Tuesday’s address may signify nothing about the Obama administration’s future policy.
Oh really? What if the President's economic team is as clueless as they seem? Wasn't this the same team that told us the economic stimulus package would be "timely, targeted and temporary?"
But then they gave us a package that is none of the above and is wholly inadequate in size and scope as well. Professor Krugman knows this and has said the same thing on several occasions. He also knows well what John Maynard Keynes said decades ago about similar problems and their solutions during the Great Depression:
When President Roosevelt’s substantial loan expenditure began, stocks (inventories) of all kinds — and particularly of agricultural products — still stood at a very high level. The "New Deal" partly consisted in a strenuous attempt to reduce these stocks (inventories) — by curtailment of current output and in all sorts of ways. The reduction of stocks (inventories) to a normal level was a necessary process — a phase which had to be endured. But so long as it lasted, namely, about two years, it constituted a substantial offset to the loan expenditure which was being incurred in other directions. Only when it had been completed was the way prepared for substantial recovery.
The General Theory of Employment, Interest and Money, Chap. 22.
Clearly, the massive gluts of houses and automobiles on the market are exacerbating, if not the directly causing, the economic collapse we are experiencing. Yet President Obama's economic team has proposed NOTHING to clear those gluts from the market to prepare the way for substantial recovery.
But more critically, why is Professor Krugman so reticent about what the stimulus package should contain? Instead of solutions, he gives us platitudes of his own:
The economic crisis grows worse, and harder to resolve, with each passing week. If we don’t get drastic action soon, we may find ourselves stuck in the muddle for a very long time.
What is the drastic action we need and why won't the Professor tell us? Apparently, as occurred during the Great Depression, the experts, save J.M. Keynes, all suffered delusional thinking.