Why budgetary hard times are going to be much harder than you think

One of the very few economists worth reading. Image by Getty Images via Daylife

The always-excellent Paul Krugman of the NY Times and the Swedish-Bank-Prize-That-is-Often-Wrongly-Described-as-the-Nobel-Prize-in-Economics Fame describes, at the federal level, exactly what is happening in Oregon and Salem: people urging cuts in government based on a fantasy about what government actually is and does.

Fiscal Fantasies

. . . The basic picture of the federal government you should have in mind is that it’s essentially a huge insurance company with an army; Social Security, Medicare, Medicaid — all of which spend the great bulk of their funds on making payments, not on administration — plus defense are the big items. Salaries aren’t.

But the Kudlow picture is nonetheless a key part of conservative imagery; the idea of vast rooms full of government employees doing nothing productive is central to their vision of painless spending cuts. The fact that it’s not remotely true is irrelevant; they want it to be true, and that’s enough.

P.S. Krugman has a long piece in the NY Times Magazine about greening the economy. Haven't read it yet but it's here, and he's one of the few growth-oriented economists who has the intellectual honesty to confront the contradictions between a sustainable planet and our currently dominant incomplete capitalism (that ignores environmental capital and focuses only on cash flow, not net worth).