Monday, December 29, 2008

Krugman Misses Again

Rarely do I find fault in Nobel Prize winning economist Paul Krugman, but first his silly Hawaii comment and now today he lays out what could be a well thought out argument for deficit spending during a recession minus the most important caveat: most state constitutions require a balanced budget each year, and those that don't cannot get the loans necessary to continue deficit spending.

Krugman does raise several important questions:

"And once the crisis is behind us, we should rethink the way we pay for key public services.

As a nation, we don’t believe that our fellow citizens should go without essential health care. Why, then, does a large share of funding for Medicaid come from state governments, which are forced to cut the program precisely when it’s needed most?

An educated population is a national resource. Why, then, is basic education mainly paid for by local governments, which are forced to neglect the next generation every time the economy hits a rough patch?

And why should investments in infrastructure, which will serve the nation for decades, be at the mercy of short-run fluctuations in local budgets?"
These questions should be the focus of his article. Rewriting state constitutions to allow for balanced budgets to be put off in rough economic times. The exceptions should be spelled out, ie, recessions, but this change would allow for fewer provincial Herbert Hoovers.
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