Monday, August 09, 2010

Krugman Off-Target On Critique of Spending Cuts

While Paul Krugman won a Nobel Prize for Economics for work done long ago, his current stint as an op-ed writer for the New York Times allows him to ignore all too many facts and observations that would prevent him from looking silly.

He's busy complaining that cities and localities around the country are busy ripping up streets, turning out lights, and cutting back on spending in the midst of a deep recession and that it is adding to the very depth of the recession. That much is true, but he associates the cuts to anti-government sentiment going back 30 years.

That's where he's wrong.

People aren't adverse to state spending. They're adverse to idiotic state spending on programs of dubious value that simply don't do what they're supposed to do. People want roads maintained and infrastructure improvements, but big-government types start throwing all kinds of social programs into the mix, that end up costing far more and draining coffers of the localities, states, and the federal government leaving the infrastructure maintenance costs to be made up through still higher taxes and spending.

States can't afford the higher costs.
Localities can't afford the higher costs.

Yet, Krugman is there demanding still more spending and more taxes to go along with the spending binge.
And the federal government, which can sell inflation-protected long-term bonds at an interest rate of only 1.04 percent, isn’t cash-strapped at all. It could and should be offering aid to local governments, to protect the future of our infrastructure and our children.

But Washington is providing only a trickle of help, and even that grudgingly. We must place priority on reducing the deficit, say Republicans and “centrist” Democrats. And then, virtually in the next breath, they declare that we must preserve tax cuts for the very affluent, at a budget cost of $700 billion over the next decade.

In effect, a large part of our political class is showing its priorities: given the choice between asking the richest 2 percent or so of Americans to go back to paying the tax rates they paid during the Clinton-era boom, or allowing the nation’s foundations to crumble — literally in the case of roads, figuratively in the case of education — they’re choosing the latter.

It’s a disastrous choice in both the short run and the long run.

In the short run, those state and local cutbacks are a major drag on the economy, perpetuating devastatingly high unemployment.
He's essentially calling for the elimination of the Bush tax cuts on the rich - a group that he doesn't define, but which would affect the middle class all to sustain a bloated government workforce that is weighing down the private sector that actually creates the revenues on which the economy is sustained.

He thinks that the tax hikes will somehow keep the lights lit and roads paved, ignoring that the states failed to maintain the roads and keep the bridges in workable conditions prior to the Bush tax cuts that became effective in 2001 and 2003. Krugman ignores that infrastructure upkeep isn't sexy but new bridges and structures get funding all while localities struggle to maintain what they've already built.

Study after study has shown that municipalities have ignored and underfunded basic maintenance of infrastructure for generations.

You don't get states where a third of all bridges are structurally deficient or obsolete in a single year. California has 66% of its roads in poor of mediocre condition. That takes years of failing to maintain what has already been built. 42% of New York’s bridges are structurally deficient or functionally obsolete, despite the fact that the state has one of the largest annual budgets in the country ($136.5 billion for the 2010-2011 fiscal year).

All that's coming back to bite the country in a big way and the nation has to deal with a prioritization of limited resources - namely a lack of money. States can't spend what they don't have. Cities can't spend what they don't have, and yet everyone from the federal government on down has done just that - spending beyond their means on things that they can't afford.

CNN has a major report on the state of the power distribution grid and it is indeed quite troubling. The nation has seen a troubling increasing in blackouts and brownouts, and that trend is going to continue, regardless of conservation efforts because new technologies are demanding more power at more times during the day (and no one has been able to adequately explain how electric powered vehicles are supposed to be charged with a power grid that can't adequately handle the demand - or how it is cleaner for coal powered plants to provide that power over the gas-powered engines that dominate the roads today). Throw in NIMBY and a refusal to build new cleaner alternative energy generation facilities of any kind - but especially nuclear power plants that can provide the kind of power necessary to retire older coal powered plants with a far smaller footprint, and we've got a mess on our hands.

Much of the focus is on smart-grid technologies, which don't exactly increase the power available, but rather limit customers access to power so as to keep the juice flowing to more people over time. As demand increases, the capacity to provide the power where it is needed most continues to lag, and the power distribution system is constrained because people simply do not want the power lines in their backyards or have power plants built where it might impede their views. And in the end, the NIMBY types have repeatedly won the battle, but the nation is losing the war on upgrading its key infrastructure.

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