With a recession nigh or here, we should expect the demogogues and the government pundits to start sounding off. But the Don Boudreauxs of the world will be there to check their reasoning:
#1 Paul Krugman repeats the refrain that the economy for ordinary Americans is a shambles ("Crisis of Confidence," April 14). I’m doubtful, but will here assume that he’s correct about this matter. What conclusion are we to draw?
Rather than conclude (as Mr. Krugman does) that this problem reflects a need for higher taxes and greater government control over the economy, why not conclude the opposite? At no time since Mr. Krugman’s imagined Golden Age of the 1970s has Uncle Sam’s budget been severely reduced. Indeed, inflation-adjusted spending on programs such as Social Security, Medicare, and Medicaid have consistently risen since then. During the past three decades, some welfare programs have been scaled back, while others have been expanded and even newly created. We now have, as we did not prior to the 1970s, cabinet-level departments to regulate energy, education, veterans affairs, and homeland security. Some regulations have been repealed, while others have been created at both the state and national levels.
Weren’t FDR’s New Deal and LBJ’s Great Society – most of which programs remain with us today – supposed to make life better for ordinary Americans? If Mr. Krugman’s factual claim about the state of the economy is correct, these programs clearly have failed.
#2 Arguing that today’s economy is "considerably worse" than official data suggests, Paul Krugman notes that "The official unemployment rate may be relatively low – but the percentage of prime-working-age Americans without jobs, which isn’t the same thing, is historically high" ("Crisis of Confidence," April 14).
Sounds awful, for Mr. Krugman here implies that Americans between the ages of 25 and 54 have more difficulty finding jobs today than they did even during the Great Depression. But this implication fails the smell test. There are many reasons why some prime-working-age people are without jobs – reasons having nothing to do with being unemployed. Retirees are without jobs; many full-time students are without jobs; stay-at-home parents are without jobs. Contrary to Mr. Krugman’s suggestion, perhaps the economy is trending so remarkably WELL, over the long run, that more and more people remain in school longer and retire earlier, a luxury much less affordable in the past."