Krugman says we should “write off anyone who asserts that it’s always better to cut taxes than to increase government spending.” I agree. I don’t know of any critics who are asserting that, but there must be some out there. Krugman dismisses them by arguing that air traffic control is useful. Again, I agree.
He then proceeds: “Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts.” For those who are not well-versed in the rules of classical rhetoric, the phrase “it’s clear that…” means “I am about to make an assertion that I strongly believe but would be very hard to prove.” In fact, there is a raging debate about whether tax cuts or public spending do more to revive a troubled economy.
It is also misleading to imply that one must favor either tax cuts or the proposed spending projects right now. I don’t believe that either holds the key to economic recovery. At the heart of our current crisis lie a downward spiral in the housing sector and a near collapse of our financial sector. There are plans that address these root causes, but they are likely to be expensive. Without such action, a fiscal boost is unlikely to save the day. With such action, a fiscal boost (beyond what is already in the works) may be unnecessary and unaffordable.