Today liberal pundit Paul Krugman came out with a piece in the New York Times blaming income inequality in America on the financial crisis and claiming that the Republican Party is now explicitly doing the bidding of the oft-demonized 1%.
Krugman cites a pair of congressional scholars to back up him claims that Republicans are at fault for the rise of partisanship in Washington.
“They say our political dysfunction is largely because of the transformation of the Republican Party into an extremist force that is ‘dismissive of the legitimacy of its political opposition.’”
To say that the modern Republican Party is “dismissive” of the Left is absurd. If anything, Krugman is the one who is dismissive of the legitimacy of the political opposition by misrepresenting the positions of Milton Friedman and vastly overestimating his “Goldbug” enemies in the Republican Party.
“Friedman called for monetary flexibility; today, much of the G.O.P. is fanatically devoted to the gold standard,” Krugman writes.
Milton Friedman DID NOT advocate for interventionist monetary policy. Friedman actually said the Federal Reserve should target inflation rates rather than attempting to use monetary policy as the flexible tool Krugman believes it to be.
What does this mean for the non-economically inclined? All unemployment is structural, meaning it is the result of government regulations or changes in the market for labor rather than a lack of spending.
Increasing the money supply causes inflation and decreases purchasing power rather than stimulating the economy.
Likewise, Krugman vastly overstates the penetration of “Goldbugs” within the Republican Party.
While Ron Paul’s campaign has managed to outlast every other “Not Romney” candidate and his supporters make quite a bit of noise, one would be very hard pressed to find a politician whose last name isn’t “Paul” who openly advocates for a gold standard.
Krugman’s thesis is that it is income inequality, which led to our current financial crisis, but his suggestions for responses to the crisis don’t do anything to reverse that trend.
Krugman found the bailouts necessary to keep the financial system afloat, but which income bracket is the direct recipient of bailouts of financial institutions? I’ll give you a hint: it isn’t the middle class.
As government grows, it begins to wield ever-increasing influence in the market. Those who are most well off are best able to use their resources to direct this growing state to do their bidding. Thus, the powerful are able to entrench their power.
A larger government will not lead to less income inequality, but only the further entrenchment of the interests of the already powerful. Krugman, however, seems insistent that an increase in government spending is necessary to get us out of the recession, failing or refusing to see that it is the very same wealthy people he demonizes who would almost certainly be the first to get their hands on this largess.
Excess government intervention into the economy was one of the root causes of the financial crisis, and it is only by allowing Americans to pursuit their own goals rather than those of policymakers like Krugman that we will be able to create real wealth and economic growth.
