Paul Krugman has an insanely stupid article in the New York Times today that tries to draw a correlation between the success of Apple's iphone and government spending. Krugman proposes that if new iphones can convince consumers to part ways with their hard-earned money, thus giving the economy a small boost, then think of what more money spent on teachers and bridges will do! Seriously. I'm not making this stupid argument up. It's a Krugman original.
Nevermind that government money is not behind the success of Apple's iphone. If it were, the gadget would cost four times as much and work half as well, but don't worry because there would be a government subsidy to help you purchase one if you made below a certain income. In other words, shares of Apple would be worth about the same as shares of GM.
What Keynesians like Krugman fail to realize in all their economic models is the difference betweeen money spent and money well spent. In their world all spending is equal, or if anything government spending is given added importance. This is more a mask for Krugman's statist tendencies than an argument for Keynesian economics.
Because Apple is a private company, it goes wihout saying that their success is profit-driven, not politically-driven. That means innovating their products to meet the demands of the consumer. Efficiency is rewarded. If they fail to innovate, they lose customers. If they succeed, demand increases and they hire more workers in a desire to increase market share. This is why free enterprise is such a successful economic model.
Krugman argues for increased spending for politically-driven interests. This makes them grossly inefficient. There is no risk of failure so long as the government is providing the backing, meaning there is no incentive to innovate. Increased government spending in this case doesn't meet the demands of the consumer, it ignores the consumer to meet the demands of the special interests. This is the opposite of Apple's model.
Take into account all the debt that comes with more government spending, and what you are creating isn't a robust economy, it's an economy that will ultimately crash due to myopic splurging.
Krugman quotes Keynes, saying "we are all dead in the long run" so better borrow and spend today. Yet what we leave behind matters. Do we leave behind successful and growing businesses free to hire workers and invest in products that can change humanity? Or is our legacy that of failed government programs that cost so much businesses like Apple are burdened with higher taxes and regulations until they can no longer operate for society's benefit?
America's economy isn't failing because we lack teachers and bridges. It's failing because we have invested so much in government that political interests impede us from holding anyone accountable anymore. Instead, we get more teachers educating dumber students, green energy companies that never produce a kilowatt of energy, and bridges to nowhere. All of which Krugman argues are somehow great for our economy.
Some days I think President Obama's Nobel Prize was more deserved than Krugman's.