Paul Krugman still clings to the proven bankrupt Keynesian doctrine that a nation can spend itself to prosperity.  

There's an old adage that tells us that stupidity will rise to its own level of incompetence. Having said that, one has to wonder if there's a bigger fool than Dr. Paul Krugman, who teaches Economics at Princeton University in New Jersey. In addition to his teaching duties, Dr. Krugman writes a regular column for the New York Times and has won a Nobel in Economics. The problem with all of this is that Dr. Krugman doggedly clings to the theories of John Maynard Keynes, long ago debunked as so much rot and nonsense.

Dr. Krugman's column of July 1, 2010 was written with the intent of shooting down the so-called "myths of austerity." On the way to his pretzel logic, Dr. Krugman bypasses several key points that need to be addressed. First and foremost is that there no country in human history that can rightfully boast of being pulled from the depths of economic despair by having had its government spend its way out of the doldrums. The laws of economics are no less valid and ironclad than the laws of physics. Just as no human being can jump off the roof of a house and fly, no human can spend what they don't have without incurring eventual damage.

Governments are no different. Any government that continues to ignore reality by spending more than what is taken in is merely kicking a giant snowball down a steep hill and hoping to eventually have a way to stop it before any damage can occur to anything in the pathway of that snowball. To believers of Keynesian theory, recessions come about via a sudden collapse in spending — by consumers and by investors. Therefore, government must be there to spend when they won't. To this sort of thinking, government is the quintessential solution because of its continuous access to endless steams of cash via taxation and loans. Because of that access, they further theorize, governments can "stimulate" slumping economies by spending cash it doesn't necessarily have or need to immediately possess. Since Keynesians constantly seek inflationary credit expansion, they avoid talking about the root cause of every recession — that is the previous excesses of inflationary bank credit, stimulated and controlled by the central bank, which, in the U.S., is the Federal Reserve System.

Franklin Delano Roosevelt is one of the great heroes to Keynesians. They champion FDR as one who ended the "Great Depression" during the 1930s. Yet. FDR's Treasury Secretary, Henry Morgenthau, wrote in his diary "We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!" Yet, Roosevelt was able to somehow parlay his own gross financial ignorance into getting re-elected two more times. Not only that, he established a fierce loyalty among his supporters that remains to this day. Roosevelt's New Deal prolonged the Great Depression; it did not end it. World War II came along, halting the policies of the New Deal, which in turn, stopped the Great Depression in its tracks. Ignored by history is the fact that a deeper and more powerful recession occurred in 1920 and was over by 1922. Why so short? Easy. There was no government meddling involved. I leave it to the readers to do their own research to learn for themselves.

Dr. Krugman has seen the dismal returns of the current government stimulus. His response? The stimulus wasn't nearly large enough to do the job for which it was intended. Let's review and reinforce an earlier point. To wit: sustained deficit spending has never, ever stimulated aggregate demand. To illustrate this principle, let's take a look at an economy that was once the great envy of nearly everyone in America. It was during the 1980s that Japan shot past the United States in terms of production of quality consumer goods, led its the automobile industry. After reaching its peak in 1989, the Japanese economic bubble burst in 1991. A lengthy series of stimulus packages were trotted out and failed miserably. Eventually, interest rates were also reduced, again achieving far less than desirable results. Between 1993 and 2005, Japan's budget deficit averaged 6.3 percent per year, and the government's gross debt rose from 67.6 percent to more than 175 percent of GDP. Nonetheless, economic growth averaged an anemic 1.1 percent during that period; the worst performance in the industrialized world.

Dr. Krugman is of the belief that the recent Obama stimulus package has no bearing on America's long run budgetary problems and how we will deal with them. This notion borders on ignominy. Here's a little more fuel to spill on the fire. By next year, the nation's total federal debt is expected to be more than $14 trillion – the equivalent of $47,000 for every US resident. China currently holds $920 billion in U.S. IOU's. This is a double whammy. China, a Communist nation, is (by their own admission) a sworn enemy of the United States. Hasn't anybody in the Obama administration realized that creditors can dictate nearly anything they desire to debtors? Dr. Krugman wrote in his column on July 1st "investors evidently see it [the debt] as their safest bet in a stumbling economy."

Oh, really?!? Is this why Secretary of State Hillary Clinton had to travel to China this past February to beg the Chinese to keep financing our debt? What has happened since then? First and foremost, the hemorrhaging of jobs in this country has continued nearly unabated. Since February 2009 the U.S. economy has lost a net 2.35 million jobs. Supposedly, the unemployment rate would peak at 9 percent without the stimulus and that with the stimulus the rate would stay at 8 percent or below. That hasn't happened. Today there are 700,000 fewer jobs than if we'd have done nothing at all. There is also the matter of moral hazard; the tendency of insurance against calamity by rewarding behavior that produces calamity. In other words, the more money that is thrown at anything will produce more of that situation.

Erskine Bowles, White House chief of staff under President Bill Clinton, recently said that there is a coming fiscal calamity that is staring the country in the face. It will be unlike the current economic crisis, which was largely unforeseen before it hit in fall 2008. "This one is as clear as a bell," he said. "This debt is like a cancer. By 2020 the United States will be spending $2 trillion on just the interest of the national debt", said Bowles, "if the United States makes no changes … We can't grow our way out of this." (as reported in the Washington Post).

"Unsustainable" is an ugly buzzword that recently entered political discourse, coming authoritatively from Congressional Budget Office (CBO) Director Douglas Elmendorf. Unsustainability is the operative moniker for Barack Obama's massive deficit spending, which Elmendorf said "cannot be solved through minor tinkering." Greece is currently teetering on the brink of financial collapse. At the end of 2009, Greece's public debt was equivalent to 114 percent of its gross domestic product; that's on top of the 3 percent of GDP that the European Union contributes as direct aid each year. Greece has had five separate instances of default or rescheduling of its debt since 1826; Germany, eight; Spain, 13 and Portugal, six. Yet, America's current financial woes exceed those of Greece, according to the July 27th edition of Financial Times.

I honestly hate to cast aspersions at someone so accomplished in life as Dr. Krugman. However, I truly believe that my 16 year-old Turkish Van/Siamese male house cat understands capitalism and economics better than Dr. Krugman does. Then again, the cat was not educated at Princeton; a definite plus for my best friend.