Thursday, January 15, 2009

You're so close

Paul Krugman is generally one of the good guys, and I assume his Nobel Prize is well-deserved, but even he can miss things once in a while. In this piece in the NYT last month, he talks about the reluctance of Germany to buy into the generally-accepted European rescue plan. Krugman feels that the lack of unanimity will destroy any attempt to solve the problem. And there's this:
To understand the problem, think of what would happen if, say, New Jersey were to attempt to boost its economy through tax cuts or public works, without this state-level stimulus being part of a nationwide program. Clearly, much of the stimulus would “leak” away to neighboring states, so that New Jersey would end up with all of the debt while other states got many if not most of the jobs.
Now, take the preceding paragraph, replace "New Jersey" with "the United States," and replace "state" with "country," and you get a perfect description of what will happen to our stimulus. All this talk we hear about new jobs in energy or in medical IT is just that, talk, because of the "leaking" to which Krugman refers. Obama may think that some miniscule tax credit will induce companies to keep those stimulus-generated jobs from leaving, and that is a remarkably naive belief for such a smart guy.

What amazes me is that Krugman doesn't see it, that he is as blind to the real implications of the global economy as is everyone else.

For more about this, look at a Carrie post from a couple of days ago. There's a pretty lively discussion there about the magical IT jobs that will come from Obama's desire to computerize medical records.

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