Last month, Nobel Laureate economist and New York Times columnist Paul Krugman seriously suggested that what we need to stimulate the economy is an outside threat. Referring to the jobs created during World War II, he wrote, "If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better [off]."
Well Mr. Krugman, a space alien did attack. Her name was Irene, and she is still causing havoc in the northeastern states. Billions of dollars were spent preparing for her arrival, and billions more are still being spent cleaning up her mess. Billions more were lost in opportunity costs as people stayed home that weekend, reducing the incomes of restaurant owners, taxi drivers, and other establishments owned by hardworking business people.
As it turned out, Irene didn't attack where she was expected, and many of the billions spent on sandbagging shorelines, boarding up windows, and evacuating neighborhoods were wasted. But according to Krugman, that's a good thing. We enjoyed all that economic stimulus, without enduring any of the damage. Win-win, right?
How is the alien attack working out for you, Mr. Krugman? Have you seen a big turnaround in the economy? Will you be cheering again this winter, when municipal leaders have no money left in their budgets for snow removal and pothole repair? But you don't have to wait until winter to see the results of such faulty thinking. Ask the family who spent $1,000 on gas, hotels, plywood, and batteries when they evacuated for the weekend. Because of that expenditure, they won't be able to spend that $1,000 on school clothes, a new computer, a real vacation, or even debt reduction.
I doubt that Keynesian Krugman is backing down any time soon. In fact, if an alien attack can produce so much economic stimulation, just think what a pandemic disease could accomplish! According to some cheerful historians, the bubonic plague was the best thing that happened in the Middle Ages. When the plague killed off an estimated half of the workers in Europe, supply and demand forced wages up, creating an economic turnaround that funded the continued growth of the second half of the last millennium. Wow! We ought to build a monument to those heroic fleas.
In fact, forget Obama's mantra, "Pass the Jobs Bill." Let's just pass the germs.