The Power of Bad Analogies

Paul Krugman offers the most concise explanation of why the national budget is not like our household budgets. As long as bad politics continue to trump sound economics, we are not going to see a full economic recovery.


  1. Unemployment compensation is government spending but was enacted to help business by putting money into the hands of consumers. The incentive was not really to help the unemployed but to ‘stimulate’ the economy.

    Government spending does create jobs by enabling demand. That’s not to say we should spend with abandon, but government spending does save businesses and jobs when nothing else is working very well.

    With the many tax breaks Indiana has given to corporations the last few years – including elimination of the huge inventory tax
    and then the constitutional amendment capping property taxes – both of which shifted taxes from businesses to individuals – Indiana should have zero unemployment. Unfortunately even the Indianapolis STAR reports we’ve had a net loss of jobs during this tax-cutting era.

    Cutting taxes has enabled some businesses to use their tax cuts to load the trucks shipping equipment and jobs to Mexico. Since that strategy has not worked, perhaps we should try another.

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