Paul Krugman's Simple -- or Is It Simplistic? -- Reasoning

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It's a "remarkably simple problem," said Paul Krugman, Nobel laureate in economics, professor at Princeton's Woodrow Wilson School, New York Times columnist, devotee of John Maynard Keynes, leading voice of the left and lightning rod for the right. If the folks in Washington would just listen to him, they could end this depression now, which also just happens to be the title of his new book.

Last night at the Princeton Club in New York City, Krugman promoted his latest paean to government spending in front of an adoring crowd of about 150. I went because I happened to be in the neighborhood.

In case you are wondering about his use of the "D" word instead of the "R" word, Krugman explained that a recession is when things are going down. A depression is when they stay down. The problem is "not enough spending and not enough demand," he said. If we, as a country, just had the political will, "we could be back to full employment. We could do it faster than anyone imagines."

No need to look for creative projects, he said. Just rehiring the school teachers, casualties of budget cuts at the state and local level, would give the economy "a big boost."

Why isn't anyone listening? Unfortunately, he said, "Very Serious People" -- they're always capitalized on his blog, so I assume they were in his speech, too -- "believe the deficit is the biggest problem."

I raised my hand to ask Krugman about some of those Very Serious People, specifically Carmen and Vincent Reinhart and Ken Rogoff. The economists' latest research on debt overhangs -- defined as periods where gross government debt exceeds 90 percent of GDP for five years -- upends the notion that nations can grow their way out of excessive debt. Their research shows that debt can depress growth for two decades -- causality goes the other way as well -- and that bond markets often don't scream until it's too late. The U.S. is on the waiting list for the debt hangover club, having first exceeded the 90 percent threshold following the 2008 financial crisis.

Is there any level of government spending or debt that is too much, I asked. The audience laughed. Krugman responded sportingly: He doesn't like having the government debt level as high as it is, he said, but reining it in doesn't work. Oh, and by the way, did he mention that, "on a 20-year basis, I'm a fiscal hawk"?

We all know how Keynes would respond to that.

(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)

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