Saturday :: Sep 3, 2011

Paul Krugman on the Ozone Regulation Decision

by Mary

Paul Krugman says that the ozone regulations that the Republicans called job-destroying would actually have created jobs by giving companies a reason to spend some of their idle cash.

something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.

And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

At the rate the economy is going, it could take decades before firms start spending again. So the decision was not only bad for our health but also the health of the economy. Just to give a sacrifice to the economy-destroying Republicans.

Mary :: 10:17 AM :: Comments (2) :: Digg It!