In the article The Real Job Killer: Missed Opportunity Paul Krugman writes:
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 the economist John Maynard Keynes put it in his “General Theory of Employment, Interest, and Money,” a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plants and equipment.
At the end of my September 2, 2011 blog post Obama halts controversial EPA regulation I made the same point that Krugman is making in his article.
I heard a news report of an estimated cost of the regulations as $19 to $90 billion dollars. The President was reported to have said that this was too big a burden at this time. Does he think that the money was going to be used directly to plug up smoke stacks and be burned in the process? That $19 to $90 billion would have been spent buying pollution control technology. That would have meant job creation for the people producing and installing the technology. The money might have had to come from industry’s cash reserves that are sitting idle. This President apparently understands nothing about economics and how to stimulate an economy. Why did I ever think he had the intelligence to understand this?
It is nice to have confirmation from a Nobel Prize winning economist about my understanding of how macro-economics works. (I know, I have intimated before that the title ” Nobel Prize winning economist” is not always proof that you know what you are talking about with regard to economics.)