Yesterday Paul Krugman, citing Brad DeLong's post earlier in the day, joined the commentary on my Wall Street Journal article of Friday which I further discussed in my blog of Sunday. Krugman takes issue with my statement that “Mr. Obama, in his budget submitted in February, proposed to make that spending binge permanent” and instead claims to see no “huge expansion of the federal government” once one takes account of the slowdown in nominal GDP growth due to the recession.
Krugman is wrong. The Administration's budget did propose spending levels which make the recently increased rate of government spending as a share of GDP permanent, regardless of the reason for the recent increase.