For the past 30 years, we’ve been told that government spending is bad, and conservative opposition to fiscal stimulus (which might make people think better of government) has been bitter and unrelenting even in the face of the worst slump since the Great Depression. Predictably, then, Republicans — and some Democrats — have treated any bad news as evidence of failure, rather than as a reason to make the policy stronger.

In dealing with the crude analysis that accompanies such Keynesian thinking, I use Krugman’s columns because he is the most popular exponent of that viewpoint. If one wishes to learn Keynesianism, read Krugman’s columns.

The Keynesian economic “theology” holds that only spending matters. Keynesians believe that it does not matter who does the spending, although it is preferable for government to do it, since politicians love to buy votes with other people’s money.

A recent quote in a Krugman column demonstrates this point. He claims that since private borrowing is down, even with the government’s current rapid accumulation of debt, overall borrowing is less than what it was during the boom. Thus he concludes the overt worrying of some over the massive increase in government debt is just another tale of woe from the “economic Cassandras.”

In other words, Krugman does not differentiate between private and government borrowing, even though business borrowing mainly is done for capital investment and government borrowing is done so governments can spend more than they take in with taxes. Keynesians seem to believe that the only benefit business borrowing provides is the spending that takes place, so if government does the borrowing and spending instead, then all the better.

Now to deal with the quote from Krugman’s column. Austrian economists do not respond negatively to what Krugman says because we “hate” government for “ideological” reasons (even though most of us look askance at government and its coercive ways), but rather because we understand the differences between private and government spending. They are not mirror images of each other, no matter what Krugman says.

In the Keynesian viewpoint, all assets and all capital are homogeneous. It does not matter if one spends money on a “bridge to nowhere” or invests in a new line of production; what is important is that money is spent.

Furthermore, in Keynesian thinking, as long as there are “idle resources,” then government spending — if it is enough and enough money is printed — ultimately can result in “full employment” of those resources. Why those resources might be idle in the first place is not up for discussion; the important thing is that government “stimulates” enough spending to put those resources back to work.

This is short-sighted and crude analysis. In the real world, capital matters, for it is in the development of capital that we make workers more productive, thus increasing individual wealth and the overall standard of living in a society. Capital spending is not just money dropped from a helicopter; it is undertaken for a specific productive purpose.

Austrians hold that typical Fed-created credit booms are not sustainable and that when once-productive assets become idle in the downturn, it is because the capital was malinvested. Granted, to understand the entire concept of malinvestment, one must be able to differentiate between the kinds of capital investment that can be sustained and what will have to be abandoned. Keynesians, unfortunately, have decided to ignore that kind of thinking or unilaterally to declare it “discredited.”

Yet when one applies simple logic, it is not hard to see which set of economic ideas should be discredited, and it is not the Austrian theory.

It is not enough to mock these editorials, given that it seems I might be piling onto yet another troubled company. The larger point is that our government, not to mention the mainstream of public intellectuals, is claiming that if it, as well as governments around the world, can spend enough, perhaps we can climb out of this recession.

If one believes that public intellectuals like Paul Krugman are beyond reproach, then there is nothing to read here. Should the U.S. government be able to print enough money and shove it out into the larger economy, then somehow that is supposed to magically lift the economy back into a state of prosperity, or at least preserve it until a recovery occurs.

It is time someone understood and told the truth. Actually, some people have been telling the truth, but many public intellectuals, not to mention newspaper editorialists and those who now hold power in Washington, have been telling a much different story: all it takes is a little more borrowing and spending. (Actually, they are saying that it takes a lot more borrowing and spending and that the printing press will work magic.) Unfortunately, people who tell the truth are neither in political power nor in control of the major editorial offices.

We have to remember that understanding the truth and power are not exactly synonymous. In fact, those who often have held power have not understood or told the truth, and that is what is happening today. Americans are being told that all it takes to make the economy recover is for the U.S. government to borrow trillions of dollars and direct it to be spent wherever the politicians wish.

It is intuitive to most people that we cannot spend our way to prosperity. For example, if I were to tell someone who was going through hard economic times that all it would take to pull them out of their troubles would be to obtain a few more credit cards and max out, they most likely would think I had lost my mind. Yet, we are told that governments somehow can spend profligately and create prosperity.

The reason that people seem to think governments can magically create prosperity is that governments have a legal monopoly on creating money. As I emphasized several weeks ago, the creation of new “money” by governments does not create wealth. Indeed, it does the opposite; it makes most people worse off than before the new money was created.

There is another reason that governments cannot spend a country into prosperity: an economy is not a perpetual motion machine that is driven by new money, despite what one might read on the New York Times editorial pages. Economies grow when entrepreneurs can take resources and create more goods than before. Period. They cannot grow any other way, and they certainly cannot grow when governments shower people with newly printed money. If that were the case, the countries like Zimbabwe, Bolivia, and Germany in 1923 would have been the richest countries in the world.

The U.S. economy will grow only when people begin to save money and entrepreneurs have the freedom to find new and improved ways to use resources. Unfortunately, the powers that be have decided otherwise, and we are going to have to learn some painful lessons–again.