Krugman's theory has been tried before. In France. Read the (free) ebook Fiat Money Inflation in France to see where that ended. Government stimulus at first appeared to work great (sound familiar) then, like gasoline on a fire the effect died away. What to do? More stimulus! This also appeared to work (only for a shorter amount of time), then, guess what, no more gasoline. More stimulus! Even less effective. On and on it went until the government collapsed and Paul Krugman - oops, I mean William Law, author of the grand inflation - was run out of France. This is where Krugman's theories would lead us.
Of course, since Mr. Krugman has a nice house on a Caribbean island and spends his days drinking Mai Tai's on the beach while telling us how to destroy ourselves, he probably will not mind being run out of the country.
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One thing France does much better than the US is to take care of those in need of a social safety net. I don't know the exact numbers but I can tell you of two recent experiences in a large US city and in Paris. In Detroit, there seem to be homeless/desparate/addicted people on every block. It was impossible to be downtown for 3 days without seeing dozens of people in dire conditions. It was heartbreaking. In Paris, there were a handful of people in the span of 6 days across almost every arrondisement that were in a dire condition.
I'm sure there are studies to show how expensive and inefficient that safety net is in France. Or studies that show we just didn't look closely enough to see the homeless/desparate/ addicted in Paris. But at least France tries - we don't. Sure, we have the Salvation Army and city missions, but those address just a fraction of the needs.
In America, we have allowed our churches to be more focused on new facilities so we can be more comfortable because the state and federal governments will care for those in need. Ever heard of a church that said "We have decided not to expand or buy new chairs or carpet or hire new staff, instead we are directly helping those in need around us with shelter, food, training, and jobs."
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