The Business Insider and Krugman need a re-think!
For one, Keynesian spending works very well on the assumption that spending raises the average disposable income. For this to happen, the extra spending by government needs to go the labour intensive production or services. The problem with much American spending is that it is concentrated because of substitution in manufacturing and services away from labour intensity. This means that what happened in the thirties could not happen today because the average disposable income rise would be diminished by capital intensity of labour in services and manufacturing? Good thing too!
The iPhone is substitutive in a way that the iPad is not. Krugman is less accurate if he considers the role of the iPad in innovation. Schumpeterians will in any event be pleased to acknowledge the joint role of raising per capita disposable income and of innovation in growth dynamics. They both are a necessary base for solid growth.
Right now American firms are accumulating profits as savings for another ratcheting up of capital intensity. This is great for America, but not necessarily for average per capita disposable income. The best thing that American workers can do is the get retrained and prepared for a higher level of technology specification all across American industry and services. Pity the uneducated, but get them retrained. Upgrade their input into the American economy.
Underlying everything is education because it speeds per capita income rise and innovation.
Yes, raise the taxes on the wealthy and use the money to reduce education costs so that per capita disposable incomes can rise in a capital intensive world of services. Raising education levels for the average employee raises the rate of innovation, while innovation is raised by improving basic research and the environment of invention.
http://www.businessinsider.com/paul-krugman-on-the-iphone-5-2012-9
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