I think he correctly characterizes the current situation among national policymakers, namely that they're in complete denial. While Joe Biden talks about the Summer of Recovery and Treasury Secretary (read: tax cheat) Timmy Geithner bids us "Welcome to the recovery," unemployment is not moving off 10% and everything from auto sales to home sales to consumer confidence is either flat or plunging to historic lows.
The Democrats currently running Washington seem to be living in a world that exists outside the reality of everyday Americans. While the government stimulates itself to no end, the people who make this country work are threatened with oppressive new regulations and taxes. The only sector of the economy experiencing any growth is the government sector. And even then, most state and local governments are now being forced to make cuts, which is having a "ripple effect" in local communities. It seems like the primary beneficiaries of the federal stimulus programs are the feds themselves.
Unfortunately, Krugman's insight doesn't last for long. He quickly moves on to blame the current economic situation on the Republicans in Congress who are supposedly stonewalling all efforts by the angelic Democrats to right the economy. He then makes his usual case for even more government spending. Though, what's curious is that as the current majority party in both chambers of Congress and in the White House, you'd think that if the Democrats actually wanted to do something, they would do it.
There's also the issue of Krugman's call for more spending. It seems as if no amount of spending is too small for Krugman and if we just spent a little bit more we'd be on the road to economic bliss and joy. Aside from the fact that the experience of the past two years has throughly de-bunked the notion that a government can stimulate an economy out of recession, Krugman's position is also intellectually deficient. He never has to admit that he's wrong, because he can always argue for even more spending. What he fails to appreciate is the generational theft that his policies inevitably bring about.