This is a great explanation, hvogel.
Rick 2811, do you see this now? Imagine you're on a subsistence farm with 309,999,999 other folks. Your barn burns down. Now you need to rebuild the barn instead of doing other work. It postpones any advance you might make in standard of living by increasing your herds and crops. Just because we're a big country with a much-too-large and obnoxious government we can't suspend the basic rules of economics in the way that Krugman (especially) and other non-thinkers do.