Oops, another P3 comment, discussing this lovely little refutation from Krugman today.
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Yes, that's the clearest bit of refutation I've seen recently (and the FRED data is awesomely accessible), though Krugman's been doing the same day in day out for years: "you say x about economics? Here's the evidence and here's the macro 101 that we've known for decades that says y."

This is excellent: "it’s not often that you see an economic theory fail so utterly and completely. Yet that theory’s grip on the GOP has only strengthened as its failure becomes ever more undeniable."

Krugman's work - and the post you highlight here is a fantastic exemplar of that - illustrates what's wrong with another recent take on `economic denialism' (I wonder what you think of this?) by Aditya Chakrabortty. From this point of view, all neoclassical economists (Krugman's one; my PhD uses his core-periphery model extensively for spare parts) are merely "high priests" blessing existing power structures with their otherwise meaningless mathematical incantations.

Which, if it were true, actually matches what Krugman's accusing Republicans of. As Phillip Ball puts it, it's all “citadels of crystalline mathematical perfection that would shatter if touched by the harsh rays of reality” (Ball 2007 p.647). This Krugman post is a nice illustration that's not true of all economists - and I think the difference isn't in the models, it's in the modellers' understanding of their uses and meaning. In that respect, it's quite different to, say, climate modelling (I think). (Nice Marshall quote on that: "economic laws and reasonings in fact are merely a part of the material of which conscience and common-sense have to make use in solving practical problems, and in laying down rules which may be a guide to life.” Marshall 1895.)

Which is not to deny there's a definite relationship between power structures and a particular, brittle set of economic concepts - Krugman himself acknowledges this when he explains why he pursued a general equilibrium form for the core-periphery model as a way to entice others in his field to consider geography: "mainstream economics isn’t going away: like it or not, the White House has a Council of Economic Advisers, not a Council of Geographical Advisers, the World Bank hires lots of economists and not many geographers." (The New Economic Geography, Now Middle Aged, 2010, PDF.)

So yeah - we're looking at much the same process that I mentioned standing out so clearly in the Boston Globe's coverage of Willie Soon. Economics, climate... doesn't matter. Evidence seems to end up like a butterfly in a gale when it approaches power centres.

The obvious answer seems to be to remove the influence of money in politics - but to get that via any current democratic route, you'd need politicians to vote for who eschew major donations. They would lose. Or you would need politicians to vote for imposing, say, modest but even state-funded campaigns - and again, of course, if they're already on the money, how will that happen?