Krugman doesn't make enough concessions here:
Yes, an increase in government demand could be offset by a fall in private demand because people expect their future taxes to be higher. Private demand could also fall because an employer who would have hired those workers finds that they're already employed by the government. Or private demand could fall because the money they would have borrowed to finance a project is instead used to buy government bonds. There are lots of ways that government spending can crowd out private-sector activity.
And here he seems to suggest that too many tax cuts were part of what caused the Great Depression:
In the United States, the Republican party remains committed to a belief in that old tax-cut magic, with no willingness to rethink its doctrine in the face of catastrophe... So yes, we can have another depression — because those who refuse to learn from history may be condemned to repeat it.
Herbert Hoover didn't want to run deficits, so he raised taxes: "in 1931-1932 Hoover had proposed -- and a Democratic-controlled Congress had enacted -- a massive tax increase in a desperate effort to balance the federal budget." I believe the standard Keynesian line has usually been that Hoover's fiscal austerity during a depression was a disastrous mistake.