Krugman Backpedals

[LA Ute]

Krugman: I didn't mean that stimulus!

[Uncle Ted]

Wait... Is this the same Krugman that said the stimulus was too small?

So this wasn’t a test of fiscal stimulus, even though it has played out that way in the political arena: the whole thing was obviously underpowered from the start.

And now he is saying it wasn't even the right kind of stimulus? This just makes Obama look like a double dumbass for getting it so wrong because we all know that Krugman is usually right.

[Jacob]

Should I add "humorless" to the list of baneful adjectives I typically use to describe Krugman? In this video he proposes getting out of the depression by a military buildup to defend against an inter-galactic alien threat that fails to materialize. And he doesn't even crack a smile as if he were making a joke.
http://www.newsbusters.org/blogs/noe...massive-defens

Here's the relevant text:

PAUL KRUGMAN, NEW YORK TIMES: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.
...
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better –

ROGOFF: And we need Orson Welles, is what you're saying.

KRUGMAN: No, there was a "Twilight Zone" episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don't need it, we need it in order to get some fiscal stimulus.

According to Krugman all we really need is inflation...and a war, or some other program that utterly wastes a huge amount of tax receipts and borrowed funds.

[Ma'ake]

Krugman opens himself up to ridicule with theoreticals like the alien threat, but at this point I'd have to say his general take on the economy is pretty astute.

Where the hell is hyper-inflation? Walmart sales in the US are down. Naturally, austerity is trendy, which is supposed to give business confidence and keep interest rates low...wait, they're already near zero.

Most corporations are sitting on mountains of cash, but they're not just waiting for the abolishment of the EPA...they want customers, but the demand isnt there.

Folks, we have a classic Keynesian aggregate demand problem, but the basic predicament is completely lost on just about all conservatives, who think none of this would be a problem if Bernanke was tried for treason. </hyperbole>

It's always more complex than a single economic school of thought can adequately explain, but what is Romney or Perry or Bachmann's strategy for reviving demand? Eliminate regulation? Remember, the corps already have plenty of cash.

[il Padrino Ute]

Krugman opens himself up to ridicule with theoreticals like the alien threat, but at this point I'd have to say his general take on the economy is pretty astute.

Where the hell is hyper-inflation? Walmart sales in the US are down. Naturally, austerity is trendy, which is supposed to give business confidence and keep interest rates low...wait, they're already near zero.

Most corporations are sitting on mountains of cash, but they're not just waiting for the abolishment of the EPA...they want customers, but the demand isnt there.

Folks, we have a classic Keynesian aggregate demand problem, but the basic predicament is completely lost on just about all conservatives, who think none of this would be a problem if Bernanke was tried for treason. </hyperbole>

It's always more complex than a single economic school of thought can adequately explain, but what is Romney or Perry or Bachmann's strategy for reviving demand? Eliminate regulation? Remember, the corps already have plenty of cash.

I'm not an economist, but IMO, the best way to revive demand is to ensure that there is disposable income for the citizens. The way to do that is to create an environment that encourages businesses to hire. The way to do that is for government to get the hell out of the way.

[Goatnapper'96]

Krugman opens himself up to ridicule with theoreticals like the alien threat, but at this point I'd have to say his general take on the economy is pretty astute.

Where the hell is hyper-inflation? Walmart sales in the US are down. Naturally, austerity is trendy, which is supposed to give business confidence and keep interest rates low...wait, they're already near zero.

Most corporations are sitting on mountains of cash, but they're not just waiting for the abolishment of the EPA...they want customers, but the demand isnt there.

Folks, we have a classic Keynesian aggregate demand problem, but the basic predicament is completely lost on just about all conservatives, who think none of this would be a problem if Bernanke was tried for treason. </hyperbole>

It's always more complex than a single economic school of thought can adequately explain, but what is Romney or Perry or Bachmann's strategy for reviving demand? Eliminate regulation? Remember, the corps already have plenty of cash.

I think Obama screwed up his one chance for a good Keynesian stimulus. You know it became an abortion delivered live and the chance was lost to a wasteful porkfest.

Further, he then compounded his mistake by throwing another long term entitlement upon future generations. Between you and me it isn't just conservatives who then became concerned about the massive current and mo' massive future deficits.

I agree that the problem is aggregate demand. It is an international problem as well. Not just within the US. I don't think a Keynesian stimulus is likely to work because the issue, at its core, is upside down balance sheets. From the individual consumer, his/her household to the federal government. We, both individual consumers and the government, have lived off of debt for a real long time. That is unravelling a bit and there is nothing Keynesian stimulus can do to unwind the massive debts facing both households and the country. This is one issue that only time and patience can help. I also am skeptical the US consumer will come back to spend as much as he/she did 5 years ago. I think our economy was overheated on debt and we are slowly returning to where our real GDP should be. In essence I think we lived a few decades off of various Keynesian stimulus and the crash is not a great deal of fun but it is the medicine we need.

[Goatnapper'96]

I'm not an economist, but IMO, the best way to revive demand is to ensure that there is disposable income for the citizens. The way to do that is to create an environment that encourages businesses to hire. The way to do that is for government to get the hell out of the way.

I agree with Ma'ake that the reason businesses are not hiring is not due to the political situation, at least from a regulatory and tax structure issue. I think the deficit issue has businesses nervous, but in an international economy the USS USA might be taking water but she is still the best ship out there. I think the reason businesses are not hiring is because their current output meets the current demand for their products. Until that demand exceeds their output they will stay trim, effecient and wealthy. That demand is not going to pick up until consumers don't owe more on their houses than their houses are worth.

[U-Ute]

I'm not an economist, but IMO, the best way to revive demand is to ensure that there is disposable income for the citizens. The way to do that is to create an environment that encourages businesses to hire. The way to do that is for government to get the hell out of the way.

I agree that government getting out of the way of business is a good way to encourage business, but the current economic problem is much more complex than simply telling the government to "go away".

You have to remember that the "economic boom" of the last 15 years was a false one, driven mostly by consumer debt spending driven by the inflated prices of the housing market (due to the "free money" refinancing and HELOCs provided) and "cheap" credit cards ("0% for 12 months!"). Wages have been flat since the late 90's.

Meanwhile, a greater and greater portion of those flat wages have gone into paying for housing and medical expenses.

So, in reality, until housing prices and medical costs and wages are back in line with each other, people just won't have any disposable income. Getting government out of the way of business is not the only answer to this. There has to be something else coupled with it.

[LA Ute]

Mickey Kaus:

Paul Krugman decries "hippie punching." This is now an accepted way to mock almost any contemporary criticism of unabashed liberals. I was a hippie–-hippie adjacent anyway. I knew hippies. Hippies were friends of mine. They hated liberals. That goes double for the ’60s New Left. Liberals were the enemy, and many of the New Left’s critiques (e.g. of Big Labor/Big Government corporatism, interest-group politics and anti-participatory bureaucracies) were very similar to today’s Tea Party critiques. …

Mickey's becoming one of my daily must-reads. He's a real, live moderate/centrist Democrat.

[Jacob]

Krugman opens himself up to ridicule with theoreticals like the alien threat, but at this point I'd have to say his general take on the economy is pretty astute.

Where the hell is hyper-inflation? Walmart sales in the US are down. Naturally, austerity is trendy, which is supposed to give business confidence and keep interest rates low...wait, they're already near zero.

Most corporations are sitting on mountains of cash, but they're not just waiting for the abolishment of the EPA...they want customers, but the demand isnt there.

Folks, we have a classic Keynesian aggregate demand problem, but the basic predicament is completely lost on just about all conservatives, who think none of this would be a problem if Bernanke was tried for treason. </hyperbole>

It's always more complex than a single economic school of thought can adequately explain, but what is Romney or Perry or Bachmann's strategy for reviving demand? Eliminate regulation? Remember, the corps already have plenty of cash.

I don't think its a good argument that hyper-inflation hasn't happened yet. I think inflation is sure to come. How can it not with the current money policy? But maybe other factors will prevent it. Housing, etc?

What is Romney's strategy for reviving demand? Hopefully it's to let the market to its thing. I'm not really into central economic planning. I don't believe that the federal government is the driver of the economy. Or rather, when it is, the economy is sure to be weak.

Krugman admits that the new deal keynsian economic policies didn't solve your demand problem. They didn't get us out of depression. He says, and almost everyone agrees that the war did that. So what does he propose? Something akin to War. Just spend the money on anything...or nothing at all. Just spend it. How stupid is that? But it worked in WWII is the argument? Come on. Maybe we should just kill off 2 million of our young men and destroy Europe. I'm sure that would solve our current mess.

[Goatnapper'96]

I agree that government getting out of the way of business is a good way to encourage business, but the current economic problem is much more complex than simply telling the government to "go away".

You have to remember that the "economic boom" of the last 15 years was a false one, driven mostly by consumer debt spending driven by the inflated prices of the housing market (due to the "free money" refinancing and HELOCs provided) and "cheap" credit cards ("0% for 12 months!"). Wages have been flat since the late 90's.

Meanwhile, a greater and greater portion of those flat wages have gone into paying for housing and medical expenses.

So, in reality, until housing prices and medical costs and wages are back in line with each other, people just won't have any disposable income. Getting government out of the way of business is not the only answer to this. There has to be something else coupled with it.

I think something could be done about medical costs. But I am not sure what. The Republicans ignored the issue for years while in power, and the Democrats could not contain themselves when they had the chance to address the issue. The endstate is Republicans did nothing and Democrats used their opportunity to try and extend another middle class entitlement without addressing the underlying core issues of radically increasing medical costs. However, against all hope I am optimistic that that piece driving the debt issue, both individual and governmental, can one day come under control.

I don't think anything can be done about the stagnating wages. That is, IMO, the result of the world economy and that is not likely to change. There is still opportunity in America but without education or specific skills I think the days of a solid middle class lifestyle working in a factory or mill are gone and lost forever. But I loved the movie "Breaking Away," go you Cutters go!

[Jacob]

I agree with Ma'ake that the reason businesses are not hiring is not due to the political situation, at least from a regulatory and tax structure issue. I think the deficit issue has businesses nervous, but in an international economy the USS USA might be taking water but she is still the best ship out there. I think the reason businesses are not hiring is because their current output meets the current demand for their products. Until that demand exceeds their output they will stay trim, effecient and wealthy. That demand is not going to pick up until consumers don't owe more on their houses than their houses are worth.

I think you quys are way off. Who are all these corporations sitting on piles of cash? I seriously doubt it's the small businesses, who are the creators of most jobs in our economy. The small businesses I work with lost most of their wealth during the recession and aren't holding back hiring due to the political situation (whatever you mean by that).

I quess we can agree that business are not hiring because their current output meets the current demand. That's the market being efficient. And I also agree that that demand is held back somewhat by the large amounts of consumer debt.
But none of this explains in what way you agree with Ma'ake, who is arguing that a lot more government spending is the cure. Are even larger deficits going to make businessmen less concerned about the political situation? I really don't think so.

[LA Ute]

This is an excerpt from Mike Allen's Politico Playbook, reporting on the president's Martha's Vineyard vacation. The irony is pretty rich:

Ira Stoll, editor and founder of FutureOfCapitalism.com, emails: …."Spotted Wednesday night on Deep Bottom Road: Margaret Marshall, the chief justice who authored the Massachusetts gay marriage decision, driving out in a gray Honda SUV with Anthony Lewis in the passenger seat. Welcome to paradise. ... There's plenty of regular folk here. Compared to Nantucket or Bridgehampton, it's practically middle America."

http://www.politico.com/playbook/

(Anthony Lewis is a famous New York Time columnist.)

How out of touch can these people be?

[Jacob]

The endstate is Republicans did nothing and Democrats used their opportunity to try and extend another middle class entitlement without addressing the underlying core issues of radically increasing medical costs.

This is not correct. The republicans didn't do nothing. Much like the democrats, they also used their opportunity to create another middle class entitlement--Medicare part D.

[Jacob]

This is an excerpt from Mike Allen's Politico Playbook, reporting on the president's Martha's Vineyard vacation. The irony is pretty rich:



http://www.politico.com/playbook/

(Anthony Lewis is a famous New York Time columnist.)

How out of touch can these people be?

This is great stuff. I don't have a problem with the President taking a vacation, except when he says this the day before:

"We've got to be doing every single thing we can, every minute of every day" to help the American people,” Obama told a crowd Wednesday in Alpha, Ill., the last stop on his bus tour.

http://blogs.abcnews.com/politicalpu...-vineyard.html