firstThingsFirst

Krugman on Unemployment and GDP: Huh?

You have every right to disagree with Krugman despite his Nobel Prize. A Nobel Prize winner can be horribly wrong, as we saw with Milton Friedman and the current disaster, thanks to Friedman's acolytes and corporatist economics.

On the other hand, Krugman has been consistently right so far, so I think I'll believe him.


On Aug 02 11:00 AM Glen L. wrote:

> Krugman says it's hard to know what we should have expected. So
> much for the value of a Nobel Prize in economics. If he wasn't a
> steroid-enhanced Keynesian he would have expected the recession to
> be just as bad as it is, but he didn't. He pushed hard for the crazy
> stimulus packages, and pretty much got what he wanted, although he
> moans that it may have been too little, too late. Too little to
> kick the can down the road a couple more years and protect his undeserved
> reputation and his NY Times hack status. Oh, well, Paul, soon the
> Gray Lady will assume room temperature, but don't worry - Goldmans
> Sachs is hiring. So's the federal government.

Revolt of the Stenographers

An interesting thing about that 1983 NY Times article on Canada's single-payer system. At the time of the article, they spent about 8% of GDP on health care while we spent 10%. They're still at about 8%, while we're around 15, and yet they're results are much better than ours. It looks like if we had had single-payer all this time, we too would have had everyone covered, no one going bankrupt or even dying for lack of insurance, and we would spend roughly half of what we spend now.

California's Default Is Certain

I sympathize with California, coming from a state with a similar problem. In Minnesota, though only a simple majority is needed to raise taxes, and the success of tax increases through referenda would seem to indicate the public mood, our taxophobic governor has vetoed any tax increase, thereby requiring a supermajority of two-thirds to raise a tax (just like California): and the Republicans have barely above one third of one house, enough for their unreasoning attitude to endanger state finances (again, you'd think the steady loss of seats the last five years would tell them something, but no). We're not as far along as California, but we're going the same way for the same reason.

So I'll say yes to the bailout of California, with strict enough conditions to make bailouts unappealing for the other 49 states. The federal taxpayers will tide California over while it straightens out its finances, conditional on enough Republicans acting like adults and agreeing to tax increases to access the structural deficit. California will also have to stop requiring a two-thirds majority for tax increases. Maybe California will be required to reform their ballot initiatives.

It seems such a large amount of federal dictation of how a state handles its finances should deter any other state from wanting to let things get to the point of asking for a bailout.

Anyone Have a Good Feeling About the Next Employment Report?

Keep up the explanations Brad. Judging from the comments, you're right that some people can't tell the difference between the stimulus and the bailout, can't tell the difference between monetary and fiscal stimulus, and won't see past their conservative ideology even after all their policies disintegrated upon contact with reality.

Fiscal Policy in Second Half of 2009

The practical problem is, if I recall correctly, 49 states have balanced budget requirements in their constitutions, and most have difficult processes for amending them. Even if states were willing to amend their constitutions to allow them to run deficits, the time involved would defeat the purpose. There's a case for additional stimulus, relief of state debt just isn't the way. Besides, the states that swalloed hard and raised taxes to balance their budgets will feel like this amounts to bailing out the irresponsible states. So it seems we have to accept the necessity of state and local governments to play Hoover, and the federal government needs to provide the fiscal stimulus by direct spending.

Paul Krugman, Please Call Ben on This 'Printing Money' Thing

Todd, you're engaging in that conservative canard that there's no such thing as a difference of opinion, but that anyone who disagrees is lying. Calling someone a liar is like calling them a Nazi: it stops the conservation. There's really no where to go after that point.

In Krugman's defense, I'll point out that his column is for print. If you look at his blog, you'll see he regularly links to what he commenting about. Also, you're trying to show Krugman changing what's he's saying, but remember his comments opposing deficits were made in 1996 when the economy was healthy. In the part you quoted, he specifically warned that governments running deficits should wonder what they would do in case of emergency. The current circumstance, where we ran into an emergency with the government already in deep deficit, proves he was correct.

In the article you linked to at the start of your post, Krugman followed the paragraph you quoted with an explanaation of why the first story was wrong, though you imply he didn't explain it. Krugman said, "Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all. "

You don't have to agree with him that the Fed's actions aren't a problem, but you can't say he doesn't answer your objection.

U.S. Records Huge Trade Deficit: Obama's Broken Promise

The crux of the post, that Obama is ignoring the trade deficit, makes no sense. He inherited multiple crises, not just a few problems. He knows about the trade deficit, but there are several more urgent problems. I certainly include global warming among those more urgent issues. That's a matter of opinion of course, but what's not a matter of opinion is that Obama's cap and trade proposal includes includes tax credits at the bottom to address the issue of poor people more adversely affected by price increases. Besides, pollution already has real costs, but the costs are externalized for the polluters. New taxes or cleanup requirements just make polluters cover their own costs, so it's not really a cost increase, just a shifting of costs back to where they belong.

What Does the Bubble in U.S. Treasuries Mean for the Economy?

I was growing concerned up until the part about government mandated subprime lending in real estate. The government never mandated subprime lending. It actually tried to prohibit it until deregulation in the late 90's early 00's. Having something like this backwards made me start to doubt.

The idea the markets won't fall is nonsense. They HAVE fallen. If governments fall, forming investment funds will be the last things we're thinking about. I'm not completely dismissing the premise, as I also worry about the massive debts being taken on by governments, but with the private markets collapsing, there really isn't a choice. Though I think TARP was done badly it had to be done, and though any of us can pick parts of the stimulus we don't agree with, it has to be done, and other governments will have to do something similar. Once we're through the emergency and our structural problems are being addressed, then we can worry about paying off the debt. The debt is a big problem, but we have several bigger problems to contend with.

How Much Does the Bailout Really Cost?

Wow. I'm thinking of how opponents of the New Deal complained so bitterly about the cost. Maybe the biggest failing was that it was done on the cheap, or maybe we should conclude that New Deal-style spending aimed at the bottom is that much more effective that several times the spending aimed at the top. I'm also amazed by the cheapness of the Marshall Plan, especially when I think of how Americans reflexively complain about foreign aid as if it sucks up most of our money.

Lehman Is Just the Thin Edge of the Wedge

Can anyone explain how the people who let this happen and are running the economy into the ground still have a shot at winning the election? So McCain was a POW and Palin's from a small town, and that's all that matters? The lobbyists who wrote these corporate socialism laws to nationalize the risk get to run the next administration?