Once again, a Krugman kick to the right's sac

Discussion in 'Politics' started by Ricter, Mar 25, 2011.

  1. Ricter



    "The Austerity Delusion
    Published: March 24, 2011
    The New York Times

    Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.

    What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

    It’s too bad, then, that these days you’re not considered serious in Washington unless you profess allegiance to the same doctrine that’s failing so dismally in Europe.

    It was not always thus. Two years ago, faced with soaring unemployment and large budget deficits — both the consequences of a severe financial crisis — most advanced-country leaders seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.

    Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.

    So jobs now, deficits later was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.

    How’s that story working out so far?

    Self-styled deficit hawks have been crying wolf over U.S. interest rates more or less continuously since the financial crisis began to ease, taking every uptick in rates as a sign that markets were turning on America. But the truth is that rates have fluctuated, not with debt fears, but with rising and falling hope for economic recovery. And with full recovery still seeming very distant, rates are lower now than they were two years ago.

    But couldn’t America still end up like Greece? Yes, of course. If investors decide that we’re a banana republic whose politicians can’t or won’t come to grips with long-term problems, they will indeed stop buying our debt. But that’s not a prospect that hinges, one way or another, on whether we punish ourselves with short-run spending cuts.

    Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.

    That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.

    And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback. As I like to put it, the Cameron plan was based on belief that the confidence fairy would make everything all right.

    But she hasn’t: British growth has stalled, and the government has marked up its deficit projections as a result.

    Which brings me back to what passes for budget debate in Washington these days.

    A serious fiscal plan for America would address the long-run drivers of spending, above all health care costs, and it would almost certainly include some kind of tax increase. But we’re not serious: any talk of using Medicare funds effectively is met with shrieks of “death panels,” and the official G.O.P. position — barely challenged by Democrats — appears to be that nobody should ever pay higher taxes. Instead, all the talk is about short-run spending cuts.

    In short, we have a political climate in which self-styled deficit hawks want to punish the unemployed even as they oppose any action that would address our long-run budget problems. And here’s what we know from experience abroad: The confidence fairy won’t save us from the consequences of our folly. "
  2. Forget financial shenanigans. Here are some real ideas to get this economy humming again while bringing more americans aboard:

    -Return REAL productivity back to the USA with a pro-industry policy

    -slash domestic individual and corp taxes to 15% max.

    -Natural Resources: Our greatest gift must be responsibly tapped at a much higher level. I like the Pickens plan.

    -End low skill immigration that has killed working peoples wages

    -Do all this while maintaining sound environmental stewardship.

    The financial focus is part of the sickness, not the cure.
  3. You forgot to include cutting a bloated and unnecessary military spending.

    Cut that in half.

    The wars we engage in are just skirmishes really, and can be handled much more efficiently.

  4. pspr


    So, Krugman wants the government to continue to spend like a drunken sailor? If Krugman can keep his head while all those around him are losing theirs, he doesn't understand the problem.
  5. Sounds good.
  6. nothing high-speed rail, necessarily skyrocketing energy costs associated with saving the climate and continuing the insane pensions of worthless government bureaucrats can't solve ... Not to mention free hand outs to those who refuse to work.

    Is this guy really suggesting that padding the coffers of bloated governments really did anything to stimulate? Is he suggesting only government knows how to spend our way back to prosperity?

    I netted about 60% of my last paycheck, and of course, this doesn't include sales, car, gasoline, etc ... taxes. It will soon be not worth getting out of bed in the morning, knowing I'm spending about 60-70% of my day contributing to the big open pit that is government spending.

    Krugman is a vile little man...

    Ironic, the markets collpased after reckless speculation, spending and obscene valuations. Krugman clearly is buying at an obscene premium what the government-firsters are offering.
  7. Hello


    Krugman should immediately forfeit his degree in economics. What he is saying is that if we continue to spend monery we dont have, that it will be good for the economy/average worker. He is living in the land of rainbows and lolly pops.

    Guess what, if i run a business it will be good for all of my employees IN THE SHORT TERM, if i decide to start racking up a never ending credit card starting tomorrow, infact i could even give all these employees raises while my company falls apart. At some point though there is a pesky little problem which any business owner would refer to as a "creditor." So while i may be able to make all of my employees happy little campers for an extended period of time, at some point i have to pay the piper, and that my friend... is a pesky little obstacle called REALITY.

  8. Hello


    If deficit spending was the solution to Americas fiscal problems, America would be the Tiger Woods of economics.
  9. BURN THEM TO THE GROUND ................

  10. Cut business taxes.
    Fire all public sector workers hired in the last 5 years.
    Reduce public sector workers' compensation to 2005 levels.
    Reduce spending to 2008 levels.
    Resume off-shore oil drilling. Drill ANWR Alaska.
    Follow what Germany & England are doing. They're doing a great job.

    The big problem we face is the left rioting, police & fire going on strike. Deploy the National Guard.

    Getting this or any country back on the right track is easy. All we need are politicians with some ball$. [​IMG]
    #10     Mar 26, 2011