Krugman

Return of the Blood Libel


if we look across America there is a correlation between violent crime and the prevalence of undocumented immigrants — a negative correlation. That is, places with a lot of immigrants, legal and undocumented, tend to have exceptionally low crime rates. The poster child for this tale of un-carnage is the biggest city of them all: New York, where more than a third of the population is foreign-born, probably including around half a million undocumented immigrants — and crime has fallen to levels not seen since the 1950s.
via Return of the Blood Libel
There is no immigration crime wave.

Intellectuals, Politics and Bad Faith


The story itself, although ugly, isn’t that important. But it offers a window into a reality few people, certainly in the news media, are willing to acknowledge: the bad faith that pervades conservative discourse. And yes, I do mean “conservative.” There are dishonest individuals of every political persuasion, but if you’re looking for systematic gaslighting, insistence that up is down and black is white, you’ll find it disproportionately on one side of the political spectrum.
via Intellectuals, Politics and Bad Faith
Worth a read.

Unicorns of the Intellectual Right


while there are many conservative economists with appointments at top universities, publications in top journals, and so on, they have no influence on conservative policymaking. What the right wants are charlatans and cranks, in (conservative) Greg Mankiw’s famous phrase. If they use actual economists, they use them the way a drunkard uses a lamppost: for support, not illumination.
via Unicorns of the Intellectual Right

They don’t want to govern. They don’t want to debate policy.

Krugman: On Economic Arrogance

According to press reports, the Trump administration is basing its budget projections on the assumption that the U.S. economy will grow very rapidly over the next decade — in fact, almost twice as fast as independent institutions like the Congressional Budget Office and the Federal Reserve expect. There is, as far as we can tell, no serious analysis behind this optimism; instead, the number was plugged in to make the fiscal outlook appear better.

I guess this was only to be expected from a man who keeps insisting that crime, which is actually near record lows, is at a record high, that millions of illegal ballots were responsible for his popular vote loss, and so on: In Trumpworld, numbers are what you want them to be, and anything else is fake news. But the truth is that unwarranted arrogance about economics isn’t Trump-specific. On the contrary, it’s the modern Republican norm. And the question is why.

(via On Economic Arrogance - The New York Times)

Math has a liberal bias.

Seduced and Betrayed by Donald Trump - The New York Times

by looking at Census data from 2013 to 2015, which show the impact of the full implementation of Obamacare. Over that period, the number of uninsured Americans dropped by 13 million; whites without a college degree, who voted Trump by around two to one, accounted for about eight million of that decline. So we’re probably looking at more than five million Trump supporters, many of whom have chronic health problems and recently got health insurance for the first time, who just voted to make their lives nastier, more brutish, and shorter.

(via Seduced and Betrayed by Donald Trump - The New York Times)

Krugman does the math.

Paul Krugman: 5.5 million Trump voters could lose health care — because they voted for him

Paul Krugman: 5.5 million Trump voters could lose health care — because they voted for him:

As Krugman notes, 6 million non-Hispanic whites gained insurance between 2013 and 2015; considering 66 percent of white people without a college degree (and therefore likely uninsured before Obamacare) voted for Trump, Krugman reasons at least 3.96 million non-college educated Trump voters will lose their insurance.

Sure you’ll lose your healthcare, but think of the tax cuts coastal elites will get.

Wrath of the Conned

Wrath of the Conned:

Both parties make promises to their bases. But while the Democratic establishment more or less tries to make good on those promises, the Republican establishment has essentially been playing bait-and-switch for decades. And voters finally rebelled against the con.

One possible explanation is the decadence of the G.O.P. establishment, which has become ingrown and lost touch. Apparatchiks who have spent their whole careers inside the bubble of right-wing think tanks and partisan media may suffer from the delusion that their ideology is actually popular with real people. And this has left them hapless in the face of a Trumpian challenge.

Worth a read.

Fear and Friends

Fear and Friends:

nobody in the GOP field wants to say anything positive about the strength of Western democracy, or make a remark about the nature of a cause that has nothing going for it except the ability to kill innocent civilians. Instead, we have Jeb! insisting that we’re looking at a plan to destroy Western civilization, and Ted Cruz declaring that what we need to do is abandon our own scruples aboutkilling innocent bystanders.

Paul Krugman:Trump Is Right on Economics

all indications are that Mr. Bush’s attacks on Mr. Trump are falling flat, because the Republican base doesn’t actually share the Republican establishment’s economic delusions.

(via Trump Is Right on Economics - The New York Times)

When Trump came out for raising income taxes on the rich, like him for saving social security and for increased spending on domestic infrastructure I was sure that he was going to lose his Tea Party base. But he didn’t. Krugman’s explanation actually makes some sense.

Krugman on Gravity and Trade

that the volume of trade between Kanesh and various trading partners seems to fit a gravity equation: trade between any two regional economies is roughly proportional to the product of their GDPs and inversely related to distance. Neat.

But what does the seemingly universal applicability of the gravity equation tell us?

It’s the law!

(via Gravity)

Krugman on trade is always worth a read.

Tea and Trumpism

the conservative explanation of the GOP’s onset of DTs is, as best I can figure, that base voters are victims of celebrity; what they really want is a true conservative, but they’re being hijacked and hoodwinked by someone who makes good TV.

Meanwhile, the liberal version, as I’ve seen it, seems to be that Trump is appealing to resentment that ultimately rests on economic failure: working-class whites have been left behind by soaring inequality, but they mistakenly blame immigrants taking their jobs.

But are Trumpists being hoodwinked? Are they members of the suffering working class who don’t understand why they’re hurting? OK, here’s my guess: they look a lot like Tea Party supporters

(via Tea and Trumpism - The New York Times)

Slavery’s Long Shadow

the political scientist Larry Bartels, analyzed the move of the white working class away from Democrats, a move made famous in Thomas Frank’s “What’s the Matter With Kansas?” Mr. Frank argued that working-class whites were being induced to vote against their own interests by the right’s exploitation of cultural issues. But Mr. Bartels showed that the working-class turn against Democrats wasn’t a national phenomenon — it was entirely restricted to the South, where whites turned overwhelmingly Republican after the passage of the Civil Rights Act and Richard Nixon’s adoption of the so-called Southern strategy.

Only one former member of the Confederacy has expanded Medicaid, and while a few Northern states are also part of the movement, more than 80 percent of the population in Medicaid-refusing America lives in states that practiced slavery before the Civil War. And it’s not just health reform: a history of slavery is a strong predictor of everything from gun control (or rather its absence), to low minimum wages and hostility to unions, to tax policy.

(via Slavery’s Long Shadow - The New York Times)

Krugman on veiwing the modern, post-Nixon GOP as the neo-Confederacy.

'Wingnut welfare is an important, underrated feature of the modern U.S. political scene. I don’t know...'

Wingnut welfare is an important, underrated feature of the modern U.S. political scene. I don’t know who came up with the term, but anyone who follows right-wing careers knows whereof I speak: the lavishly-funded ecosystem of billionaire-financed think tanks, media outlets, and so on provides a comfortable cushion for politicians and pundits who tell such people what they want to hear. Lose an election, make economic forecasts that turn out laughably wrong, whatever — no matter, there’s always a fallback job available.

Obviously this reality has important incentive effects. It encourages conservatives to espouse ever-cruder positions, because they don’t need to be taken seriously outside their closed universe.



- Wingnut Welfare and Work Incentives - NYTimes.com

Liberals, Conservatives, and Jobs

Liberals, Conservatives, and Jobs:

If creating “millions” of jobs means adding 2 million or more in a given year, then we did that in three of Jimmy Carter’s four years in office, and 13 times since Reagan left the White House — 8 times under Bill Clinton, twice under George W. Bush, and three times so far under Barack Obama. Actually, the only times we haven’t added millions of jobs under Democrats have been in the aftermath of severe shocks — the oil shock of 1979 and the financial crisis of 2008. Am I claiming that Democratic presidents were responsible for all this job creation? No, not at all, nor do I need to. The point, instead, is that their policies didn’t prevent a lot of employment growth. That is, what you learn from both national experience and the California story is that you can raise taxes on the rich and expand access to health care without killing the economy.

Naked Came The Class Warriors

Naked Came The Class Warriors:

If you look for an overarching theme for overall conservative policy these past four decades, it definitely isn’t liberty — by and large the GOP has been enthusiastic about expanding the security and surveillance state. Nor is it in a consistent fashion smaller government, unless you define military and homeland security as not government. Instead, it has been about making the tax-and-transfer system harsher on the poor and easier on the rich. In short, class warfare.

Those Radical VSPs

Those Radical VSPs:

although many of the press reports describe Syriza as “far-left”, it’s actually preaching fairly conventional economics, while the supposedly responsible officials of Brussels and Berlin have been relying on radical doctrines like expansionary austerity and a growth cliff at 90 percent. The same has to a certain extent been true in the US context. Once again: textbook macroeconomics says that focusing on deficit reduction in a depressed economy, where the zero lower bound constrains the effectiveness of monetary policy, is a very bad idea. And although nobody will believe it, textbook macro has actually been a very good guide to the economy since the financial crisis, as Jared Bernstein also emphasizes.

Krugman points out how current right of center economic theory isn’t based on conservative economic or on textbook mainstream economics. Its based on very radical and very untested ideas that aren’t working out.

In Front Of Your Macroeconomic Nose

In Front Of Your Macroeconomic Nose:

at this point we’ve been at the zero lower bound for six years; we’ve seen a 400 percent rise in the monetary base without a takeoff in inflation; we’ve seen record peacetime deficits go along with record low long-term interest rates. Liquidity trap economics aren’t a speculative hypothesis at this point, they’re the world we’ve been living in for years. How can that go unnoticed?

It’s not unnoticed. There is plenty of people who noticed. But since the truth isn’t the right wing approved talking point, it isn’t being talked about.

The Wisdom of Peter Schiff

The Wisdom of Peter Schiff:

what Schiff says very clearly is that according to his worldview, rolling the printing presses should cause inflation (by the normal definition) even in a depressed economy, and that high unemployment should in fact make inflation higher, not lower. He has that exactly right: the central dispute is between those who see depressions as the result of inadequate demand, implying that inflation will fall and that printing money does nothing unless it boosts employment, and those who see depressions as the result of maladapation of resources or something — anyway, something on the supply side — who predict that running the printing presses will lead to runaway inflation. How could you test those rival views? Why, how about having a huge slump, to which central banks respond with aggressive monetary expansion? And that is, of course, the test we’ve just run. And everywhere you look, inflation is low, verging on deflation. So we’ve just run the Schiff test — and his brand of economics, by his own criteria, loses with flying colors. And that goes for just about all anti-Keynesian doctrines: we ran as close to a clean experiment as you’re ever going to get, and the answer is no.

And it isn’t just the US economy. The same experiment was run across Europe and in Japan. Schiff’s theory is zero for twelve. In no economy did we get results they his theory would demand.

Inflation Derp Abides

Inflation Derp Abides:

Jim Rogers declared that “we are all going to pay a terrible price for all this money-printing and debt.” And I asked the obvious question: How long has Rogers been predicting a printing-press-and-deficits disaster? The answer is, a very, very long time. Here he is in October 2008 — six full years ago — declaring that we were setting the stage for a “massive inflation holocaust.”

What I expect is that inflation will be slightly higher than normal and the people claiming inflation holocaust for the past six years will act as if they were right all along.

Build We Won’t

Build We Won’t:

We can’t simply write a check to the highway fund, we’re told, because that would increase the deficit. And deficits are evil, at least when there’s a Democrat in the White House, even if the government can borrow at incredibly low interest rates. And we can’t raise gas taxes because that would be a tax increase, and tax increases are even more evil than deficits. So our roads must be allowed to fall into disrepair.

Charlatans, Cranks and Kansas

Charlatans, Cranks and Kansas:

the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people.

People who want those tax cuts the most, care the least that they don’t actually work.

High Plains Moochers

High Plains Moochers:

Suppose he had been grazing his cattle on land belonging to one of his neighbors, and had refused to pay for the privilege. That would clearly have been theft — and brandishing guns when someone tried to stop the theft would have turned it into armed robbery. The fact that in this case the public owns the land shouldn’t make any difference.

So, what happens if two ranchers want to use that land? Or if some rancher wants to graze his herd on land that Mr. Bundy owns and isn’t using?

The Piketty Panic

The Piketty Panic:

what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.

In the warped little minds of the hard right, the real problem isn’t capitalism (which they redefine as needed) but crony capitalism (which they also redefine as needed) where the very wealthy use the state to steal wealth. But we also can’t tax those people because that’s theft and will reduce the incentive for them to work hard. And pointing out the contradiction is Marxism.

Krugman on Paul Ryan at CPAC: Actually kind of awesome, in the worst way.

Krugman on Paul Ryan at CPAC: Actually kind of awesome, in the worst way.:

the caricature of Ryan and people like him is that they treat the hardships of poverty as if they were merely psychological, that they talk big about dignity while ignoring the difficulty of getting essentials like food and health care. Well, it’s not a caricature

Worth reading, but also read Ryan’s words. The inability to see the world past their own noses seems to be a problem with politicians in general, but on the right it is stunning.

What they’re offering people is a full stomach and an empty soul

Ummm…hierarchy of needs? Have they heard of it?

The Real Poverty Trap

The Real Poverty Trap:

the evidence suggests that welfare-state programs enhance social mobility, thanks to little things like children of the poor having adequate nutrition and medical care. And conversely,of course, when such programs are absent or inadequate, the poor find themselves in a trap they often can’t escape, not because they lack the incentive, but because they lack the resources.

The stats make the article worth a read. Basically, if you make it easier for people to be less poor, people will be less likely to be poor. No surprise there.

Krugman: Envy Versus Anger

Krugman: Envy Versus Anger:

But the polling data don’t say anything about envy: when people say that they have lost their belief that hard work will be rewarded, they aren’t saying that they are envious of the rich; they’re saying that they have lost their belief that hard work will be rewarded. To the extent that people have negative feelings about the one percent, the emotion involved isn’t envy — it’s anger, which isn’t at all the same thing. Envy is when you have negative feelings about rich because of what they have; anger is when you have negative feelings about the rich because of what they do.

The standard defense is to dismiss criticism of 1% by the 99% as envy and criticism of the 1% by the 1% as hypocrisy. How convenient that literally no one is able to criticize the 1% without that being proof that there is something wrong with them.

The Undeserving Rich

The Undeserving Rich:

conservatives seem fixated on the notion that poverty is basically the result of character problems among the poor. This may once have had a grain of truth to it, but for the past three decades and more the main obstacle facing the poor has been the lack of jobs paying decent wages. But the myth of the undeserving poor persists, and so does a counterpart myth, that of the deserving rich.

I’m waiting on the right wing responses to this. I’m guessing the same old crap about taxation and gubmint.

Derp Pirate Roberts

Derp Pirate Roberts:

Mr. Green had “died of asphyxiation/heart rupture” while being tortured, nob explained. Dread Pirate Roberts replied that he found the images disturbing, but that he did not have any other choice. “I just wish more people had some integrity,” D.P.R. wrote.

DPR was acting exactly how critics of far-right libertarians suggest people in his position would act.

Enemies of the Poor

Enemies of the Poor:

our patchwork, uncoordinated system of antipoverty programs does have the effect of penalizing efforts by lower-income households to improve their position: the more they earn, the fewer benefits they can collect. In effect, these households face very high marginal tax rates. A large fraction, in some cases 80 cents or more, of each additional dollar they earn is clawed back by the government.The question is what we could do to reduce these high effective tax rates.

That’s Friedman’s argument for a negative income tax.

A War on the Poor

A War on the Poor:

I still sometimes see pundits claiming that the Tea Party movement is basically driven by concerns about budget deficits. That’s delusional. Read the founding rant by Rick Santelli of CNBC: There’s nary a mention of deficits. Instead, it’s a tirade against the possibility that the government might help “losers” avoid foreclosure. Or read transcripts from Rush Limbaugh or other right-wing talk radio hosts. There’s not much about fiscal responsibility, but there’s a lot about how the government is rewarding the lazy and undeserving.

The tea party merges the prosperity gospels with Ayn Rand and walks away with a belief that economics is nothing more than a morality play where the wealthy are wealthy because of virtue and the poor are poor because of vice. 

Flim Flam Forever

Flim Flam Forever:

the really crucial thing for the WH is a matter of principle: no deal unless the extortion ends. And Rs just can’t or won’t give up the idea that they deserve to be rewarded for not blowing up the world.

Krugman nails it. Obama was too easy on the GOP early on thinking they would reward his cooperation. He let think this as a valuable tactic. And now it has to end.

The Debt Ceiling and the Housing Bust

The Debt Ceiling and the Housing Bust:

You can argue that these spending cuts wouldn’t have as much impact as the housing bust, because payment would be delayed, not cancelled, and at least some players would continue to expect eventual payment. On the other hand, as I pointed out in my last post, this time around we would have disconnected the automatic stabilizers — as GDP fell, revenues would fall, forcing another round of spending cuts, and so on.


GOP seems to prefer vicious cycles to virtuous ones. 

Krugman: Automatic Destabilizers

Krugman: Automatic Destabilizers:

The immediate question is whether Treasury can, in fact, “prioritize” — pay interest on the debt while stiffing everyone else, from vendors to Social Security recipients. If they can, they might choose to do this to avoid financial meltdown.

My worry s that once people stop getting paid the GOP will decided that they have more leverage and make greater demands. 

Rich Man's Recovery

Rich Man's Recovery

>These numbers should (but probably won't) finally kill claims that rising inequality is all about the highly educated doing better than those with less training. Only a small fraction of college graduates make it into the charmed circle of the 1 percent. Meanwhile, many, even most, highly educated young people are having a very rough time. They have their degrees, often acquired at the cost of heavy debts, butmany remain unemployed or underemployed

It Takes A Government (To Make A Market)

It Takes A Government (To Make A Market)

there's an additional factor, that even supporters of the Affordable Care Act mostly missed: the extent to which, for the first time, the Act is creating a truly functioning market in nongroup insurance.

Market based reforms often require government. This should be obvious, but since it violates right-wing political correctness, it is ignored or shouted down.

Moment of Truthiness

Moment of Truthiness

Do people like Mr. Cantor or Mr. Paul know that what they're saying isn't true? Do they care? Probably not. In Stephen Colbert's famous formulation, claims about runaway deficits may not be true, but they have truthiness, and that's all that matters.

And please stop saying both sides are just as bad. MSNBC is not reporting we are running a surplus. The NYT isn’t reporting there is no deficit. Its isn’t the same.

Detroit was creatively destroyed by creative destruction

Detroit was creatively destroyed by creative destruction

free-market enthusiasts love to quote Joseph Schumpeter about the inevitability of "creative destruction" - but they and their audiences invariably picture themselves as being the creative destroyers, not the creatively destroyed. Well, guess what: Someone always ends up being the modern equivalent of a buggy-whip producer, and it might be you.

John Galt and the Theory of the Firm

John Galt and the Theory of the Firm

We may live in a market sea, but that sea is dotted with many islands that we call firms, some of them quite large, within which decisions are made not via markets but via hierarchy - even, you might say, via central planning. Clearly, there are some things you don't want to leave up to the market - the market itself is telling us that, by creating those islands of planning and hierarchy.

Krugman: Where Are The Deficit Celebrations?

Krugman: Where Are The Deficit Celebrations?

For three years and more Beltway politics has been all about the deficit. Urgent action was needed to avert crisis. A Grand Bargain absolutely had to be reached. Fix the Debt, now now now!

So where are the celebrations now that the debt issue looks, if not solved, at least greatly mitigated? And it's not just recovering revenues: health costs, the biggest driver of long-run spending, have slowed dramatically

Maybe they didn’t actually care about debt and deficit? Maybe the people who said nothing while W grew the debt don’t care about fiscal issues at all. They care about cutting the parts of the state that provide services for the bottom 99% and transferring that wealth to the top 1%

Krugman: Not Everything Is Political

Krugman: Not Everything Is Political

in practice it turns out that many conservatives are unwilling to concede that Keynesian macro has any validity to it, or that you can sometimes run the printing presses without unleashing runaway inflation, because they fear that any such admission would open the doors to much wider government intervention. But that's exactly my point! They're letting their views about how the world works be dictated by their vision of the kind of society they want; they're politicizing their economic analysis. And that's why they keep getting everything wrong.

This is why we can not have a policy discussion. Because one side doesn’t care about how the world actually works, only the kind of world they wish to live in.

Bush brought an unprecedented level of systematic dishonesty to American political life

Bush brought an unprecedented level of systematic dishonesty to American political life, and we may never recover. Think about his two main "achievements", if you want to call them that: the tax cuts and the Iraq war, both of which continue to cast long shadows over our nation's destiny. The key thing to remember is that both were sold with lies.
Krugman: Bush brought an unprecedented level of systematic dishonesty to American political life

it's hard to think of a proposition that has been more thoroughly refuted by history than the notion that social insurance undermines a free society. Almost 70 years have passed since Friedrich Hayek predicted (or at any rate was understood by his admirers to predict) that Britain's welfare state would put the nation on the slippery slope to Stalinism; 46 years have passed since Medicare went into effect; as far as most of us can tell, freedom hasn't died on either side of the Atlantic.

it's hard to think of a proposition that has been more thoroughly refuted by history than the notion that social insurance undermines a free society. Almost 70 years have passed since Friedrich Hayek predicted (or at any rate was understood by his admirers to predict) that Britain's welfare state would put the nation on the slippery slope to Stalinism; 46 years have passed since Medicare went into effect; as far as most of us can tell, freedom hasn't died on either side of the Atlantic.
Krugman: Insurance and Freedom

with Hayek, as with Reagan, the truly amazing thing is that we have people citing as a source of wisdom someone who has been as thoroughly refuted by history as anyone can be. Three generations into the modern welfare state, and western democracies look less Stalinist than ever.

with Hayek, as with Reagan, the truly amazing thing is that we have people citing as a source of wisdom someone who has been as thoroughly refuted by history as anyone can be. Three generations into the modern welfare state, and western democracies look less Stalinist than ever.
Jack-booted Insurance-bringing Thugs

When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence. But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.

When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence. But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.

Austerity, Italian-Style - NYTimes.com

And the response is always the same. It wasn’t enough austerity! They didn’t go far enough! Cut more!

Economics 101 tells us to be very cautious about attempts to legislate market outcomes. Every textbook - mine included - lays out the unintended consequences that flow from policies like rent controls or agricultural price supports. And even most liberal economists would, I suspect, agree that setting a minimum wage of, say, $20 an hour would create a lot of problems. But that's not what's on the table. And there are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects.

Economics 101 tells us to be very cautious about attempts to legislate market outcomes. Every textbook - mine included - lays out the unintended consequences that flow from policies like rent controls or agricultural price supports. And even most liberal economists would, I suspect, agree that setting a minimum wage of, say, $20 an hour would create a lot of problems. But that's not what's on the table. And there are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects.

Raise That Wage - NYTimes.com

All the people claiming that those in favor of raising the minimum wage are ignorant of, or not considering basic econ101 are clearly wrong. But they will keep making that claim anyway.

Disco-era Macroeconomics

Disco-era Macroeconomics

People on the right tend to use "Keynesian" to mean "liberal stuff I don't like", but aside from that definition, the 70s tell us nothing about the issues we're discussing right now. You can argue that monetary policy was too loose, that the Fed was too expansionary in 1972 (when Arthur Burns was trying to reelect Richard Nixon) and that it failed to tighten in the face of oil-shock-driven inflation. But again, the idea that this experience has any relevance to expansionary fiscal policy in the face of a liquidity trap is totally bogus.

Worth a read.

The haters love to claim that people like me view more demand, more money printing, as the solution to all problems. But of course that's not true. Aggregate demand won't solve a problem of low productivity, or inadequate productive capacity, or for that matter extreme inequality due to technology or market power. But it can solve certain problems, which happen to be the problems we have now.

The haters love to claim that people like me view more demand, more money printing, as the solution to all problems. But of course that's not true. Aggregate demand won't solve a problem of low productivity, or inadequate productive capacity, or for that matter extreme inequality due to technology or market power. But it can solve certain problems, which happen to be the problems we have now.
Money, Wealth, and Models - NYTimes.com

Outside that bubble, a fair number of people have noticed that Keynesian economics has performed spectacularly in the crisis - it successfully predicted that deficits wouldn't drive up interest rates, that monetary expansion wouldn't be inflationary, that austerity policies in Britain and elsewhere would hit economic growth. And no, don't tell me that Keynesians predicted that the Obama stimulus would produce full employment; serious Keynesians, like me, were more or less frantically warning back in early 2009 that the stimulus was too small. But in Ryan's world everyone knows that Keynesian economics has failed.

Outside that bubble, a fair number of people have noticed that Keynesian economics has performed spectacularly in the crisis - it successfully predicted that deficits wouldn't drive up interest rates, that monetary expansion wouldn't be inflationary, that austerity policies in Britain and elsewhere would hit economic growth. And no, don't tell me that Keynesians predicted that the Obama stimulus would produce full employment; serious Keynesians, like me, were more or less frantically warning back in early 2009 that the stimulus was too small. But in Ryan's world everyone knows that Keynesian economics has failed.
Failures - NYTimes.com

we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he's holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac - a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, "My god, we can't dress the secretary up as a clown!" Even when it will make him a hero who saves the day?

we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he's holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac - a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, "My god, we can't dress the secretary up as a clown!" Even when it will make him a hero who saves the day?
Rage Against the Coin - NYTimes.com

The key thing to remember - and what the GOP hopes you won't understand - is that raising the debt ceiling only empowers the president to spend money that he's authorized to spend by Congressional legislation; nothing more. Conversely, a party that refuses to raise the debt limit is saying that it's prepared to inflict vast damage on America in order to achieve things that it couldn't achieve through actual legislation - in effect, that it's prepared to use vandalism to subvert the constitutional process.

The key thing to remember - and what the GOP hopes you won't understand - is that raising the debt ceiling only empowers the president to spend money that he's authorized to spend by Congressional legislation; nothing more. Conversely, a party that refuses to raise the debt limit is saying that it's prepared to inflict vast damage on America in order to achieve things that it couldn't achieve through actual legislation - in effect, that it's prepared to use vandalism to subvert the constitutional process.
The Hostage Drama Begins - NYTimes.com

the deficit-scold movement was never really about the deficit

Recent events have also demonstrated clearly what was already apparent to careful observers: the deficit-scold movement was never really about the deficit. Instead, it was about using deficit fears to shred the social safety net. And letting that happen wouldn't just be bad policy; it would be a betrayal of the Americans who just re-elected a health-reformer president and voted in some of the most progressive senators ever.
—Krugman on the deficit scolds Deficit Hawks and Hypocrites - NYTimes.com

Soup Kitchens Caused the Great Depression

Soup Kitchens Caused the Great Depression

Quiggin's post takes on both Mulligan's specifics and the broader claim that increased use of the social safety net is a cause rather than a result of the depressed economy. As one of his commenters points out, this amounts to the claim that soup kitchens caused the Great Depression. Quiggin does an admirable job of refuting this claim. I would, however, add one more point. If you really believe that the problem is that excessive generosity to the downtrodden is reducing the incentive to work, so that what we really have is a supply problem rather than a demand problem, you should expect to see upward pressure on wages.

For the last few years we have had downward pressure on wages consistent with a demand problem. And it is unlikely that soup kitchens were a cause of the Great Depression.

anyone who believes that the gold standard era was marked by price stability, or for that matter any kind of stability, just hasn't looked at the evidence. The fact is that prices have been far more stable under that dangerous inflationist Ben Bernanke than they ever were when gold ruled.

anyone who believes that the gold standard era was marked by price stability, or for that matter any kind of stability, just hasn't looked at the evidence. The fact is that prices have been far more stable under that dangerous inflationist Ben Bernanke than they ever were when gold ruled.
Golden Instability - NYTimes.com

Those who claim that inflation is vastly understated often appeal to the authority of Shadowstats

Those who claim that inflation is vastly understated often appeal to the authority of Shadowstats, a site that purports to provide true measures of many economic variables. Shadowstats doesn't come cheap: currently, an annual subscription costs $175. Six years ago, an annual subscription cost ... $175.
Another Alternative Inflation Measure - NYTimes.com

The Ryan Role

The Ryan Role

Ryan hasn't "crunched the numbers"; he has just scribbled some stuff down, without checking at all to see if it makes sense. He asserts that he can cut taxes without net loss of revenue by closing unspecified loopholes; he asserts that he can cut discretionary spending to levels not seen since Calvin Coolidge, without saying how; he asserts that he can convert Medicare to a voucher system, with much lower spending than now projected, without even a hint of how this is supposed to work. This is just a fantasy, not a serious policy proposal.

The Ryan plan is snake oil. I’m starting to think that Romney picked him to divert from his tax disclosure problems.

we have lots of empirical work on the effects of tax changes at the top - and none of it supports the Romney camp's claims. What we've just learned is that they were faking it all along. There is no plan to offset the tax cuts; Romney is just intending to blow up the deficit to lavish favors on the wealthy, then use it as an excuse to savage Social Security and Medicare.

we have lots of empirical work on the effects of tax changes at the top - and none of it supports the Romney camp's claims. What we've just learned is that they were faking it all along. There is no plan to offset the tax cuts; Romney is just intending to blow up the deficit to lavish favors on the wealthy, then use it as an excuse to savage Social Security and Medicare.
Dooh Nibor - NYTimes.com

What does it say about Romney's campaign that to run against a sitting president, one with a three and a half year track record, they have to lie about what he said to find a point of attack?

What does it say about Romney's campaign that to run against a sitting president, one with a three and a half year track record, they have to lie about what he said to find a point of attack?

They Didn’t Build That - NYTimes.com

Once again, reality has a liberal bias.

Krugman, Say's Law and the silliness of Going Galt

Krugman, Say's Law and the silliness of Going Galt

Now suppose that President Obama has reduced Mr. Wheelerdealer to despair; not only does the president waste money by doing things like feeding children, he says mean things about some rich people, which is just like the Nazis invading Poland, or something. So Wheelerdealer decides to go Galt. Well, actually just one-third Galt, reducing his working time to just 2000 hours a year so he can spend more time with his wife and mistress. According to marginal productivity theory, this does in fact shrink the economy: Wheelerdealer adds $10,000 worth of production for every hour he works, so his semi-withdrawal reduces GDP by $10 million. Bad! But what is the impact on the incomes of Americans other than Wheelerdealer? GDP is down by $10 million - but payments to Wheelerdealer are also down by $10 million. So the impact on the incomes of non-Wheelerdealer America is ... zero. Enjoy your leisure, John!

At some point we will be forced to admit that the folks who live on the equity side of the ledger are over paid and under taxed and this is a problem for people on the asset side of the ledger. If they all went Galt, no one would miss them and many people, mostly wage workers, would be better off.

Reagan Was a Keynesian

Reagan Was a Keynesian

Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration - mainly for emergency aid programs like unemployment insurance and food stamps - that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War. Why was government spending much stronger under Reagan than in the current slump? "Weaponized Keynesianism" - Reagan's big military buildup - played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around. … if you want to see government responding to economic hard times with the "tax and spend" policies conservatives always denounce, you should look to the Reagan era - not the Obama years.

The current GOP is so far removed from the GOP under Reagan it is almost unrecognizable.

The New Political Correctness

The New Political Correctness

Today, however, the big threat to our discourse is right-wing political correctness, which - unlike the liberal version - has lots of power and money behind it. And the goal is very much the kind of thing Orwell tried to convey with his notion of Newspeak: to make it impossible to talk, and possibly even think, about ideas that challenge the established order. Thus, even talking about "the wealthy" brings angry denunciations; we're supposed to call them "job creators". Even talking about inequality is "class warfare".

Krugman is 100% on the mark here. The real epidemic of political correctness is from the right not the left.

one thing I've noticed is that everyone on the right, and a fair number of people who should know better, basically believes that Gordon Gekko was right. Before the Gekkos came along, they assert, American business was sluggish, unproductive, and uncompetitive. Then came the LBOs and all that, and our economic energy was unleashed. As I said, everyone on the right knows that this happened. Needless to say, none of it is at all true.

one thing I've noticed is that everyone on the right, and a fair number of people who should know better, basically believes that Gordon Gekko was right. Before the Gekkos came along, they assert, American business was sluggish, unproductive, and uncompetitive. Then came the LBOs and all that, and our economic energy was unleashed. As I said, everyone on the right knows that this happened. Needless to say, none of it is at all true.

Was Greed Good? - NYTimes.com

Krugman looks at the numbers.

Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast. There seems to be some kind of lesson here about macroeconomics, but I can't quite put my finger on it If austerity worked, the bars for the UK and Italy would be positive. It spending didn't work, the bars for Japan would look like Italy's bar. (via Spending and Growth - NYTimes.com)

I didn't believe in the liquidity trap and was pretty down on old-fashioned Keynesianism until 1998, when a hard look at Japan and an attempt to understand what was happening there led me to change my mind.

I didn't believe in the liquidity trap and was pretty down on old-fashioned Keynesianism until 1998, when a hard look at Japan and an attempt to understand what was happening there led me to change my mind.

Krugman on Japan and Keynes.

Macroeconomic Morality - NYTimes.com

People in my camp have repeated until we're blue in the face that the case for fiscal expansion is very specific to circumstance - it's desirable when you're in a liquidity trap, and only when you're in a liquidity trap.

People in my camp have repeated until we're blue in the face that the case for fiscal expansion is very specific to circumstance - it's desirable when you're in a liquidity trap, and only when you're in a liquidity trap.

Structural Flashbacks - NYTimes.com

Keynesian Economics 101

Mr. Romney constantly talks about job losses under Mr. Obama. Yet all of the net job loss took place in the first few months of 2009, that is, before any of the new administration's policies had time to take effect. So the Ohio speech was a perfect illustration of the way the Romney campaign is banking on amnesia, on the hope that voters don't remember that Mr. Obama inherited an economy that was already in free fall.

Mr. Romney constantly talks about job losses under Mr. Obama. Yet all of the net job loss took place in the first few months of 2009, that is, before any of the new administration's policies had time to take effect. So the Ohio speech was a perfect illustration of the way the Romney campaign is banking on amnesia, on the hope that voters don't remember that Mr. Obama inherited an economy that was already in free fall.
The Amnesia Candidate - NYTimes.com

Europe has had several years of experience with harsh austerity programs

Europe has had several years of experience with harsh austerity programs, and the results are exactly what students of history told you would happen: such programs push depressed economies even deeper into depression. And because investors look at the state of a nation's economy when assessing its ability to repay debt, austerity programs haven't even worked as a way to reduce borrowing costs.
Europe's Economic Suicide - NYTimes.com

what the money of rich cranks does is ensure that bad ideas never go away - indeed, they can gain strength even as they fail in practice again and again. The notion that wonderful things happen if you cut taxes on the rich and terrible things happen if you raise them has a stronger hold than ever on the GOP, despite the experience of the Clinton tax hike and the Bush tax cut.

what the money of rich cranks does is ensure that bad ideas never go away - indeed, they can gain strength even as they fail in practice again and again. The notion that wonderful things happen if you cut taxes on the rich and terrible things happen if you raise them has a stronger hold than ever on the GOP, despite the experience of the Clinton tax hike and the Bush tax cut.

Crankocracy - NYTimes.com

Crankocracy. Its a thing now.

when the rating agencies upgraded the UK outlook, the Cameron government hailed this as proof that austerity was working; when they downgraded it due to poor economic performance, the Cameron government declared that this showed the need for even more austerity.

when the rating agencies upgraded the UK outlook, the Cameron government hailed this as proof that austerity was working; when they downgraded it due to poor economic performance, the Cameron government declared that this showed the need for even more austerity.

It’s Always Time For Austerity - NYTimes.com

The beatings will continue until moral improves.

Pundits in good standing have been expected to make calls for bipartisanship that involve pretending that Republican politicians are actually the kind of statesmen the party used to contain, but no longer does.

Pundits in good standing have been expected to make calls for bipartisanship that involve pretending that Republican politicians are actually the kind of statesmen the party used to contain, but no longer does.
Looking Back With Shrillness - NYTimes.com

we have become a society in which less-educated men have great difficulty finding jobs with decent wages and good benefits. Yet somehow we're supposed to be surprised that such men have become less likely to participate in the work force or get married, and conclude that there must have been some mysterious moral collapse caused by snooty liberals.

we have become a society in which less-educated men have great difficulty finding jobs with decent wages and good benefits. Yet somehow we're supposed to be surprised that such men have become less likely to participate in the work force or get married, and conclude that there must have been some mysterious moral collapse caused by snooty liberals.
Money and Morals - NYTimes.com

you never do find conservatives arguing that we shouldn't worry about higher tax rates on the rich, because they'll just work harder to be able to afford those luxury goods; or that a higher inheritance tax probably expands work effort, because it would force the Paris Hiltons of this world to go out and get real jobs.

you never do find conservatives arguing that we shouldn't worry about higher tax rates on the rich, because they'll just work harder to be able to afford those luxury goods; or that a higher inheritance tax probably expands work effort, because it would force the Paris Hiltons of this world to go out and get real jobs.
Different Slopes for Different Folks - NYTimes.com

fact-checking should be about checking facts - not about trying to impose some sort of Marquess of Queensbury rules on how you're allowed to use facts. Aside from undermining the mission, this makes the whole thing subjective - notice that Politifact wasn't even analyzing what Obama said, they were analyzing their impression about what he might have been trying to imply.

fact-checking should be about checking facts - not about trying to impose some sort of Marquess of Queensbury rules on how you're allowed to use facts. Aside from undermining the mission, this makes the whole thing subjective - notice that Politifact wasn't even analyzing what Obama said, they were analyzing their impression about what he might have been trying to imply.
Finding the Truth - NYTimes.com

Say's Law For Thee But Not For Me

Say's Law For Thee But Not For Me

Mark Thoma notes a double standard in the conservative outcry over the Keystone XL decision. As he notes, when it comes to the question of whether government spending can create jobs, the usual suspects claim that it's logically impossible: income has to be spent somewhere, so all the government can do is divert funds from other uses. But when it's a private investment, somehow that logic no longer applies.

They also fail to connect tax cuts and tax credits to Say’s Law. The larger point is that they don’t care if the argument is true. It doesn’t have to be true for them to benefit from it.

The great era of US economic growth was the postwar generation

The great era of US economic growth was the postwar generation; even during the good years of the 90s we didn't achieve comparable growth, and overall, the post-Reagan era was marked by slower growth than the equivalent period of time pre-Reagan. And I haven't even gotten into the income distribution thing. All of which makes me wonder: what goes on in these peoples' minds? Do they never even think of actually looking at the numbers, because they know that Reagan ushered in a great boom?
Reaganite Delusions - NYTimes.com

is there anything at all in Romney's stump speech that's true? It's all based on attacking Obama for apologizing for America, which he didn't, on making deep cuts in defense, which he also didn't, and on being a radical redistributionist who wants equality of outcomes, which he isn't. When the issue turns to jobs, Romney makes false assertions both about Obama's record and about his own. I can't find a single true assertion anywhere.

is there anything at all in Romney's stump speech that's true? It's all based on attacking Obama for apologizing for America, which he didn't, on making deep cuts in defense, which he also didn't, and on being a radical redistributionist who wants equality of outcomes, which he isn't. When the issue turns to jobs, Romney makes false assertions both about Obama's record and about his own. I can't find a single true assertion anywhere.
Untruths, Wholly Untrue, And Nothing But Untruths - NYTimes.com

The story of Romney and the auto bailout

what the story of Romney and the auto bailout actually shows is something we already knew from health care: he's a smart guy who is also a moral coward. His original proposal for the auto industry, like his health reform, bore considerable resemblance to what Obama actually did. But when the deed took place, Romney - rather than having the courage to say that the president was actually doing something reasonable - joined the rest of his party in whining and denouncing the plan.
Romney and the Bailout - NYTimes.com

right now, there are people declaring that our best days are behind us, that the economy has suffered a general loss of dynamism, that it's unrealistic to expect a quick return to anything like full employment. There were people saying the same thing in the 1930s! Then came the approach of World War II, which finally induced an adequate-sized fiscal stimulus - and suddenly there were enough jobs, and all those unneeded and useless workers turned out to be quite productive, thank you.

right now, there are people declaring that our best days are behind us, that the economy has suffered a general loss of dynamism, that it's unrealistic to expect a quick return to anything like full employment. There were people saying the same thing in the 1930s! Then came the approach of World War II, which finally induced an adequate-sized fiscal stimulus - and suddenly there were enough jobs, and all those unneeded and useless workers turned out to be quite productive, thank you.
The Defeatism of Depression - NYTimes.com

the Austrian/Ron Paul types made some very strong predictions about inflation - and rightly, given their model of how the world works. In their version of reality, it really isn't possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that's not only possible but what the model predicts in a liquidity trap. So since we did indeed triple the monetary base with nothing much happening to inflation, the right lesson to draw is that their model is all wrong. Unfortunately, I see no hint that anyone in that camp is prepared to consider that possibility.

the Austrian/Ron Paul types made some very strong predictions about inflation - and rightly, given their model of how the world works. In their version of reality, it really isn't possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that's not only possible but what the model predicts in a liquidity trap. So since we did indeed triple the monetary base with nothing much happening to inflation, the right lesson to draw is that their model is all wrong. Unfortunately, I see no hint that anyone in that camp is prepared to consider that possibility.
Inflation Predictions - NYTimes.com

Paul is unique among the GOP contenders, or for that matter among politicians in general, in making monetary policy his signature issue. So it's worth noting that he is among those who have been wrong about everything in this slump. Here's a sample from earlier this year...

Paul is unique among the GOP contenders, or for that matter among politicians in general, in making monetary policy his signature issue. So it's worth noting that he is among those who have been wrong about everything in this slump. Here's a sample from earlier this year…
Speaking of People Whose Models Have Failed - NYTimes.com

more austerity isn't going to convince the bond markets that Italy is just fine, let alone cut interest rates sufficiently to make contractionary policies expansionary. In fact, austerity - at least if not accompanied by major policy changes in Frankfurt - is probably self-defeating, because it will hurt the Italian economy more than it helps the short-term budget picture.

more austerity isn't going to convince the bond markets that Italy is just fine, let alone cut interest rates sufficiently to make contractionary policies expansionary. In fact, austerity - at least if not accompanied by major policy changes in Frankfurt - is probably self-defeating, because it will hurt the Italian economy more than it helps the short-term budget picture.
Mario and the Confidence Fairy - NYTimes.com

a bunch of people got together, with each group bringing what it could - the Wampanoag brought deer, the Pilgrims apparently shot some birds, etc.. Then everyone shared equally in the feast - regardless of how much they brought to the table. Socialism!

a bunch of people got together, with each group bringing what it could - the Wampanoag brought deer, the Pilgrims apparently shot some birds, etc.. Then everyone shared equally in the feast - regardless of how much they brought to the table. Socialism!
Thanksgiving Is Un-American - NYTimes.com

You have a Republican ideology, which Mitt Romney obviously doesn't believe in. He just oozes insincerity, that's just so obvious. But all of the others are fools and clowns. And there is a question here, my hypothesis is that maybe this is an ideology that only fools and clowns can believe in. And that's the Republican problem.

You have a Republican ideology, which Mitt Romney obviously doesn’t believe in. He just oozes insincerity, that’s just so obvious. But all of the others are fools and clowns. And there is a question here, my hypothesis is that maybe this is an ideology that only fools and clowns can believe in. And that’s the Republican problem.
Krugman: ‘Only Fools and Clowns’ Believe Republican Ideology | Video Cafe

In Democrat-world, up is up and down is down. Raising taxes increases revenue, and cutting spending while the economy is still depressed reduces employment. But in Republican-world, down is up. The way to increase revenue is to cut taxes on corporations and the wealthy, and slashing government spending is a job-creation strategy. Try getting a leading Republican to admit that the Bush tax cuts increased the deficit or that sharp cuts in government spending (except on the military) would hurt the economic recovery.

In Democrat-world, up is up and down is down. Raising taxes increases revenue, and cutting spending while the economy is still depressed reduces employment. But in Republican-world, down is up. The way to increase revenue is to cut taxes on corporations and the wealthy, and slashing government spending is a job-creation strategy. Try getting a leading Republican to admit that the Bush tax cuts increased the deficit or that sharp cuts in government spending (except on the military) would hurt the economic recovery.
Failure Is Good - NYTimes.com

This is the way the euro ends - not with a bang but with bunga bunga.... if you look around the world you see that the big determining factor for interest rates isn't the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy's 7 percent. Britain's fiscal prospects look worse than Spain's, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent. What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else's currency, with all the loss of flexibility that implies.

This is the way the euro ends - not with a bang but with bunga bunga…. if you look around the world you see that the big determining factor for interest rates isn't the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy's 7 percent. Britain's fiscal prospects look worse than Spain's, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent.

What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else's currency, with all the loss of flexibility that implies.

Legends of the Fail - NYTimes.com

Rule 1 is that Krugman is usually right. Rule 2 is that if you find yourself disagreeing with Krugman, refer back to rule 1.

it's worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government "pick winners," yet they demand special treatment for this industry precisely because they claim it will be a winner.

it's worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government "pick winners," yet they demand special treatment for this industry precisely because they claim it will be a winner.

Here Comes Solar Energy - NYTimes.com

I’ve been calling these subsidies for fossil fuels Carbon Socialism.

the way to understand the "Barney Frank did it" school of thought about the crisis is that it's an attempt to turn a huge defeat for conservative ideas into a win. The reality of the financial crisis was that deregulation - which was part of a broader rightward shift in policies that played a large role in creating rapid growth in income inequality - led to an economic catastrophe of the kind that just didn't happen during the 50 years or so when we had effective bank regulation. So the right's answer is to claim not just that the government did it, but that it caused the crisis by its attempts to reduce inequality! It's kind of a masterstroke, in an evil way.

the way to understand the "Barney Frank did it" school of thought about the crisis is that it's an attempt to turn a huge defeat for conservative ideas into a win. The reality of the financial crisis was that deregulation - which was part of a broader rightward shift in policies that played a large role in creating rapid growth in income inequality - led to an economic catastrophe of the kind that just didn't happen during the 50 years or so when we had effective bank regulation. So the right's answer is to claim not just that the government did it, but that it caused the crisis by its attempts to reduce inequality! It's kind of a masterstroke, in an evil way.
Financial Big Lies - NYTimes.com

The point is that I know technocrats, and these people aren't - they're faith healers who are making stuff up to suit their prejudices. You can say something similar, although a bit less pointed, about the Obama administration. The line from people there, including the president, has been that it was too technocratic. But the real technocrats - people like Christy Romer and, well, me - were saying right from the beginning that the stimulus was too small, etc.; people like Geithner who opposed stronger action were basing their position on gut feelings about confidence, not number-crunching.

The point is that I know technocrats, and these people aren't - they're faith healers who are making stuff up to suit their prejudices. You can say something similar, although a bit less pointed, about the Obama administration. The line from people there, including the president, has been that it was too technocratic. But the real technocrats - people like Christy Romer and, well, me - were saying right from the beginning that the stimulus was too small, etc.; people like Geithner who opposed stronger action were basing their position on gut feelings about confidence, not number-crunching.

Crats, Maybe, But Not Much Techno - NYTimes.com

They’re avoiding the math because it has a liberal bias. Better to cater to prejudices than reality.

Republicans - who normally insist that the government can't create jobs, and who have argued that lower, not higher, federal spending is the key to recovery - have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.

Republicans - who normally insist that the government can't create jobs, and who have argued that lower, not higher, federal spending is the key to recovery - have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.

Krugman calls out the “weaponized Keynesians” in the GOP.

Bombs, Bridges and Jobs - NYTimes.com

If I say that Paul Ryan's mother was a hamster and his father smelt of elderberries, that's ad hominem. If I say that his plan would hurt millions of people and that he's not being honest about the numbers, that's harsh, but not ad hominem. And you really have to be somewhat awed when people who routinely accuse Obama of being a socialist get all weepy over him saying that eliminating protections against pollution would lead to more pollution.

If I say that Paul Ryan's mother was a hamster and his father smelt of elderberries, that's ad hominem. If I say that his plan would hurt millions of people and that he's not being honest about the numbers, that's harsh, but not ad hominem. And you really have to be somewhat awed when people who routinely accuse Obama of being a socialist get all weepy over him saying that eliminating protections against pollution would lead to more pollution.
The Truth Has A Well-Known, Well, You Know - NYTimes.com

this is the way the right goes after everyone who stands in their way: accuse them of everything, no matter how implausible or contradictory the accusations are. Progressives are atheistic socialists who want to impose Sharia law. Class warfare is evil; also, John Kerry is too rich. And so on.

this is the way the right goes after everyone who stands in their way: accuse them of everything, no matter how implausible or contradictory the accusations are. Progressives are atheistic socialists who want to impose Sharia law. Class warfare is evil; also, John Kerry is too rich. And so on.

Krugman on the Right Wing claims that OWS is anti-semitic

Say Anything - NYTimes.com

what Britain needs is for everyone to pay down debt, said in obvious obliviousness to the fact that if everyone cuts spending at the same time, income must fall. But then, this kind of obliviousness is very widespread, and my experience is that if you try to point out the problem - if you try to explain that my spending is your income and vice versa - you get a belligerent response. Y=E is seen as a political statement, which in a way it is if one side of the political spectrum insists on believing things that can't be true.

what Britain needs is for everyone to pay down debt, said in obvious obliviousness to the fact that if everyone cuts spending at the same time, income must fall. But then, this kind of obliviousness is very widespread, and my experience is that if you try to point out the problem - if you try to explain that my spending is your income and vice versa - you get a belligerent response. Y=E is seen as a political statement, which in a way it is if one side of the political spectrum insists on believing things that can't be true.
Arithmetic Has A Well-Known Keynesian Bias - NYTimes.com

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst - but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers' sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support - and the wealth they still possessed thanks to the bailouts - behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis. Given this history, how can you not applaud the protesters for finally taking a stand?

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst - but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers' sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support - and the wealth they still possessed thanks to the bailouts - behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis. Given this history, how can you not applaud the protesters for finally taking a stand?

Krugman on the Occupy Wall Street protest.

Confronting the Malefactors - NYTimes.com

after three years in which Very Serious People refused to hold the financial industry accountable

it's becoming clear that there's something important happening: finally, after three years in which Very Serious People refused to hold the financial industry accountable, there's a real grass-roots uprising against the Masters of the Universe.

Unsavvy People - NYTimes.com

Anyone else remember that the Tea Party started as a protest against the bank bailouts?

Part of what has always fascinated me about the Civil War is that like World War II, it was a war in which the basically non-military culture of modern America - which at that point didn't include the South - used its mastery of the arts of peace and production to overcome more warlike adversaries.

Part of what has always fascinated me about the Civil War is that like World War II, it was a war in which the basically non-military culture of modern America - which at that point didn't include the South - used its mastery of the arts of peace and production to overcome more warlike adversaries.
Mapping Through Georgia - NYTimes.com

What Tom describes as the centrist position both parties know they should adopt, but refuse to do because of partisanship on both sides, is in fact the actually existing position of the Democratic party - a position that Republicans denounce as "socialist." I know that admitting that Barack Obama is already the candidate of centrists' dreams would be awkward, would make it hard to adopt the stance that both sides are equally at fault. But that is the truth.

What Tom describes as the centrist position both parties know they should adopt, but refuse to do because of partisanship on both sides, is in fact the actually existing position of the Democratic party - a position that Republicans denounce as "socialist." I know that admitting that Barack Obama is already the candidate of centrists' dreams would be awkward, would make it hard to adopt the stance that both sides are equally at fault. But that is the truth.
Hidden in the Middle - NYTimes.com

a large part of it, it seems obvious, is the intense desire to see economics as a morality play of sin and punishment, where the sinners are, of course, workers and governments, not the bankers. Pain is not an unfortunate consequence of policies, it's what is supposed to happen.

a large part of it, it seems obvious, is the intense desire to see economics as a morality play of sin and punishment, where the sinners are, of course, workers and governments, not the bankers. Pain is not an unfortunate consequence of policies, it's what is supposed to happen.
Defeatism - NYTimes.com

The only real tests we've had of Keynesian economics were the prediction that large budget deficits in a depressed economy wouldn't drive up interest rates, and the prediction that austerity in depressed economies would deepen their depression. How do you think that turned out?

The only real tests we've had of Keynesian economics were the prediction that large budget deficits in a depressed economy wouldn't drive up interest rates, and the prediction that austerity in depressed economies would deepen their depression. How do you think that turned out?
Stimulus Tales - NYTimes.com

Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an "existential threat" to America. Yet they are insisting that the wealthy - who presumably have as much of a stake as everyone else in the nation's future - should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you're wondering, is what real class warfare looks like.

Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an "existential threat" to America. Yet they are insisting that the wealthy - who presumably have as much of a stake as everyone else in the nation's future - should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you're wondering, is what real class warfare looks like.
The Social Contract - NYTimes.com

Look at the IRS data on returns for the 400 highest incomes in America (pdf) - specifically, Table 43. If you look at the numbers since 2004, you'll see that in a typical year between 30 and 40 percent of those super-high-income players paid an average tax rate of less than 15 percent; most of them paid less than 20 percent. Bear in mind that for the very wealthy the payroll tax - the main burden on working-class Americans - is trivial, because of the cap on Social Security and the fact that it only applies to earned income. And what becomes clear is that the Obama/Buffet claim is absolutely, totally true.

Look at the IRS data on returns for the 400 highest incomes in America (pdf) - specifically, Table 43. If you look at the numbers since 2004, you'll see that in a typical year between 30 and 40 percent of those super-high-income players paid an average tax rate of less than 15 percent; most of them paid less than 20 percent. Bear in mind that for the very wealthy the payroll tax - the main burden on working-class Americans - is trivial, because of the cap on Social Security and the fact that it only applies to earned income. And what becomes clear is that the Obama/Buffet claim is absolutely, totally true.
Billionaires and Secretaries - NYTimes.com

What happened after 9/11 - and I think even people on the right know this, whether they admit it or not - was deeply shameful. The atrocity should have been a unifying event, but instead it became a wedge issue. Fake heroes like Bernie Kerik, Rudy Giuliani, and, yes, George W. Bush raced to cash in on the horror. And then the attack was used to justify an unrelated war the neocons wanted to fight, for all the wrong reasons.

What happened after 9/11 - and I think even people on the right know this, whether they admit it or not - was deeply shameful. The atrocity should have been a unifying event, but instead it became a wedge issue. Fake heroes like Bernie Kerik, Rudy Giuliani, and, yes, George W. Bush raced to cash in on the horror. And then the attack was used to justify an unrelated war the neocons wanted to fight, for all the wrong reasons.
The Years of Shame - NYTimes.com

What's so striking about all this, from an economist's point of view, is the absence of anything that sounds like a model. It's all about virtue and vice, with just the assumption that virtue will be rewarded.

What's so striking about all this, from an economist's point of view, is the absence of anything that sounds like a model. It's all about virtue and vice, with just the assumption that virtue will be rewarded.

The Beatings Must Continue - NYTimes.com

The first rule of austerity club is…

Krugman being grouchy in the NYT

Zero job growth, with unemployment still at nosebleed levels. Meanwhile, the interest rate on 10-year US bonds is down to 2.04%, and it's negative on inflation-protected securities.

Aren't you glad we pivoted from jobs to deficits a year and a half ago?

Meanwhile, on the other side of the pond, Is austerity killing Europe's recovery?

After more than a year of aggressive budget cutting by European governments, an economic slowdown on the continent is confronting policymakers from Madrid to Frankfurt with an uncomfortable question: Have they been addressing the wrong problem?

Yah think?

Too bad there weren't any prominent economists warning that the obsession with short-term deficits was a terrible mistake, that austerity would undermine hopes of recovery. Oh, wait.


From Krugman being grouchy in the NYT


This is Krugman’s fault for spending all him time arguing for alien invasions and breaking windows rather than a fact based analysis of the economy to guide practical, implementable public policy. Oh, wait.

Not long ago, a political party seeking to change U.S. policy would try to achieve that goal by building popular support for its ideas, then implementing those ideas through legislation. That, after all, is how our political system was designed to work. But today's G.O.P. has decided to bypass all that and go for a quicker route. Never mind getting enough votes to pass legislation; it gets what it wants by threatening to hurt America if its demands aren't met. That's what happened with the debt-ceiling fight, and now it's what's happening over disaster aid. In effect, Mr. Cantor and his allies are threatening to take hurricane victims hostage, using their suffering as a bargaining chip.

Not long ago, a political party seeking to change U.S. policy would try to achieve that goal by building popular support for its ideas, then implementing those ideas through legislation. That, after all, is how our political system was designed to work.

But today's G.O.P. has decided to bypass all that and go for a quicker route. Never mind getting enough votes to pass legislation; it gets what it wants by threatening to hurt America if its demands aren't met. That's what happened with the debt-ceiling fight, and now it's what's happening over disaster aid. In effect, Mr. Cantor and his allies are threatening to take hurricane victims hostage, using their suffering as a bargaining chip.

Eric and Irene - NYTimes.com

I may be wasting my time doing any kind of rational analysis of Eric Cantor's demand that any disaster aid in the wake of Irene be offset by spending cuts elsewhere. Cantor is, of course, being totally hypocritical; where were the demands for offsets to the cost of invading Iraq?

I may be wasting my time doing any kind of rational analysis of Eric Cantor's demand that any disaster aid in the wake of Irene be offset by spending cuts elsewhere. Cantor is, of course, being totally hypocritical; where were the demands for offsets to the cost of invading Iraq?
Disaster Relief Economics - NYTimes.com

Krugman: Republicans Against Science

Mr. Perry suggests; those scientists are just in it for the money, "manipulating data" to create a fake threat. In his book "Fed Up," he dismissed climate science as a "contrived phony mess that is falling apart."

I could point out that Mr. Perry is buying into a truly crazy conspiracy theory, which asserts that thousands of scientists all around the world are on the take, with not one willing to break the code of silence. I could also point out that multiple investigations into charges of intellectual malpractice on the part of climate scientists have ended up exonerating the accused researchers of all accusations. But never mind: Mr. Perry and those who think like him know what they want to believe, and their response to anyone who contradicts them is to start a witch hunt.


From Republicans Against Science

This is normal practice for pseudo intellectual flat-earthers and creation-science folk. When science isn’t on their side, they pick at the way the science is being done. Never mind that the same techniques are being used elsewhere without controversy.

The Cracked Conservative Mirror

Whenever you read conservatives trying to critique what they think the other side believes, you find them assuming that their opponents must be mirror images of themselves. The right believes that less government spending is always good, regardless of circumstances, so it assumes that the other side must always favor more government spending. The right says that deficits are always evil (unless they're caused by tax cuts), so they assume that the center-left must favor deficits in all conditions.

From The Cracked Conservative Mirror - NYTimes.com

GOP strategy is to find a policy that failed, declare it Keynesian and therefore proof that Keynes was wrong.

S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4%. This amounts to a massive market rejection of S&P's concerns.

S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4%. This amounts to a massive market rejection of S&P's concerns.

Aaauuuggghhh! Market Commentary Edition - NYTimes.com

Tea Party manages to hurt private sector while helping push investors into public debt market. Heckofajob.

The point here is not so much the $2 trillion, which makes very little difference to real US fiscal prospects; it's the fact that S&P stands revealed as not understanding basic analysis of budget estimates. I mean, I don't think I would have made that mistake; real budget experts, like the people at the Center on Budget and Policy Priorities, certainly wouldn't have. So what we just saw was amateur hour. And these people are pronouncing on US credit-worthiness?

The point here is not so much the $2 trillion, which makes very little difference to real US fiscal prospects; it's the fact that S&P stands revealed as not understanding basic analysis of budget estimates. I mean, I don't think I would have made that mistake; real budget experts, like the people at the Center on Budget and Policy Priorities, certainly wouldn't have.

So what we just saw was amateur hour. And these people are pronouncing on US credit-worthiness?

—Krugman on S&P
I Heard It Through The Baseline - NYTimes.com

Basically the Republicans said we'll blow up the world economy unless you give us exactly what we want, and the President said OK. That's what happened... . We're having a debate in Washington which is all about, "we're going to make this economy worse, but are we going to make it worse on 90 percent of the Republican's terms or 10o percent of the Republican's terms?" And the answer is 100 percent.

Basically the Republicans said we’ll blow up the world economy unless you give us exactly what we want, and the President said OK. That’s what happened… . We’re having a debate in Washington which is all about, “we’re going to make this economy worse, but are we going to make it worse on 90 percent of the Republican's terms or 10o percent of the Republican's terms?” And the answer is 100 percent.
Krugman: America is heading for a “lost decade” - War Room - salon.com

As Chait says, the first thing you need to understand is that modern Republicans don't care about deficits. They only pretend to care when they believe that deficit hawkery can be used to dismantle social programs; as soon as the conversation turns to taxes, or anything else that would require them and their friends to make even the smallest sacrifice, deficits don't matter at all.

As Chait says, the first thing you need to understand is that modern Republicans don't care about deficits. They only pretend to care when they believe that deficit hawkery can be used to dismantle social programs; as soon as the conversation turns to taxes, or anything else that would require them and their friends to make even the smallest sacrifice, deficits don't matter at all.
Very Serious Suckers - NYTimes.com

The deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America's long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

The deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America's long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.
Paul Krugman - The President Surrenders on Debt Ceiling - NYTimes.com

Lawyers, Coins, and Money

there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.

The government can also raise money through sales: For example, it could sell the Federal Reserve an option to purchase government property for $2 trillion. The Fed would then credit the proceeds to the government's checking account. Once Congress lifts the debt ceiling, the president could buy back the option for a dollar, or the option could simply expire in 90 days.


From Lawyers, Coins, and Money - NYTimes.com

I hate the idea, but only slightly less than the idea of having to do this again in six months.

Conservative Origins of Obamacare

Romneycare, is a three-legged stool of regulation and subsidies: community rating requiring insurers to make the same policies available to everyone regardless of health status; an individual mandate, requiring everyone to purchase insurance, so that healthy people don't opt out; and subsidies to keep insurance affordable for those with lower incomes.

The original Heritage plan from 1989 had all these features.

These days, Heritage strives mightily to deny the obvious


From NYTimes.com

Heritage declares we have always been at war with Eastasia.

What Eurosclerosis? "More detailed analysis shows that the remaining gap comes from lower employment rates in Europe for the young and old; prime-age workers, especially men, are if anything more likely to be working in Europe. And you should note that this European performance comes despite the fact that tax levels and levels of social benefits are vastly higher than they are here. Any US politician proposing even a partial move in Europe's direction would be accused of being a job-killer. Somehow, though, the jobs survive." (via The End of Eurosclerosis - NYTimes.com)

Debt and Forgetfulness

Between 1993 and 2001, federal debt held by the public fell from 49.2 percent of GDP to 32.5 percent of GDP. What stopped the paydown of debt wasn't liberal big spending; it was demands from conservatives that the surplus be used to cut taxes. George Bush said that a surplus means that the government is collecting too much money; Alan Greenspan warned that we were paying off our debt too fast.

Oh, and I was very much against those tax cuts, arguing that we should pay down the debt to prepare for future needs. As a reward, I now get accused of inconsistency, for saying that deficits were bad under Bush but good now.


From Debt and Forgetfulness

What critics of Keynes don’t understand is that it isn’t about deficit spending. Ideally, it is about saving when times are good and spending when times are bad. Counter-cyclical spending to keep the highs from getting too high and the lows from being too low.

Ending Carbon Socialism

If you seriously believe in markets, you should believe that given the right incentives - namely, putting a price on emissions, through either a tax or a tradable permit scheme - the economy will find lots of ways to emit less. You should definitely not believe, as anti-environmentalists claim, that the result would be economic disaster.

The point is that renewable energy like wind and solar has not gone through a comparable process of improvement - yet - because the incentives haven't been there. But once we get to the point where a carbon price makes these commercially viable, there's every reason to expect huge improvement over time through, yes, the magic of the marketplace.


From Ending Carbon Socialism

I’ve been fond of calling the statis quo on energy policy Carbon Socialism.

Getting to Crazy

the modern G.O.P. fundamentally does not accept the legitimacy of a Democratic presidency - any Democratic presidency. We saw that under Bill Clinton, and we saw it again as soon as Mr. Obama took office.

As a result, Republicans are automatically against anything the president wants, even if they have supported similar proposals in the past.


From Getting to Crazy

Sad but true.

The Obama-Keynes Mystery

here's an unprofessional speculation: maybe it's personal. Maybe the president just doesn't like the kind of people who tell him counterintuitive things, who say that the government is not like a family, that it's not right for the government to tighten its belt when Americans are tightening theirs, that unemployment is not caused by lack of the right skills. Certainly just about all the people who might have tried to make that argument have left the administration or are leaving soon.

And what's left, I'm afraid, are the Very Serious People. It looks as if those are the people the president feels comfortable with. And that, of course, is a tragedy.


From The Obama-Keynes Mystery


Maybe. But I wonder how much of this is just the Washington bubble.

Hedge Fund Hippies

Mr. Biggs, former chief global strategist for U.S. investment banking powerhouse Morgan Stanley, demanded the U.S. government temporarily return to ideas used in the Great Depression as a way to get the country back to higher growth.

"What the U.S. really needs is a massive infrastructure program ... similar to the WPA back in the 1930s," he says.

The plan would be to employ some of the many unemployed people, jump start the economy, as well as help catch up with Asia, which is building state-of-the-art infrastructure from new mechanized port facilities to high-speed trains.

He suggested financing such building through the sale of U.S. Treasuries.


From Hedge Fund Hippies


Must be one of those left-wing commie-pinko hedge fund traders.

Thoughts on Voodoo

In short, there's a very good case to be made that austerity now isn't just a bad idea because of its impact on the economy and the unemployed; it may well fail even at the task of helping the budget balance.

It's important to realize that I'm not saying that government spending always pays for itself, and that saving money is always counterproductive. These kinds of effects are specific to a liquidity trap situation. But that's the situation we're in.


From NYT

More detail in the article.

Lysenkoism as economic policy in the Diamond nomination

I think the rejection of a Nobel laureate for a seat at the Fed is tied, in a fundamental way, to the willingness of economists with decent professional reputations to sign on to the increasingly crazy proclamations issued by Republican politicians. Whether they are honest with themselves or not, what they've realized is that they face a loyalty test - or maybe that's an apparatchik test; if they have any ambitions of serving in a policy position, they have to prove themselves willing to follow the party line wherever it goes.

From Everything Is Political

Lysenkoism as economic policy.

The Rentier Regime

What explains this opposition to any and all attempts to mitigate the economic disaster? I can think of a number of causes, but Kuttner makes a very good point: everything we're seeing makes sense if you think of the right as representing the interests of rentiers, of creditors who have claims from the past - bonds, loans, cash - as opposed to people actually trying to make a living through producing stuff. Deflation is hell for workers and business owners, but it's heaven for creditors.


From NYT

Borders on conspiracy theory but interesting point.

It's hard to see that too much democracy was the problem.

Whenever I read pieces like David Brooks's column this morning - pieces that attribute our budget deficits to the public's irresponsibility and lack of realism - I find myself wondering how so much recent history went down the memory hole.

Remember, we had a budget surplus in 2000. Where did it go? The two biggest policy changes responsible for the swing into deficit were the big tax cuts of 2001 and 2003, and the war of choice in Iraq.

And neither of these policy changes was in any sense a response to public demand. Americans weren't clamoring for a tax cut in 2000; Bush pushed his tax cuts to please his donors and his base. And the decision to invade Iraq not only wasn't a response to public demand, Bush and co. had to spend months selling the idea to the public.

In fact, the only budget-busting measure undertaken in recent memory that was driven by popular demand as opposed to the agenda of a small number of powerful people was Medicare Part D. And even there, the plan was needlessly expensive, not because that's the way the public wanted it - it could easily have been simply an addition to traditional Medicare - but to please the drug lobby and the anti-government ideologues.


From Krugman: It's hard to see that too much democracy was the problem.


Correcting the record.

New study says Paul Krugman is top prognosticator

The Hamilton students sampled the predictions of 26 individuals who wrote columns in major print media and who appeared on the three major Sunday news shows - Face the Nation, Meet the Press, and This Week - and evaluated the accuracy of 472 predictions made during the 16-month period. They used a scale of 1 to 5 (1 being "will not happen, 5 being "will absolutely happen") to rate the accuracy of each, and then divided them into three categories: The Good, The Bad, and The Ugly.

The students found that only nine of the prognosticators they studied could predict more accurately than a coin flip. Two were significantly less accurate, and the remaining 14 were not statistically any better or worse than a coin flip.

The top prognosticators - led by New York Times columnist Paul Krugman - scored above five points and were labeled "Good," while those scoring between zero and five were "Bad." Anyone scoring less than zero (which was possible because prognosticators lost points for inaccurate predictions) were put into "The Ugly" category.


From New study says Paul Krugman is top prognosticator


Krugman, better than a coin flip.

Who Benefits From Bubbles?

in several years during the last decade the top 400 accounted for more than 10 percent of all capital gains income in America. Just 400 people!

Conservatives often try to sell the notion that reducing the capital gains tax is about helping small business people. But you really want to think of the fact that a significant chunk of that tax break is going to just 400 people.


From Who Benefits From Bubbles?

Interesting factoid. Turns out that hypothetical question has an answer.

An Insurance Company With An Army

When you talk about federal spending, you're overwhelmingly talking about Social Security, Medicare, Medicaid, and defense. And the bulk of the insurance - all of Social Security and Medicare, about 2/3 of Medicaid - is for the elderly and disabled.

Put it this way: Whenever someone talks about making government smaller, he should be asked which of these big four he proposes cutting, and how. If he responds with generalities, he's faking it.


From An Insurance Company With An Army


Calling it as it is.

European and US Employment

Lots of people have an image of Europe as an economic pit of doom, with millions of prime-age workers sitting idle thanks to the welfare state. And there was some truth to that image 15 years ago. But things got better over there even as they got worse here: Even before the Great Recession struck, people in the prime of life were equally likely to be employed on either side of the Atlantic, and at this point Europe has a better prime-age employment situation than we do.


From European and US Employment - NYTimes.com

Let's Not Be Civil

Whenever there's something the G.O.P. doesn't like - say, environmental protection - Heritage can be counted on to produce a report, based on no economic model anyone else recognizes, claiming that this policy would cause huge job losses. Correspondingly, whenever there's something Republicans want, like tax cuts for the wealthy or for corporations, Heritage can be counted on to claim that this policy would yield immense economic benefits.

The point is that the two parties don't just live in different moral universes, they also live in different intellectual universes, with Republicans in particular having a stable of supposed experts who reliably endorse whatever they propose.


From Let's Not Be Civil


Calling it as it is.

Insincerely Yours

Look, we've been here before. The obvious parallel in my mind is what happened after 9/11, when more or less the same people declared themselves totally focused on fighting terrorism - but unwilling to give up anything they wanted, and in fact eagerly using the terrorist threat as an excuse to grab even more goodies. I mean, within 48 hours of the attack Congressional Republicans were preparing their response: a cut in the capital gains tax; in the immediate aftermath, the Bush administration fought hard to keep airport security in private hands. Somehow, responding to terrorism only involved doing things the administration wanted to do anyway: invading Iraq, torturing people, tapping our phones, etc..


From Insincerely Yours


He nails it.

Ludicrous and Cruel

the Congressional Budget Office estimates that by 2030 the value of a voucher would cover only a third of the cost of a private insurance policy equivalent to Medicare as we know it. So the plan would deprive many and probably most seniors of adequate health care.

And that neither should nor will happen. Mr. Ryan and his colleagues can write down whatever numbers they like, but seniors vote. And when they find that their health-care vouchers are grossly inadequate, they'll demand and get bigger vouchers - wiping out the plan's supposed savings.

From Ludicrous and Cruel - NYTimes.com

What if the point of privatization is simply to optimize the profitability of rent-seeking activity in the health care industry?

Ryan and Taxes

The Ryan plan calls for cutting the top marginal rate to 25 percent - lower than it has been at any time in the past 80 years. That in itself should tell you that this is a deeply unserious proposal: anyone who tells you that we have to face hard truths, that everyone must sacrifice, and by the way, rich people will pay lower taxes than they have at any time since the 1930s, is just engaged in a power grab.

From Ryan and Taxes

The Ryan plan should not be viewed as a budget. It should be looked at as a statement of ideological principals. If it were really serious about the budget, it would trim the military budget and corporate subsidies.

The economic beatings will continue until economic morale improves

The GOP prescription for higher employment is actually quite spectacular - it's a thing of many levels, an ignorance wrapped in a fallacy.

The idea is this: we'll lay off government workers; this will raise unemployment, putting downward pressure on wages; and lower wages will lead to higher employment.

So, for this to work you first have to have a downward-sloping demand for labor as a function of the nominal wage rate. There's no reason to believe that's the case: in a liquidity trap, falling wages probably reduce the demand for labor, because they worsen the burden of debt.

And even if you somehow bypass this objection, the argument is still nonsense: it says that by reducing demand, you cut the price, which increases demand, which means that you end up selling more than before. Um, no - that's the kind of answer that, in Econ 101, has you suggesting that the student get special tutoring.


From Worse Is Better


The economic beatings will continue until economic morale improves.

Krugman on William Cronon and the American Thought Police

Recently William Cronon, a historian who teaches at the University of Wisconsin, decided to weigh in on his state's political turmoil. He started a blog, "Scholar as Citizen," devoting his first post to the role of the shadowy American Legislative Exchange Council in pushing hard-line conservative legislation at the state level. Then he published an opinion piece in The Times, suggesting that Wisconsin's Republican governor has turned his back on the state's long tradition of "neighborliness, decency and mutual respect."

So what was the G.O.P.'s response? A demand for copies of all e-mails sent to or from Mr. Cronon's university mail account containing any of a wide range of terms, including the word "Republican" and the names of a number of Republican politicians.

If this action strikes you as no big deal, you're missing the point. The hard right - which these days is more or less synonymous with the Republican Party - has a modus operandi when it comes to scholars expressing views it dislikes: never mind the substance, go for the smear. And that demand for copies of e-mails is obviously motivated by no more than a hope that it will provide something, anything, that can be used to subject Mr. Cronon to the usual treatment.

From Paul Krugman

Call this what it is, right wing political correctness.

The Austerity Delusion

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.


From The Austerity Delusion


This would be a case against austerity measures if those advocating austerity were interested in fact based policy arguments.

Economics as a Science: A Bad Example

Yes, the old Keynesian Phillips curve was abandoned in the face of evidence. But while real business cycle theory has indeed been "invalidated by reality", as far as I can tell it's still going strong in freshwater departments.

The point is that while economics certainly did have some of the characteristics of a science three decades ago, you can make a good case that significant parts of the field have lost those characteristics since then.


From Economics as a Science: A Bad Example - NYTimes.com


That’s the problem with faith based science. When invalidated by reality, they simply declare reality broken or the methodology used to invalidate tainted by socialists.

The Rationing Switcheroo

reformers argue that Medicare needs to make choices about what it will pay for; people like Huckabee then scream that the government is going to tell people that they can't get medical care it disapproves of.

But nobody is proposing that the government deny you the right to have whatever medical care you want at your own expense. We're only talking about what medical care will be paid for by the government. And right-wingers, of all people, shouldn't believe that everyone has the right to have whatever they want, at taxpayers' expense.

From NYTimes.com

Krugman on the cynical death panel arguments.

the signature initiatives of Republican presidents - the Reagan tax cut, the Bush tax cut, the Medicare drug benefit - have all been unfunded deficit-raisers; the signature initiatives of Democratic presidents - the Clinton tax hike, Obamacare - have all been deficit-reducing. (Yes, the stimulus - but that was intended to be temporary, and has in fact proved too temporary; and Bush I's tax increase was an exception, but the GOP has made it clear that nothing like that will ever happen again.)

the signature initiatives of Republican presidents - the Reagan tax cut, the Bush tax cut, the Medicare drug benefit - have all been unfunded deficit-raisers; the signature initiatives of Democratic presidents - the Clinton tax hike, Obamacare - have all been deficit-reducing. (Yes, the stimulus - but that was intended to be temporary, and has in fact proved too temporary; and Bush I's tax increase was an exception, but the GOP has made it clear that nothing like that will ever happen again.)
Turning a Blind Eye to the Obvious - NYTimes.com

Deja vu all over again

I don't watch cable news, or actually any kind of TV news. But I gather that there's a virtual blackout on the huge demonstrations in Wisconsin, except on Fox, which portrays them as thuggish and violent.

What that makes me think of is January-February 2003, when anyone watching cable news would have believed that only a few kooks were opposed to the imminent invasion of Iraq. It was quite spooky, realizing that hundreds of thousands of people could march through New York, and by tacit agreement be ignored by news networks whose headquarters were just a few blocks away.

And it's even more spooky to see it happening all over again.


From That Iraq Feeling - NYTimes.com

Wisconsin Power Play

There's a bitter irony here. The fiscal crisis in Wisconsin, as in other states, was largely caused by the increasing power of America's oligarchy. After all, it was superwealthy players, not the general public, who pushed for financial deregulation and thereby set the stage for the economic crisis of 2008-9, a crisis whose aftermath is the main reason for the current budget crunch. And now the political right is trying to exploit that very crisis, using it to remove one of the few remaining checks on oligarchic influence.


From NYTimes.com


The takeway quote.

Realism on Defense Spending

if we're talking about fiscal issues, you have to bear the arithmetic in mind. We're not living in the 1950s, when defense was half the federal budget. Even a drastic cut in military spending wouldn't release enough money to offset more than a small fraction of the projected rise in health care costs.


From Realism on Defense Spending


Good point.

Krugman: Republicans have a mandate to repeal the laws of arithmetic

Pew on public fiscal views isn't really all that surprising, but it's still striking: people want spending cut, but are opposed to cuts in anything except foreign aid:

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And they want state governments to balance their budgets without cutting spending or raising taxes:

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The conclusion is inescapable: Republicans have a mandate to repeal the laws of arithmetic.


From Don’t Cut You, Don’t Cut Me

Gradual Trends and Extreme Events

I've spent a lot of the last several days reading about climate change, extreme weather events, food prices, and so on. And one thing that became clear to me is that there's widespread misunderstanding of the relationship between the gradual trend of rising temperatures and the extreme weather events that have become so much more common.

From Krugman

Professor Krugman does a good job explaining probability distribution and how it relates to climate change predictions. Worth a read.

Ideas Are Not The Same As Race

And it's not just the fact that you can choose your ideology, but not your race. Ideologies have a real effect on overall life outlook, which has a direct impact on job choices. Military officers are much more conservative than the population at large; so?

It's particularly troubling to apply some test of equal representation when you're looking at academics who do research on the very subjects that define the political divide. Biologists, physicists, and chemists are all predominantly liberal; does this reflect discrimination, or the tendency of people who actually know science to reject a political tendency that denies climate change and is broadly hostile to the theory of evolution?


From Krugman


On bias and head counts. Good point.

Krugman on Bloomberg on the Icelandic Miracle

Today, Iceland is recovering. The three new banks had combined profit of $309 million in the first nine months of 2010. GDP grew for the first time in two years in the third quarter, by 1.2 percent, inflation is down to 1.8 percent and the cost of insuring government debt has tumbled 80 percent. Stores in Reykjavik were filled with Christmas shoppers in early December, and bank branches were crowded with customers.

To be fair, real GDP is still about 14 percent down from its 2007 peak, so Iceland hardly got off unscathed. But the human and social damage appears to have been much lighter than many expected.

From Bloomberg on the Icelandic Miracle - NYTimes.com

But I thought austerity works? So why are the austerity economies stagnant?

Inquiry and Intimidation

What the GOP wants is to make people afraid even to do research that produces conclusions they don't like. And they don't stop at trying to undermine the research - they go after the researchers personally. The goal is to create an environment in which analysts and academics are afraid to look into things like financial-industry malfeasance or climate change, for fear that some subcommittee will either dig up or invent dirt about their private lives.

McCarthy had nothing on these guys.

From Inquiry and Intimidation - NYTimes.com

Awful

Krugman proposes interstellar free trade zone

It's true that we'd have more jobs if we exported more and imported less. But the same is true of Europe and Japan, which also have depressed economies. And we can't all export more while importing less, unless we can find another planet to sell to.

From The Competition Myth - NYTimes.com

What makes this funny is that Krugman wrote a paper on interstellar trade. http://en.wikipedia.org/wiki/The_Theory_of_Interstellar_Trade http://improbable.com/ig/winners/

Krugman defends our socialist sewer system

Joe Romm has some fun with the Texas Attorney General, who declares himself opposed to regulation of CO2 on the grounds that

It is almost the height of insanity of bureaucracy to have the EPA regulating something that is emitted by all living things.

As Joe points out, this argument says that we should adopt an equally laissez-faire attitude toward sewage.

But hey, there was a time when conservatives did, in fact, argue for doing nothing about effluent of any kind. In the years leading up to the Great Stink of 1858, which finally got the British to build a London sewer system, The Economist editorialized against any such foolish notion (pdf):

suffering and evil are nature's admonitions-they cannot be got rid of.

Or, to put it (almost) in the modern vernacular, stuff happens.

From Krugman

The Texas Omen

Texas is where the modern conservative theory of budgeting - the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending - has been implemented most completely. If the theory can't make it there, it can't make it anywhere.

The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven't been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his "tough conservative decisions."

From The Texas Omen - NYTimes.com

The basic approach clearly doesn’t work.

House Republican Rule Changes Pave the Way For Major Deficit-Increasing Tax Cuts, Despite Anti-Deficit Rhetoric

House Republican leaders yesterday unveiled major changes to House procedural rules that are clearly designed to pave the way for more deficit-increasing tax cuts in the next two years. These rules stand in sharp contrast to the strong anti-deficit rhetoric that many Republicans used on the campaign trail this fall. While changes in congressional rules rarely get much public attention, these new rules - which are expected to be adopted by party-line vote when the 112th Congress convenes on January 5 - could have a substantial impact and risk making the nation's fiscal problems significantly worse.

I hear that a lot of journalistic insiders were annoyed when I began calling out self-styled deficit hawks like Paul Ryan as flim-flammers. But they are; nobody, and I mean nobody, in a position of influence within the GOP cares about deficits when tax cuts for the affluent are on the line. Deficit hawkery is just a stick with which to beat down social programs.


From House Republican Rule Changes Pave the Way For Major Deficit-Increasing Tax Cuts, Despite Anti-Deficit Rhetoric


And in other news, there is gambling going on at Rick’s

The Texas Omen

Texas is where the modern conservative theory of budgeting - the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending - has been implemented most completely. If the theory can't make it there, it can't make it anywhere.

The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven't been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his "tough conservative decisions."

From The Texas Omen - NYTimes.com

The basic approach clearly doesn’t work.

House Republican Rule Changes Pave the Way For Major Deficit-Increasing Tax Cuts, Despite Anti-Deficit Rhetoric

House Republican leaders yesterday unveiled major changes to House procedural rules that are clearly designed to pave the way for more deficit-increasing tax cuts in the next two years. These rules stand in sharp contrast to the strong anti-deficit rhetoric that many Republicans used on the campaign trail this fall. While changes in congressional rules rarely get much public attention, these new rules - which are expected to be adopted by party-line vote when the 112th Congress convenes on January 5 - could have a substantial impact and risk making the nation's fiscal problems significantly worse.

I hear that a lot of journalistic insiders were annoyed when I began calling out self-styled deficit hawks like Paul Ryan as flim-flammers. But they are; nobody, and I mean nobody, in a position of influence within the GOP cares about deficits when tax cuts for the affluent are on the line. Deficit hawkery is just a stick with which to beat down social programs.


From House Republican Rule Changes Pave the Way For Major Deficit-Increasing Tax Cuts, Despite Anti-Deficit Rhetoric


And in other news, there is gambling going on at Rick’s

When Zombies Win

It's also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we've been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we've been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation - which excludes volatile food and energy prices - now at a half-century low.

From NYTimes.com

Sadly, being wrong doesn’t effect the career of a right of center pundit.

When Zombies Win

It's also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we've been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we've been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation - which excludes volatile food and energy prices - now at a half-century low.

From NYTimes.com

Sadly, being wrong doesn’t effect the career of a right of center pundit.

The SPECTRE of Inequality

there's a scene early in the movie when the minions of SPECTRE, the evil conspiracy, are shown reporting on their profits from dastardly activities. And the numbers are ... ludicrously small. I know that's a running gag in Austin Powers, But it's true, it's true!

Even the big one - demanding a ransom for two stolen nuclear warheads - is 100 million pounds, $280 million. Adjusted for inflation, that's about $2 billion - or one-eighth of the Goldman Sachs bonus pool.

It's just an indicator of how huge top incomes have become that what were once viewed as impressive numbers, the kind of thing only arch-villains might demand, now look trivial. Or maybe the other way to look at it is that we have a lot more arch-villains around than we used to.


From The SPECTRE of Inequality - NYTimes.com


But do that have sharks with freaking laser beams?

The SPECTRE of Inequality

there's a scene early in the movie when the minions of SPECTRE, the evil conspiracy, are shown reporting on their profits from dastardly activities. And the numbers are ... ludicrously small. I know that's a running gag in Austin Powers, But it's true, it's true!

Even the big one - demanding a ransom for two stolen nuclear warheads - is 100 million pounds, $280 million. Adjusted for inflation, that's about $2 billion - or one-eighth of the Goldman Sachs bonus pool.

It's just an indicator of how huge top incomes have become that what were once viewed as impressive numbers, the kind of thing only arch-villains might demand, now look trivial. Or maybe the other way to look at it is that we have a lot more arch-villains around than we used to.


From The SPECTRE of Inequality - NYTimes.com


But do that have sharks with freaking laser beams?

Hive-minds and Kleptocrats

Stross is a spectacularly good contemporary science-fiction author, brimming with ideas, who also has a stimulating blog, where his latest entry asks why things are so messed up. His proposed answer is that we've been invaded by alien organisms - namely, corporations:

Corporations do not share our priorities. They are hive organisms constructed out of teeming workers who join or leave the collective: those who participate within it subordinate their goals to that of the collective, which pursues the three corporate objectives of growth, profitability, and pain avoidance. (The sources of pain a corporate organism seeks to avoid are lawsuits, prosecution, and a drop in shareholder value.)

Corporations have a mean life expectancy of around 30 years, but are potentially immortal; they live only in the present, having little regard for past or (thanks to short term accounting regulations) the deep future: and they generally exhibit a sociopathic lack of empathy.

I like it; it's fun (although William Gibson said much the same thing, I think); but it's so 1960s, if you know what I mean.


From Hive-minds and Kleptocrats


Odd and interesting.

Learned Helplessness

It's true that if you bought completely into rational-expectations macroeconomics, the crisis in the economy should be causing a crisis in your faith - although as far as I can tell, the freshwater types remain smugly convinced of their rightness. But those of us who hadn't forgotten Keynes, who paid attention to things like Japan's lost decade and developing-country financial crises, aren't feeling all that at sea.

More specifically, we knew all about liquidity traps, and had at least thought about balance-sheet crises, a decade ago. Remember, I wrote the first edition of The Return of Depression Economics in 1999. The world we're now in isn't that different from the world I suspected, back then, we'd find ourselves in.


From Learned Helplessness - NYTimes.com


So at what point will the gold bug, inflationistas and other econo-cranks be subject to tough questions on why they are wrong? My guess never.

There Will Be Blood

There's a legal limit to federal debt, which must be raised periodically if the government keeps running deficits; the limit will be reached again this spring. And since nobody, not even the hawkiest of deficit hawks, thinks the budget can be balanced immediately, the debt limit must be raised to avoid a government shutdown. But Republicans will probably try to blackmail the president into policy concessions by, in effect, holding the government hostage; they've done it before.

Now, you might think that the prospect of this kind of standoff, which might deny many Americans essential services, wreak havoc in financial markets and undermine America's role in the world, would worry all men of good will. But no, Mr. Simpson "can't wait." And he's what passes, these days, for a reasonable Republican.

From There Will Be Blood

What GOP Nihilism looks like.

A Mechanical Manifesto

it's conservative economists who insist that people are always rational and utility-maximizing; liberal economists are the ones willing to invoke bounded rationality, animal spirits, etc.. The whole salt-water fresh-water split was about which you were going to believe: the assumption of perfect maximization, or your own lying eyes. And the Keynesians were the ones who preferred to believe their eyes.


From A Mechanical Manifesto - NYTimes.com


Take away quote of the day.

The Triumph Of Reagan Over Friedman

this is a point I think conservatives who believe they can remain reasonable about macro fail to grasp - this is about philosophy of government. If your bedrock faith is that government is always the problem, never the solution, then you're not, ultimately, going to be willing to draw a line around the central bank and say that it's OK for that semi-autonomous part of the government to engage in active problem-solving.

From The Triumph Of Reagan Over Friedman

There used to be a time when the right was pro-markets rather than nihilistically anti-government and anti-policy. The only acceptable policy is deregulation and tax cuts, irregardless of the problem.

The Hijacked Commission

The goals of reform, as Mr. Bowles and Mr. Simpson see them, are presented in the form of seven bullet points. "Lower Rates" is the first point; "Reduce the Deficit" is the seventh.

So how, exactly, did a deficit-cutting commission become a commission whose first priority is cutting tax rates, with deficit reduction literally at the bottom of the list?


From The Hijacked Commission


A must read.

QE Is Not CM

QE is basically expansionary monetary policy, no different in its effects (if it works) from reducing the policy interest rate. Yes, it tends to weaken the exchange rate; but it also increases domestic demand.

China is engaged in currency manipulation, that is, buying foreign currency to keep the yuan weak; meanwhile, it is actually moving to reduce domestic demand, among other things raising interest rates.

So the United States is moving to expand world demand, with a policy that may weaken the dollar; China is moving to reduce world demand, with a policy of deliberately weakening the yuan. America's policy may annoy its trading partners, but they are not the target; China's policy is predatory, pure and simple.

No equivalence here.

From QE Is Not CM - NYTimes.com

Clear explanation on differences between QE2 and China’s yuan manipulation.

Harry Gave 'Em Hell

Reid did something Democrats almost never do: instead of apologizing for his party, he ran against a person with a habit of making crazy statements by hitting hard, again and again, with ads calling her a crazy person. It was very rude and uncivil. And it worked.


From Harry Gave ‘Em Hell


Now if we can get Reid to do that in the Senate.

Nobody Cares About Process, except Democrats

If Obama had used fancy footwork and 2 AM sessions to pass a big public works program, and this program had brought unemployment down, Republicans would be screaming about the process - and Democrats would have comfortably held control of Congress. Remember the voter backlash against the way Medicare drug benefits were passed? Neither do I.

Oh, by the way - nobody cares about the deficit, either.


From Nobody Cares About Process, except Democrats


Krugman is right about this.

Friedman On Japan

…staring in 2000, the BOJ nearly doubled monetary base over a period of 3 years. And the money just sat there. Banks did not, in fact, expand loans. In fact, Japan's experience is a key element of the case against monetarism. Just printing notes does not work when you're in a liquidity trap.


From Friedman On Japan - NYTimes.com

And it also doesn’t create the type of hyperinflation some worry about.

A Far Away Country Of Which We Know Nothing

I've been getting a lot of correspondence lately that runs something like this:

You're an idiot. Give me one example in all of history of a country that spent its way out of a depressed economy

Ahem. There's this country - people may not have heard of it - called the United States of America:

DESCRIPTION

The blue line is total debt, public plus private, in billions of dollars; the red line debt as a percentage of GDP


From A Far Away Country Of Which We Know Nothing - NYTimes.com

But the axioms say it isn’t possible! How could this ugly facts be true when my beautiful theory says it is false?

Krugman : How The Other Half Thinks

While the other side was making these predictions, people like me were saying that classical economics was all wrong in a liquidity trap. Government borrowing did not confront a fixed supply of funds: we were in a paradox of thrift world, where desired savings (at full employment) exceeded desired investment, and hence savings would expand to meet the demand, and interest rates need not rise. As for inflation, increases in the monetary base would have no effect in a liquidity trap; deflation, not inflation, was the risk.

So, how has it turned out? The 10-year bond rate is about 2.5 percent, lower than it was when Ferguson made that prediction. Inflation keeps falling. The attacks on Keynesianism now come down to "but unemployment has stayed high!" which proves nothing - especially because if you took a Keynesian view seriously, it suggested even given what we knew in early 2009 that the stimulus was much too small to restore full employment.

The point is that recent events have actually amounted to a fairly clear test of Keynesian versus classical economics - and Keynesian economics won, hands down.

From How The Other Half Thinks - NYTimes.com

Krugman called it. Not only being among the first to identify the liquidity trap but the first to properly identify how the other side would respond, what errors they were making and what would be needed to restore the economy.

The development presents something of a chicken-and-egg situation: Corporations keep saving, waiting for the economy to perk up - but the economy is unlikely to perk up if corporations keep saving.

From Companies Borrow at Low Rates, but Don't Spend - NYTimes.com

So how much evidence of a liquidity trap is needed to get the other side to re-think their flawed premises?

Who You Gonna Believe?

Suppose you had spent the last five years actually believing what you read from the usual suspects the WSJ opinion pages, National Review, right-wing economists, etc.. Here s what would have happened:

In 2006 you would have believed that there was no housing bubble.

In 2007 you would have believed that the troubles of subprime couldn t possibly spread to the financial system as a whole.

In 2008 you would have believed that we weren t in a recession and that the failure of Lehman was unlikely to have bad consequences for the real economy.

In 2009 you would have believed that high inflation was just around the corner.

At the beginning of 2010 you would have believed that sky-high interest rates were just around the corner.

Now, we all make mistakes and get things wrong although it s striking how often the trolls on this blog feel the need to accuse yours truly of saying things I didn t. But after this string of errors, wouldn t you at least begin to suspect that the people you find congenial have a fundamentally wrong-headed view of how the world works?


From Who You Gonna Believe? - NYTimes.com

I’m amazed that Krugman has been right about almost everything almost all of the time and hasn’t gotten the respect he deserves. The forward to 2008’s The Return of Depression Economics is amazingly prescient.

America Goes Dark

Meanwhile, a country that once amazed the world with its visionary investments in transportation, from the Erie Canal to the Interstate Highway System, is now in the process of unpaving itself: in a number of states, local governments are breaking up roads they can no longer afford to maintain, and returning them to gravel.

In effect, a large part of our political class is showing its priorities: given the choice between asking the richest 2 percent or so of Americans to go back to paying the tax rates they paid during the Clinton-era boom, or allowing the nation s foundations to crumble literally in the case of roads, figuratively in the case of education they re choosing the latter.


From Op-Ed Columnist - America Goes Dark - NYTimes.com

Sad but true. This is what happens when the right-wing is allowed to undo the 20th century.

Myths of Austerity

This conventional wisdom isn t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite s imagination specifically, on belief in what I ve come to think of as the invisible bond vigilante and the confidence fairy.

Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off.

What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.


From Myths of Austerity

If Krugman is right about the invisible bond vigilantes, then rates should be going down. And they are. If he is right about the confidence fairy, then there should be no (or week) correlation between economies in Austerity and growth. Right again.

I can’t help but think that the advocates of austerity would be in favor of all the same policies under a different name if the austerity argument wasn’t available. Notice how they focused on social spending and not corporate subsidies. Are any of the austerity advocates calling for an end to oil or farm subsidies? An end to the Bush tax cuts? Any tax increases at all?

The Renminbi Runaround

There have been all sorts of calculations purporting to show that the renminbi isn t really undervalued, or at least not by much. But if the renminbi isn t deeply undervalued, why has China had to buy around $1 billion a day of foreign currency to keep it from rising?

The effect of this currency undervaluation is twofold: it makes Chinese goods artificially cheap to foreigners, while making foreign goods artificially expensive to the Chinese. That is, it s as if China were simultaneously subsidizing its exports and placing a protective tariff on its imports.


From The Renminbi Runaround


Krugman explains it in four sentences. And this is why we need to lead the G8 into undoing any artificial Chinese advantage by imposing tariffs linked to the undervaluation of the Renminbi.

Oy, Canada - Paul Krugman Blog

I do feel a sense of despair here. Ever since the crisis began, some of us have been trying to get across the point that you have to be very careful with your historical precedents, that things work very differently when you have a synchronized severe financial crisis, with interest rates near zero everywhere. And here we are, two years in, and it s as if we ve been talking to a wall.
From Oy, Canada - Paul Krugman Blog - NYTimes.com

Krugman is right here. Concerns about inflation and debt need to take a back seat to concerns about unemployment and aggregate demand.

Down The Memory Hole

Basically, US postwar economic history falls into two parts: an era of high taxes on the rich and extensive regulation, during which living standards experienced extraordinary growth; and an era of low taxes on the rich and deregulation, during which living standards for most Americans rose fitfully at best.
From Down The Memory Hole - Paul Krugman Blog - NYTimes.com

While this doesn’t show causation; it does show that the claims on the right about the New Deal causing economic stagnation and Reaganomics creating a boom are unsupported.

Paul Krugman calls out Cantor on budget cuts

The real story here is that the sums involved are ludicrously trivial; eliminating everything on Cantor s list would amount to a rounding error on federal spending.

The truth is that it has always been like this. Ever since Reagan, the conservative approach has been to talk about the need for smaller government, but refuse to offer any serious proposals for spending cuts, pretending instead that there are large sums being wasted on things nobody wants.
From http://krugman.blogs.nytimes.com/2010/05/12/unserious-people/

Krugman is right of course. This is about grandstanding not solutions. The GOP is simply not interested in any real cuts in spending. They just want to blast the Dems.

Worthwhile Canadian Example

Those who blame the Fed for keeping interest rates too low too long have to explain why Canada, which basically had the same interest rate experience we did, didn t have anything like the same problems. So what s Canada s secret? Regulation, regulation, regulation. Much stricter limits on leverage, much stricter limits on unconventional mortgages, and an independent consumer protection agency for borrowers.
From Worthwhile Canadian Example - Paul Krugman Blog - NYTimes.com

Someone should explain The Austrian Business cycle to the Canadians. Clearly their stability is impossible and is likely a commie plot.

If a deficit falls in the forest

The truth is that the truth about budgets plays almost no role in real politics. Right now, Meg Whitman is campaigning for Governor of California on the claim that state spending has exploded over the last decade - when the fact is that it has fallen drastically in real per capita terms. Will she pay a price for this? Probably not.
From If a deficit falls in the forest - Paul Krugman Blog - NYTimes.com

Krugman is right of course. This is to be accepted when you have a large portion of the population that work backwards from political philosophy rather than work forward from observations. If there is a budget crisis, then is must be because government has gotten too big and taxes are too high. The actual rate of growth being negative and the taxes rate being below the historic average are irreverent to people who view the sole purpose of facts are to corroborate pre-conceived notions. If the facts contradict your world view, ignore them while you look for other facts.

Krugman on Bush Derangement Syndrome

The symptoms of Bush Derangement Syndrome, in its fullest version, are that you believed

1. That the Bush tax cuts were sold on false pretenses, and were fiscally irresponsible

2. That the Iraq war was sold on false pretenses, and that invading Iraq was a mistake

3. That for all his posturing, Bush was actually doing a bad job of fighting Al Qaeda

4. That the use of torture was ineffective as well as immoral, and was hurting America

5. That the economic expansion of the middle Bush years, such as it was, was driven by an unsustainable housing bubble

6. That the Bush administration was distorting science to avoid taking action on climate change

Crazy stuff, with one common theme: it was all true.

URL: http://krugman.blogs.nytimes.com/2009/10/19/derangement/

Krugman: Nobody could have predicted

First, those who don’t want to nominate Hillary Clinton because they don’t want to return to the nastiness of the 1990s a sizable group, at least in the punditocracy are deluding themselves. Any Democrat who makes it to the White House can expect the same treatment: an unending procession of wild charges and fake scandals, dutifully given credence by major media organizations that somehow can’t bring themselves to declare the accusations unequivocally false (at least not on Page 1).
From Nobody could have predicted - Paul Krugman Blog - NYTimes.com

Don’t you hate it when he’s right like this?

The Town Hall Mob

There was a telling incident at a town hall held by Representative Gene Green, D-Tex. An activist turned to his fellow attendees and asked if they "oppose any form of socialized or government-run health care." Nearly all did. Then Representative Green asked how many of those present were on Medicare. Almost half raised their hands.
Now, people who don't know that Medicare is a government program probably aren't reacting to what President Obama is actually proposing. They may believe some of the disinformation opponents of health care reform are spreading, like the claim that the Obama plan will lead to euthanasia for the elderly.
URL: http://www.nytimes.com/2009/08/07/opinion/07krugman.html?_r=1&partner=rss&emc=rss

I am so glad there are brave people out there protesting Obama’s plan to take over Medicare and turn it into socialized, government-run health care.

Arthur Laffer is against government take over of Medicare

If you like the Post Office and the Department of Motor Vehicles and you think they’re run well, just wait till you see Medicare, Medicaid and health care done by the government.
URL: http://www.salon.com/politics/war_room/2009/08/04/qotd/index.html

I am so glad there are brave people out there like Arthur Laffer; of Laffer Curve fame; protesting Obama’s plan to take over Medicare and turn it into socialized, government-run health care.

Is the threat of speculation a reason to shun cap and trade?

Any time you have a market, there's some opportunity for speculation. Even if the good being traded isn't storable, there may be a futures market, so you can bet on the future price.

For example, the fact that wheat is traded means that there's also a wheat futures market; and because wheat can be stored, futures prices affect spot prices.
So, should fear of speculation lead us to ban trading in wheat?

Now substitute "emission permits" for wheat. It's exactly the same story.
From: http://krugman.blogs.nytimes.com/2009/07/21/is-the-threat-of-speculation-a-reason-to-shun-cap-and-trade/

The best defense of the use of market forces to control pollution comes from who else but Paul Krugman.

Anti-green economics

Opponents of a policy change generally believe that market economies are wonderful things, able to adapt to just about anything - anything, that is, except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water - no problem. Limits on the amount of CO2 we can emit - total disaster.
From Anti-green economics - Paul Krugman Blog - NYTimes.com

Krugman sums most of the anti-regulation arguments succinctly.

Banking on the Brink

Lately the Federal Deposit Insurance Corporation has been seizing banks it deems insolvent at the rate of about two a week. When the F.D.I.C. seizes a bank, it takes over the bank's bad assets, pays off some of its debt, and resells the cleaned-up institution to private investors. And that's exactly what advocates of temporary nationalization want to see happen, not just to the small banks the F.D.I.C. has been seizing, but to major banks that are similarly insolvent.
From Op-Ed Columnist - Banking on the Brink - NYTimes.com

Krugman explains temporary Bank Nationalization as a business transaction. You may want to take notice of the fact that the plan does include the word temporary and doesn’t include the words gulag, re-education camp, or annexation of Sudetenland. This should comfort the people on the right but not the people on the far right.

The tax cut ratchet

notice that everything that happens is good for tax cuts.
If the economy is growing, and tax receipts are rising, then it shows that past tax cuts achieved wonders, plus the Laffer curve is right so let’ s cut taxes some more!
If the economy is shrinking, well, it needs a boost and what better boost than another round of tax cuts!
See, cutting taxes is always good. It makes you wonder why we ever had taxes in the first place.
From The tax cut ratchet - Paul Krugman - Op-Ed Columnist - New York Times Blog

Krugman does a bang up job exposing the tax-cut ratchet. Or tax cut racket if you prefer.

Conservatives Are Such Jokers

What’ s happening, presumably, is that modern movement conservatism attracts a certain personality type. If you identify with the downtrodden, even a little, you don’ t belong. If you think ridicule is an appropriate response to other peoples’ woes, you fit right in.
From Conservatives Are Such Jokers - New York Times

Great quote from Krugman. Bush has made the GOP less conservative, less republican and more autocratic. Downright feudal. It is really interesting to compare how angry the left of center is at what the Bushies have done to how angry the right wing is at liberals for who they are.