Republicans and Democrats are both big spenders - they just spend on different things. Republicans still have the image of being fiscally conservative which often gives them a free pass on deficit spending (see Ethanol subsidies in the last 5 years). Fox news will be busy in 09.
Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals? Why keep liberal thought in the straitjacket of pay-as-you-go, of assigning inflation control to the Federal Reserve, of attempting to "make markets work"? Why not build a new economic policy based on what is really happening in this country?
so the advice is to spend more than you take in during the bad times...and then when its good times again, no one seems to mind continuing the over spending because 'hey man, its the good times, don't be a party pooper'. and the politicians wouldn't win re-election (huge percentage of the time) if they ran on a platform of reduced spending, they just wouldn't . man, when are people going to learn the bullet must be bit sometime. all makes perfect sense.
Gov't can't expand forever. At some point they have to cut back, and I imagine at the point where gov't does cut back, people will bitch. But eventually gov't on all levels has to cut back and it isn't going to be pleasant, so no time like the present.
People need to save and invest in rebuilding US private-sector productive capability. All this government borrowing is making the credit crunch more severe for the private sector.
Also, Arnold did push a California spending limitation ballot measure that was crushed at the polls in 2005.
I am not Anonymous writes: Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals?
Or, to put it differently, why would the Democrats run conservative fiscal policies and generate budget surpluses, if the very next Republican administration will squander all of that?
MrM(Excellent) writes: Or, to put it differently, why would the Democrats run conservative fiscal policies and generate budget surpluses, if the very next Republican administration will squander all of that?
And so we see how the conditions of weak states lead naturally to a "vicious cycle" where it is in fact in the best interest of the policymakers and their constituencies to engage in competitive looting of the state.
If I have to pick between sacrificing my savings to either unemployment or inflation.
I choose unemployment, because at least then I may have a chance of getting some return on my money. I might have a chance of returning to work in an economy that has efficiently re-deployed its capital.
It'd be nice if absolutely all gov't subsidies were eliminated. Wonder what the market would produce given natural incentives and clear rules. Wish in one hand, shit in the other, I guess.
IMO, one of the biggest problems we have as a country is more or less full time government. Politicians "in session" have to do something. I generally hate market analogies, but the rules for basketball, football, whatever, haven't changed significantly over time, so why does gov't think it has to keep modifying the rules? A clear set of rules with no favoritism (subsidies) by government seems optimal.
Most state budgets have to be balanced because of the constitutions.
Mr. Krugman might factor that into his consideration of the problem.
This blog might be advised to start paying attention to the growing disconnect between the effects of this depression on the equity of the 78% of workers in the private sector vs. those in the public sector. Pension and benefits for the public sector are off the charts, and when the full accounting of the excesses in this regard (as well as salaries) is known to the folks who are currently in extreme financial distress, expect a readjustment in the political landscape.
The unions and politicians (teachers, public employees) who have been negotiating these obscene contracts at taxpayers expense are in for a shock in the near future.
Unlike the federal government, the states do not have the budgetary leeway to just continue spending. They actually have to decide where to cut, where to charge more, and/or where to sell more bonds.
No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession.
Raising taxes at this point in time would be an attempt to bring the budget closer to balance.
People might start wondering whether Krugman really understands anything he says.
Balancing the budget is critical for the long-term credibility of the united states as debtor. You cannot compare the 1930's situation with the current one. It is China that should stimulate domestic demand by providing longterm security to its inhabitants (pensions, social security,...), that will get the chinese spending and will help global recovery. US should focus on its industry (or what's left of it), spend in investment projects and cut some of its promises to citizens.
And another thing, if we don't cut defense spending as a country and reapportion that money to the things people say they want like infrastructure spending, etc., we won't improve our lives domestically. The build out that happened in the now more modern places in the world took place during the last 8 years we were playing war. If you want to know where gov't money disappeared to, look to the military. Remember Rumsfeld, the day before 9/11, announcing $2.3T had gone missing from the pentagon? As a country we need to choose our priorities.
Well I am saving all of Mr. Krugman's rants about more government spending and his continued lambasting of anyone who disagrees for my children when the ask why they have to pay 65% in taxes. The problem with the "we haven't spent enough" argument is that is right precisely until it is wrong, and when it is wrong everything blows up. I am sure he is worlds smarter than I am, but I am smart enough to see nobody can argue he is wrong in the way he has framed the debate.
Well, ideally, the States should have been running a surplus in the good times to allow to keep operations on a steady keel. Of course any such government would be demagogued for taking in more than it needed in the good times.
Krugman thinks the Government and the States have money. They have none. They have future tax claims on our children.
Krugman wants to ruin the future to avoid a recession. He thinks the State can make and distribute goods. We all know the State can't do that. Krugman thinks he can sit in his office and remote-control the daily actions of 300 million people. He's got some serious nerve.
Krugman just said state governments can run up spending deficits just like the Fed can? Really? Thats pretty ignorant.
Sometimes it helps to actually read somebody's column before popping off.
state and local government revenues are plunging along with the economy and unlike the federal government, lower-level governments cant borrow their way through the crisis. Partly thats because these governments, unlike the feds, are subject to balanced-budget rules.
The fact we have had a false economy from excess debt obviously created false employment, profits, Taxes to go with it. Government did as usual and pigged out on spending. Running up the government credit card more is as dumb as the Fed bailing out failing RE prices. Price discovery will take place no matter what. I live in a balance budget state and they even manage to spend every penny to keep us near the top of the states tax load. Krugman is for government control and cut freedom. I don't need a baby sitter. Let the economy find its self.
There's actually some legitimacy to Krugman's stance on the states policy - mandating a balanced budget is a bit like suggesting a company can't borrow during the hard times if they've been responsible during the good.
But at the same time Krugman handily illustrates the problem with politicizing economics:
By demonizing Hoover we obscure the fact that "Hoover economics" are exactly what we need during the good times if we propose to spend our way out of the bad.
I would suggest that by constantly attacking politicians who have advocated fiscally sound policies we may have taken the FDR style spending option away from ourselves.
It is good to see CR finally giving Pathos Paul the same treatment as Poor Gretchen as IMO he deserves it more. Nobel or no he's way out of his depth here. Perhaps if hecould honestly evaluate the situation by putting his politics aside he could do better but the fact that he cannot separate his emotions from his analysis is all the more reason to be critical of his "suggestions." In the classic economist ducking of responsibility his thesis can be summarized. "Spending too much got us into this mess and spending more will get us out and the only reason it won't work is the economists inability to force everyone to spend enough." Maybe low tax places like New York City are different but here in California I already see productivity strikes/slowdowns due to taxation reminescient of Great Britain of the 1970s. How'd that work out for the curtain call of a fading empire?
This has been a cause of endless whining, as you can get a whiff of from the link itself (heck, 4 paragraphs of whining goes by before the "set-aside" is mentioned). The Republicans always run against it as an example of the government "over-taxing", the Dems always are trying to spend it.
I swear no matter what you do in this insane country you can never satisfy more than a plurality. You know, it has been way, way ugly with the Gods/Guns/Gays thing, but I gotta admit the basic theory is smart: our democracy rests upon a foundation of hopeless idiots, who are just by nature agin' anything that doesn't actually put something into their perpeturally adolescent hands. So since you can never get a true 51% to back even a sure cure for cancer, you need a throwable bone for the people that are opposed to everything to chase so you have space to get your way.
Thus muslims, gay marriage, "cold dead hands". The Dems haven't been as clever at this, but sooner or later they'll figure it out.
Meanwhile I will continue to daydream about living in a country with sane transportation, health, and military policies. Don't know why I do that, might as well daydream about Megan Fox as the possiblities are dead equal.
Every country has a limited capital stock. They can only decide whether to spend in the private sector (stocks, corporate bonds, etc.) or the public sector (treasuries). Deficit spending is only crowding out private sector investment. Where's my stimulation, dude?
New Guy
Then there are federal congressional pensions:
Dole, Hayes to exit with pensions
Both lawmakers among wealthiest in Congress. A GOP colleague calls the plan a taxpayer ripoff.' 404
Pension and benefits for the public sector are off the charts,
Why do so many persist in looking at people with decent benefits and wish mightly that those people would be pulled down to their level, instead of saying why the fuck don't I have the same thing.
You just play into the hands of the 1% that owns like half of everything when you do that.
ac,
Krugman isn't advocating borrowing in tough times. It's clear that borrowing is irrelevant at this point. He's advocating stimulus spending which is an entirely different animal. California is on the verge of perhaps 6 notches of credit downgrade due to our overspending policies not spending policies. That overspending didn't prevent this recession and won't get us out. The fact that the State and now Federal government are considering an ambitious series of high speed trains as a conduit of economic stimulus is evidence of what the economist Jagger referred to as a "19th Nervous Breakdown."
You better stop
Look around
Here it comes, here it comes, here it comes, here it comes
Here comes your nine-teenth nervous breakdown.
When you were a child
You were treated kind
But you were never brought up right.
You were always spoiled with a thousand toys
But still you cried all night.
Your mother who neglected you
Owes a million dollars tax.
And your fathers still perfecting ways of making ceiling wax.
Krugman is shilling for the banking industry, the only beneficiaries of state debt and inflation. The banks are bankrupt, and can only lend to the state the worthless funny-money they get for free from their fraudulent cartel, the FED.
Households are insolvent, and so is the state after years of deliberatedly destructive fiscal, credit, monetary, foreign and industrial policies; all in the benefit of the plutocrats.
He is saying that to save the present plutocracy, future generations must be further shackled in eternal bonds of servitude. Exponentially more debt for a country ruined by debt, yes, a great suggestion indeed!
The apparatchik-ideologues called professional economists are merely doing their jobs and facilitating a final feast by the parasites before they abandon the host's rotting cadaver.
Unbelievable. That Krugman is asking such idiotic questions puts a question mark on the legitimacy of Nobel prizes. It's the same as asking a broke person why is he/she not buying a million dollar house. Hey Mr. Krugman- here is your Nobel prize worthy answer - states are not spending money because = drumroll - THEY DON'T HAVE ANY AND THEY CAN'T PRINT IT EITHER.
Robdawg is right. Krugman doesn't think, he feels. In Krugman's own NYT's yesterday was a piece about the gathering doubt that printing dollars is necessarily the best prescription for a problem caused by printing dollars.
Krugman and Bernanke are like French generals in the face of the Nazi blitzkrieg, erecting the Maginot line to defend against Panzer divisions and Luftwafte aircraft that can just go around them. This is not the Great Depression. We are not on a gold standard. Gold is not flowing out of the treasury, causing prices to fall. Prices are falling because demand is collapsing, and demand is collapsing because it was an inflation-induced illusion to start with.
Besides that, none of the Keynesian prescriptions saved us from the Great Depression. Only a massive military mobilization did, complete with destruction of excess supply by bullets and bombs. Prices and employment stabilized about the time of the Pearl Harbor attack.
If Krugman really wants to fight the Great Depression over again, he should recommend a new world war. Short of that, this is gonna be a long slog, no matter how many dollars are printed.
"And so we see how the conditions of weak states lead naturally to a "vicious cycle" where it is in fact in the best interest of the policymakers and their constituencies to engage in competitive looting of the state."
By this criterion I've never thought of the US as a weak state. I can think of a number of possible futures. A period of disorder followed by an era of the strong man who gathers up the snapped reins?
Persecuted Comrade Anonymouse writes:
Rob Dawg writes:
It is good to see CR finally giving Pathos Paul the same treatment as Poor Gretchen as IMO he deserves it more.
Where? Bill's second comment is meant to reinforce Krugman's argument.
Same treatment as in careful attention, not just blind criticism. We are adults and can come to different conclusions as long as we can defend those positions. I don't personally believe reductions in State spending "exacerbates" recessions so much as confirms and shortens recessions possibly at the cost of deeper and steeper but that's what makes a marketplace of ideas.
Bonds are the normal way but I don't have to tell any CR readers how well that isn't going at the moment. How is, say, Missouri going to compete with all the US Treasuries being issued when everybody cares nothing about returns, just the possiblity of default.
If that wasn't true it would be a great time to get cheap money.
Dickhead calling: I cannot but put out a personal take on this topic. My wife is shocked by how high is the annual tariff on any landowning person in the U.S. The overhang of excessive state and local spending is what's keeping this American abroad.
The federal deficit is a macro- abstraction, scary like dragons are scary. But closer to home, how could someone starting from square one, evaluating a new life in a new place, ignore the dire condition of local budgets?
I am flummoxed by this sort of news.
Per George, if we were to tax property (again) to enhance other revenue sources and balance budgets already bloated, how much more unattractive could any investment be?
I expect great political changes on all levels in the United States, but I cannot envision what they will be.
Are they supposed to issue vouchers or something?
Apparatchik ZackAttack
California is planning on exactly that:
Dec 9th
The legislature plans to hold budget hearings [mid Dec] and hopes to have a deal in place by Christmas [not]. The deal could include higher taxes and more program cuts. If the legislature fails again, then California is looking at issuing IOU's for only the second time in history.
state and local government revenues are plunging along with the economy â and unlike the federal government, lower-level governments can't borrow their way through the crisis. Partly that's because these governments, unlike the feds, are subject to balanced-budget rules. Sufferin' Succotash | Homepage | 12.29.08 - 9:44 am | #
I understand Krugman's view & logic as an economist, but have little sympathy for him as a media figure. He needs to add paragraphs repudiating much orthodox economic theory (and therefore much of his life-long profession) each time he attempts to argue for gov't spending as a way out of deflation. Why? Because massive holes in economic theory allow a ginormous disconnect between 1) the need for balancing budgets and building savings in order to avoid dire consequences; versus 2) the need for $1 Trillion in deficit spending to avoid dire deflationary consequences, which is what he is arguing lately; versus 3) the unlikelihood that US workers, taxpayers & the economy will ever recover strongly enough to fund these newly-increased debts and budget deficits from #2. Lay people believe we will simply revert back to a heightened crisis version of #1, rather rapidly, if #2 is successful. Some solution that is.
Krugman is losing his audience & credibility because he lacks the courage to address #3 which coincidentally is a point that nags at the common sense of lay people and regular folks: Just how dreamy & rosy & idealistic are the forecasts for wage & productivity growth levels needed to repay all this new debt? It is point #3 that most hapless media figures run from while cheerleading for $1 Trillion in more debt disguised as a stimulus.
Worse are media heads who pull a NYT Friedman on us by saying a magical talisman will appear in our future in the form of some unidentified unknown future technological breakthrough (or global finance gimmick), via that vaunted human ingenuity, that will save all us and will raise our wages and increase our profit margins and allow us to pay off most household, corporate & public debt. A magical talisman that will ensure a happy ending is a big cop-out and is intellectual vacuous, but sadly, has become a new mainstay of frightened media figures.
Maybe it is because they spent all our money during the boom days and now the well is dry. David | 12.29.08 - 9:12 am | #
That isn't what happens - they spend whatever they take in in BOTH BOOM & BUST - the difference is that they take a lot less in during a bust (tax revenue plunges) and have more requirements for it going out (welfare & other state run safety nets)... result is big deficits during the bust which needs to be cut and everyone a pony during the boom. The absolute worst of all worlds.
If Krugman really wants to fight the Great Depression over again, he should recommend a new world war.
--Curmudgeon
I can't believe you are advocating war. The housing boom and buying stuff was so fun that you don't want it to end. When it does, you propose to go kill people so you can do it again. How about you just make do with less?
In 1932, FDR campaigned on the promise that he would balance the federal budget. It was Herbert Hoover who had started the budget into deficit. FDR during the campaign made fun of Hoover's "irresponsible" fiscal policies, and I believe threatened to walk around the newly-built Commerce Department's building (14th-15th & Independence to E Streeta big sucker even today) to showcase the building as an example of Hoover's budgetary excesses.
Of course, when FDR was elected, he realized deficits were inevitable and tolerated thembut only up to 1937. His determination to arrive at a budget balance in that year is regarded as a move that prolonged the depression. So he was an on again off again fiscal conservative, unlike today's Democrats (and most Republicans) who are all on, all the time.
none of the Keynesian prescriptions saved us from the Great Depression. Only a massive military mobilization did,
Certainly one way to reduce the over-supply of labor.
The sad thing is that when the war was over, people came back to the same depressed economy. The government threw credit at the problem - "thanks for fighting for us, as a reward you get to go into debt, but at lower rates than ever before!!"
Same shit, different day. The fact is NOTHING has changed. All the country ever did during the Great Depression was kick the can down the road. And every time we eventually walked to that point in the road where the can was, we just kicked it again, only harder.
The link below was posted in response to questions I asked on the previous thread. I am reposting it as it is relevant in many ways to every thread.
The vultures are not even trying to hide it.
It is a good time to be me, said John L. Douglas, a partner in Atlanta at the law firm Paul Hastings and a former lawyer for bank regulators who helped create the agency that administered the last federal bailout, the Resolution Trust Corporation."
Krugman has changed recently. He is on a deliberate, bordering to provocative inflationist agenda. François | 12.29.08 - 9:45 am | #
He hasn't changed he was always there - it's the SITUATION that changed. In busts you run deficits - in booms you run surpluses... his bitch was that we never ran a surplus all through the last boom - a debt binge 'boom' at that. Now we face a bust so flood the place with dollars.
I get what he is saying - and I'm not terribly concerned about inflation in the short run (not in the face of ferocious deflation)... it's what happens AFTER the deflation is tamed, halted, whatever you call it - then what? I don't think they can stop on a dime, just halt there - my guess is it blows right on past in a decade of overshoot and then trying to get the inflation genie back in the bottle.
But they are prepared to worry about that bridge later... the one their on now is what consumes their effort now.
Of course, when FDR was elected, he realized deficits were inevitable and tolerated themâbut only up to 1937. JohnR(DC) | 12.29.08 - 10:23 am | #
Not only tolerated them - his advisors completely 'turned' him toward massively inceasing the deficits - I don't recall if it was Hopkins or Roper or Perkins - but one of them said [in effect] just get money in their hands [unemployed] before we have a revolution, do it by whatever means possible. And they did.
Dryfly,
I'd characterize Krugman as "spend it all in the good times and spend even more in the bad." He really doesn't understand the dangers of creeping statist expansion.
Fear is consuming their efforts now. Don't fight the Fed. I am not Anonymous | 12.29.08 - 10:30 am | #
I am NOT a rigid 'Austrian' or 'Keynesian'... I just wish they'd be a little more 'measured' and think 2-3 moves ahead. I think the repercussions from this AFTER the crisis are going to be worse than they imagine. JMHO.
Krugman never sees a bailout he doesn't like! Accountability is ignored - shovel the money out the door.
Who benefits and who loses from bailouts? The young will suffer and baby boomers will avoid loses for now. However, a cursory reading of economic history suggests that the future pain we will all experience will be severe.
When it comes to economics, American economics professors seem to believe in American exceptionalism.
How can someone criticize people who are called in to fix a mess like the S&L bankruptcies that began years earlier? Of course, money is made in bankruptcies. Are these people supposed to work for free?
Remember (Federal Reserve) Regulation Q, which kept interest rates on savings deposits so low for so long in order that S&L's could survive by borrowing short and lending long? Regulation Q controls were supported during the decades when Congress was overwhelmingly Democratic, because in the mantra of the time, S&L's needed to be protected from interest rate competition because they represented the virtues of "thrift and home ownership."
In reality, S&L's were built to fail and were only sustained by congressional intervention. They were politically untouchable. I know. I was there. The only people who were worried were Federal Reserve economists. They'd stop me in the hallway and express their worries. I told them there was nothing I could do. The intransigence of Congress on this issue cost taxpayers in the neighborhood of $150 billion. Bill Seidman did a good job at liquidating the congressionally-generated mess.
If it were all about making the books balance, all you fiscally-responsible guys would be right. Balance the budget, let the markets crash and burn freely until someday somebody builds from the wreckage. Take a seat in Andy Mellon's pew, sit back, and watch.
Unfortunately, the (eventually) tens of millions of people out of work, without healthcare, and/or newly homeless would have something to say about that.
Hamilton said it best, to Jefferson: "Your 'people,' sir, are a Great Beast."
Yes. We are. And that is why politicians will sacrifice currency over food on the plate every time. Because if you don't solve the Beast's immediate problems, it WILL eat you.
I'd characterize Krugman as "spend it all in the good times and spend even more in the bad." He really doesn't understand the dangers of creeping statist expansion. Rob Dawg | Homepage | 12.29.08 - 10:36 am | #
I'm not going to speak for the guy but he did rail against Bush's deficits a few years ago - however he didn't make clear whether he preferred to raise taxes or cut spending. BTW - as a liberal - I think libs should be awfully cautious about 'state expansion'... as Bush Cheney proved there is more to state expansion than additional 'resources' for 'head start'. You can only imagine how I get reamed by my 'fellow libs' when I try to point that out [that you will not likely just get 'head start' unless you also accept 'homeland security' - history has proven that over and over]. Be careful what you wish for.
Wolfgang Munchau's column in today's Financial Times makes the interesting point (outside Krugman's ability to grasp) that The Obama team's policy responses so far are "narrow-minded" and will do little more than "blow even more money on infrastructure investments and on education. Whatever problem this is supposed to solve, it is a different problem from the one we need to solve right now."
Hamilton said it best, to Jefferson: "Your 'people,' sir, are a Great Beast."
Yes. We are. And that is why politicians will sacrifice currency over food on the plate every time. Because if you don't solve the Beast's immediate problems, it WILL eat you. Bob Dobbs | Homepage | 12.29.08 - 10:40 am | #
Well there is always that too. FDR was the last one to face that kind of threat - the Big O might see it next, I hope not.
dryfly writes:
Fear is consuming their efforts now. Don't fight the Fed.
I am not Anonymous | 12.29.08 - 10:30 am | #
I am NOT a rigid 'Austrian' or 'Keynesian'... I just wish they'd be a little more 'measured' and think 2-3 moves ahead. I think the repercussions from this AFTER the crisis are going to be worse than they imagine. JMHO.
I wasn't attempting to classify you as anything. The Fed is back on their heels, operating from fear, reacting. Therefore they can't be measured or think 2-3 moves ahead. In their opinion they don't have that luxury.
Krugman did not advocate spending it all in good times. He was in favor of Gore's much-mocked lock box. Disagree with him if you like, but don't make up positions to disagree with.
Krugman's a clown. Yep, lots of productivity gains with socialism. Here's the path. Tell them run up the fiscal deficits, expand, spend, expand, ....the fed's will bail you out with their fiscal programs. Ponies for everyone. Dig holes, fill out paper, get a check, spend.
Like the quote, 'Why can't we keep doing good things?'.
Oh those darn keynesians, they're so cute and lovable.
Jeffry Imelt at GE I think put it best. "this is not a cyclical problem this fundamentally a re -set."
Krugman and all the other economists (beware when that lot agrees on anything) are treating this as a cyclical problem and are using all the tools (albeit on steriods) that they would use for a cycle problem.
I wasn't attempting to classify you as anything. The Fed is back on their heels, operating from fear, reacting. Therefore they can't be measured or think 2-3 moves ahead. In their opinion they don't have that luxury. Anonymous | 12.29.08 - 10:48 am | #
I understood your point - mine was they better take a deep breath & control their fear or they'll be going from crisis to crisis. If they can't do that then they better heed the calls for them to step down.
LOL nova, I just posted the article two comments above...
Comrade Kristina | 12.29.08 - 10:26 am
Didn't the smugness, the pure pigness of that article make you want to hurt them?
Dryfly - Did you get my comment about reading John Sandford? Its your part of the world. I just finished one, and now I want to go drive across the high plains.
Substantial inflationary deficit spending is the only choice now. We're in a nominal interest deflation, which means the credit markets don't work. You can't wait for the market to fix things when the market is broken. You can't inflate through monetary policy because the transmission mechanism for that, the banks, is broken too. So we have to inflate, just to have a market to do anything, and we have to do it through fiscal policy.
Different Chris:
As a resident of Pittsburgh I can attest to our disfunctional state gov't-more reps than populous california, in a system to ensure re-election. The voter backlash is still unfolding from a midnight pay raise of 16% that these folks voted themselves a couple years ago. There is much more, but I dont't know where to begin.
all these comparisons to the great depression are getting tiring! In 1932 unemployment was 25%. The banks had all failed, there was no social security, medicaire, a huge defense budget etc.Given that government spending at all levels accounts for 40% of GDP the demand collapse of 1929-32 is just not possible. Even if assumed that the consumer went to 8% savings rate overnight and the elimination of home equity extraction this would cause a 10% decline in consumer spending. Bad but not catastrophic.
Now 10% unemployment may feel like a depression because we have gotten accustomed to living high but being and feeling are two different things.
Dryfly - Did you get my comment about reading John Sandford? Its your part of the world. I just finished one, and now I want to go drive across the high plains. nova | Homepage | 12.29.08 - 10:57 am | #
Ya - I made a note - I'm going to look him ip. Thx.
There is nothing to defend. State governments are currently adding to demand destruction because they can't borrow. In addition, some of their budget cuts maximize social costs because they target the most vulnerable. A news report last week discussed cuts in Medicaid payments to nursing homes. Some homes may close, throwing out on the street bedridden elderly residents whose assets have already been depleted by said homes.
These are the facts. Anybody who has an "alternative view" shouldn't be wasting any money on a Mensa application.
Dec. 29 (Bloomberg) -- GMAC LLC, the financing arm of General Motors Corp., is still tabulating the results of its debt exchange with bondholders, a company spokeswoman said.
Did they do this in Florida? We have a chad problem here? Or are they unhappy with the way the numbers are trending and trying to "fix" it.
Krugman could get up to $5 trillion in bailouts/handouts in the Obama years. But he will also get that inflation he seems to want so bad. I've been reading up on South American-style hyperinflation. My understanding is that my 30-year mortage fixed at 5.75% will stay the same even if inflation reaches, say, 800%. So there's nothing stopping me in a few years from skipping Starbucks some morning and instead using that $150,000 to pay off the mortgage. Am I correct in this thinking?
My prev post was only partly in jest. Every minute a child with special needs is born. Every minute, people contract ailments that leave them unable to fend for themselves (hell, I may be next).
Most of the world does not (mainly because they cannot) take take of their weakest, and these are the types of places is where I've spent most of my adult life.
This is the human condition, as is our empathy. I haven't spent much time on budgetary details of local govts but they loom large now, don't they.
For PK to exhort more now from the Federal Gov't is kind of, uh, misplaced? Since much of what Washington is extracting from us and our creditors in interest payments, re-disribution and foreign adventures is an excercise too far. and haven't we been dumping on state and local to sweep things up as the feds build their empire, just to keep services flowing as folks are accustomed to seeing them come in.
Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire.
Did they do this in Florida? We have a chad problem here? Or are they unhappy with the way the numbers are trending and trying to "fix" it. nova | Homepage | 12.29.08 - 11:03 am | #
If they did it here in Minnesota they'd be waiting a lot longer than if it was done in Florida... but then if done in Florida they could just take it to the supreme court. Problem solved.
GMAC Debt Swap Results Still Being Tabulated, Company Says
2008-12-29 15:26:39GMT
Dec. 29 (Bloomberg) -- GMAC LLC, the financing arm of General Motors Corp., is still tabulating the results of its debt exchange with bondholders, a company spokeswoman said.
The auto lender needed investors holding 75 percent of its $38 billion in bonds to exchange the notes and complete the transaction. The offer expired on Dec. 26.
Once the results are inalized, we will disclose that information, Gina Proia, a spokeswoman for Detroit-based GMAC, said in a telephone interview.
Now 10% unemployment may feel like a depression because we have gotten accustomed to living high but being and feeling are two different things.
crazyvermonter
U-6 is the closest measure of how unemployment was calculated in the '30's. Last time I checked it was pushing 13%. If the Labor dept. releases 9-10%, U-6 will be in the mid-high teens. But, at the time of GD, US was the worlds largest exporter, manuf. and creditor nation. Inverse of where we are today. China would mirror the US during the GD much closer.
citizen energyecon, since the pot is indeed bubbling what about Kuwaitis refusing to finance Dow. Will the arab fatcat sovereign funds bail us out if Israel stays off the leash?
These are the facts. Anybody who has an "alternative view" shouldn't be wasting any money on a Mensa application.
The facts are you and old kruggie are advocating spending money you don't have lent to you by people whom you already owe.
Deficits you see DO matter.
I can't foresee a good outcome.
Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire. Anak | 12.29.08 - 11:05 am | #
Then you don't understand what Krugman is saying - he is saying locals can't print money so in a collapse they contract & exacerbate the collapse. It has nothing to do with who would provide services better and doesn't speak to preferences for monolithic empire or small princely states. I'm sure he has an opinion regarding central vs distributed gov't and don't doubt your impression of him might be right but that ISN'T the dish he served with this column.
Were there not more agencies, at a state or county level, in place in the 80's recession? Social service type agencies that could respond when given increased federal funding?
These are mostly gone, at least in Virginia. The safety net is "Faith based." The states spent on other types of services an infrastructure. Very nice local gov buildings and a paramilitary police force come to mind.
Did not the level of federal funding decrease dramatically for state governments? There is not a lot of slack left.
Krugman is clueless as always. It's always about spending just a little bit more for our salvation. Only a complete moron, that's you Paul, would believe that you can get yourself out of a credit bubble by trying to reflate it over and over again. I guess the dumbasses that taught Paul never learned about the absolute limits of exponential credit and money growth before it blows sky high. Popcorn time is coming Paul!
This blog might be advised to start paying attention to the growing disconnect between the effects of this depression on the equity of the 78% of workers in the private sector vs. those in the public sector. Pension and benefits for the public sector are off the charts, and when the full accounting of the excesses in this regard (as well as salaries) is known to the folks who are currently in extreme financial distress, expect a readjustment in the political landscape.
The unions and politicians (teachers, public employees) who have been negotiating these obscene contracts at taxpayers expense are in for a shock in the near future.
kstills | 12.29.08 - 9:25 am | #
Ya know, you might want to fact check before posting. I worked a gov. job for 20+ years. I contributed 15% of every dollar I earned to my pension fund during that time. I now draw a nice check from that fund every month. The check is a result of the contributions I made and return on the investment. If the DC politicians would have raided my investment fund as they did YOUR SS funds, I would not have a pension. You need to speak with your congressman or senator about them putting SS revenues into the Gen Fund - don't bash gov. employees that have a system that works. BTW, as I did not contribute, I do not draw a SS check.
I've had some experience with employment in both state and federal governments. Cutting wasteful spending would go a long way to balancing budgets. I don't expect it to happen in my lifetime.
"Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire.
Anak | 12.29.08 - 11:05 am | # "
Now you're on my territory. I believe the Feds should set national priorities for initiatives, and provide funding down to the state/local level. And the programs should be conceived of and executed by local gov't, with federal oversight. I was a tiny cog in such a fed program, and it worked pretty well.
The Reagan years looked like what you were talking about, but in those days the feds passed the responsibility back to the states -- but cut much of the money, and removed most of the targeting. They knew what would happen.
You need a Fed/local partnership. Concentrating all power in the Fed means that you end up with one-size-fits all programs that don't work very well. You also end up with pork and corruption, because concentrating all power at one point makes that point easier to control by special interests.
Concentrating all power/money at the local level is madness, too. Some of the proposals that local gov'ts put to us were crazy in the extreme, and some were outright conflicts of interest.
No. Federal guidelines and oversight with local execution works -- well, better than anything else I've seen for a large-scale initiative.
ova writes:
Were there not more agencies, at a state or county level, in place in the 80's recession? Social service type agencies that could respond when given increased federal funding?
These are mostly gone, at least in Virginia. The safety net is "Faith based."
Unless you want to get extremely pissed off, don't research the role of faith based entities in N.O. post-Katrina. Billing the govt. at $40 hr.+ for labor and more for per diem, hiring illegals at less than $10 hr., warehousing them in mold ridden, flooded out homes. But, it was done in the name of God so I guess it's alright.
all these comparisons to the great depression are getting tiring! In 1932 unemployment was 25%.
The point is to prevent things from matching or exceeding the worst ever experienced in America. You want to turn the wheel before you smash the guardrail and go over the cliff.
"he is saying locals can't print money so in a collapse they contract & exacerbate the collapse"
Yes, that is what he's saying, and thanks for the emphasis.
Only the federal government of a dominant state that prints fiat currency that happens to make up the bulk of the reserves of surplus countries around the world has the power to pull the particular stop on this pipe organ. For now.
But Dryfly, don't you think Krugman, like the lot of the NY/Beltway courtier establishment, is overreaching on what's achieveable in terms of fiscal something out of nothign?
Only someone who has never really worked a job where you can actually be fired can come up with a bullshit piece like Krugman. Paul, most of us living on this planet must live within our means, not spend more than we make, but you have no worries because you work in acedemics where you can get all those mushhy heads up to their eyeballs in debt with student loans you sorry POS. The states are toast moron. Who will buy their Bonds Paul? Oh that's right, the FEDS can pick this tab up too you jackass.
It's time to grow up you spoiled silver spooned POS who works in La-La Land University where up is down and down is up. You can't spend your way out of a liquidity trap schmuck!!
The check is a result of the contributions I made and return on the investment. If the DC politicians would have raided my investment fund as they did YOUR SS funds, I would not have a pension. You need to speak with your congressman or senator about them putting SS revenues into the Gen Fund - don't bash gov. employees that have a system that works. BTW, as I did not contribute, I do not draw a SS check. Anon. | 12.29.08 - 11:15 am | #
Is it a separate fund you control [like an annuity or like an IRA] or does the check come from a gov't agency? I ask because there never was anyway to make SS truly 'separate' - there never was a lock box - that was just a figment of political imagination - money is fungible and once inside the walls of the castle it is basically all in the same chest whether called that or not.
Not trying to pick a fight - just understand how some of these work - I don't get to see all the sausage being made.
You can't spend your way out of a liquidity trap schmuck!! SPECTRE of Deflation | 12.29.08 - 11:25 am | # I'm pretty sure he thinks that the only way out of a liquidity trap is more spending. Can I ask a question without getting completely flamed? I'm one of those "mushhy heads up to their eyeballs in debt with student loans" that you reference. Also, I can get fired. I see alot of anger at the proposed stimulus package, and I understand the fear of additional deficits - but what is the alternative? Just waiting for the whole economic swamp to drain and then rebuilding? Why is that better than the risk of additional federal debt? I'm not trying to pick a fight, I honestly want to know what the alternatives are.
But Dryfly, don't you think Krugman, like the lot of the NY/Beltway courtier establishment, is overreaching on what's achieveable in terms of fiscal something out of nothign? Anak | 12.29.08 - 11:24 am | #
Yes - I think they are both panicking [because they see THEIR ox getting gored - coastal finance & RE - and not just fly over oxes] and not considering down stream consequences. But that isn't the same as saying I'm against measured deficit spending. I have no problem with fiat - it's what we got, it's what I want us to have. For those who don't like it - buy PM & don't own fiat - plenty here do. But I believe fiat based Keynesian responses are powerful medicine - there is a fine line between appropriate prescription and drug abuse. I think we have been slipping farther into the latter than I am comfortable with.
Terrific job calling other people names. Way to go!
Where did you get your Ph.D? What was your disertation on? How many years did you teach at an Ivy League University before you began calling people names? Please cite your references.
'Ben B., Tim G., and Paul K.: if you give us inflation, we will give you Kristallnacht.'
Maybe then they will realize that hoi polloi do not like, do not tolerate, and will overthrow the established order in the face of rabid, rapid inflation.
Actually not only can you spend your way out of a liquidity trap it's basically the only way out of a liquidity trap. Fair Economist | Homepage | 12.29.08 - 11:28 am | #
They are locked into the 'monetarist' view only - they'll know all about the fiscal options in about a year from now. Think they are unhappy now - just wait.
OT-I think oil is going to need more than an Isreal vs hamas war to push up..initial run up looks tired on way back down...deflation has firm control of the lead before halftime...
Spending is the option the Japanese have chosen also. I think it is called "going fiscal." At least that what the news articles are reading like.
I think that for many in positions of power an influence, coming up with a viable policy for averting what is happening is something they are not equipped to do. CYA, incoming admin, personal income, and being a go to media person has them blocked in on all sides.
Like people I have worked with who are "job scared" so too are they.
d-, there was no storming of the Winter Palace in our '30s Lesser Deflationary Depression. There was isolated violence, and a march and demand for Veteran's bonuses.
All the malinvestment will and must be wiped out before we can begin to talk about moving forward. They can play hide the sausage all they like but the bill must be paid. For those that believe you can increase ever bigger deficits without ANY associated problems has zero understanding of history and how Empires fail. I keep hearing about the Great Depression as an example of our current ills, but very sad to say we were in a much stronger position last time, and we have no such luxury this time. For those that think that the only way out of a liquidity trap is to spend ever more, you will be punished because you believe we live in a vacuum where an object once started will go into infinity because there's no friction to slow anything down. WRONG! The virtuous cycle turns into the vicious cycle that we now find ourselves in. Each time they create an additional Program to bail someone out, we are digging a bigger hole for our children and grandchildren. Are you all so self absorbed that you don't care about how your children will live with the debt we have saddled them with? The ME Generation makes me sick!
Economists are part of the problem and should not be allowed to be part of the solution, but in a system of the Crooks, by the Crooks and for the Crooks what choice do the American People have.
d-, there was no storming of the Winter Palace in our '30s Lesser Deflationary Depression. There was isolated violence, and a march and demand for Veteran's bonuses. Comrade-Dope jg (jg) | 12.29.08 - 11:48 am | #
Thanks to FDR. He might not have ended the depression but did end the panic... plus put millions to work doing whatever they could think up. Idle minds are the devil's play ground... idle minds attached to empty stomachs all the more so.
BTW - my father remembered seeing both 'reds' and 'American Bund' on the streets in the 30s - it was closer to blowing up than we today realize.
Dry, it's really hard to get a man to refocus while he is busy masturbating. But good luck.
On another note, Krugman's column suggests a clever idea. The states are rattling their cups at the feds looking for grants to keep programs running. Now is an ideal time to get a quid pro quo: A federal requirement that states who get cash now establish an automatic rainy day fund for the good times. This would help move the states toward productive countercyclical spending, plus avoid the trap Krugman talks about, of overpaying for infrastructure when the economy is strong.
Krugman doesn't have rose colored glasses on. He's not the one saying everyone will have a pony in the future and all our lives will be beautiful.
Only his critics are saying this as they find knocking down straw men much easier than having a real discussion about the issues we face and best solutions. Many of them are limited to labelling and party lines.
There are plenty of reasonable arguments why Krugman is wrong, but they start with the understanding that we are dealing with the lesser of two evils principle. We're in bad shape and there is no quick fix, Krugman is not arguing he has one only what he thinks gives us the best way out eventually.
@ Dryfly I draw from a state PERA account. Much like CalPERS but the fund is not guaranteed by our state taxpayers. NM public employees contribute to the fund, it is run by people we elect to the board, and we are paid a defined benefit. If it goes broke, we lose. As long as it is solvent, we receive a pension check. To my knowledge no taxpayer funds are involved as all. I really do not understand all the gov. pension bashing that goes on here. It really must be a sour grapes thing.
TraderWalt, F*** a PhD! Do you really think those assholes have a clue? Paul must of studied Botany because a Money Tree is the only you can spend more than you make for an extended period of time without facing default.
Let's have Paul's state start sending him IOUs just like CA, and then he can deal with his finances like everyone else. Paul, just tell them to take it out of the TARP Money.
Most state governments are prohibited by law from running deficits, so Krugman really doesn't know what he is talking about. If he is advocating that the Fed hand money to the states, OK (though I don't think that's as wise as Krugman thinks - personally, I don't think bailing out the present mess is worth paying the future for).
The bigger problem is this: how many future Presidents will repeat Bush's mistakes of 2000-2007 because economists who advise them have no clue what happended? I'd tell Krugman: get your own house in order first.
Your line of thinking bothers me the most. You argue that hyperinflation is absolutely the only option and at this point we just have to do it. But that only favors banks at the expense of savers. In the absence of worthwhile production, all stimulus will do is keep pushing more people to the periphery. We have been trying your massive stimulus idea for at least a decade. Now you want more massive. I don't want to live in your country.
Werner writes:
trader walt writes:
...How many years did you teach at an Ivy League University...
You are talking about the ones which endowed america with Greenspan, Bernanke et al ?
Werner | 12.29.08 - 11:54 am | #---------------------------------------
If I'm not mistaken, Greenspan neither taught nor earned a degree from an Ivy League school (except perhaps for an honorary one). I believe he attended Columbia, however.
"If the legislature fails again, then California is looking at issuing IOU's for only the second time in history."
The Constitution has something to say about this, if anyone still cares about the Constitution, that is.
Article I, Section 10
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
I give the new admin 9 months before we get the mother of all hoopajoop, complex, arbitrary programs proffered.
Krugman, in his attic, sits night after night, preparing his version of this program. Dreaming of his name being added to the history books under the aegis of the "economic dream team" of the early 21st century much as his heroes of the Depression were ensconced.
Pensions are very much a long term problem. Consider GM legacy cost today and look at ratio of working employees to retired. No way possible to continue to pay the retires as promised. Conversion to a 401K style is the only way to protect the employee in the long run. SS and Medicare are on the same path of destruction. Things change and some one is going to lose. We as a country have to spend less (especially government)then we make. The government can't just print endless money as they are doing.
Each time they create an additional Program to bail someone out, we are digging a bigger hole for our children and grandchildren. Are you all so self absorbed that you don't care about how your children will live with the debt we have saddled them with? The ME Generation makes me sick!
It's making me sick...Thus why I quote Twain...
"I am said to be a revolutionist in my sympathies, by birth, by breeding and by principle. I am always on the side of the revolutionists, because there never was a revolution unless there were some oppressive and intolerable conditions against which to revolute"
"In the beginning of a change the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot"
many of the smart posters here tend to side with the peaceful approach to fight this disease at the top. I'm rational to a point. Then I think of my daughter. The hopes and dreams that you preached could come true via hard work, tolerance for others, love and giving even if it's a smile.
I as a father need nothing, I could live on a beach in baja out of a tent as long as their were waves, fish, lobster and water. Who cares about stuff?
the looting will continue...until the pigmen are displaced...sitting on a pc will not do it...been to the SF fed 2 x protesting, called and emailed congress, built email campaigns to inform friends and relatives of the deception and lies...
A lot of great minds here..Many patriots...I agree with most what is written..but tend to lean towards 1800 justice and sex pistols mentality....
"Substantial inflationary deficit spending is the only choice now."
You really need to think it through more deeply than this. First, get away from the bank-centric idea. Banks don't create business, business creates banks. Then: what business would you feel secure about backing today: airlines? transportation? real estate development? retail? energy? manufacturing? homebuilding? agriculture? consumer products?
That puts the problem in focus: in the credit bubble, almost every business borrowed the future for present market volume. There is utterly NO option now but to wait that out. NONE. No government stimulus, no credit market 'jolt'... NONE. If you have followed this blog you know that it is true of housing. If you think it through you see why it is true of other industries, too.
Also, the other way out of a liquidity trap is default. Printing money only presents itself as a solution when a gov't is bankrupt. Printing money then means that market participants paid in dollars have the value of their labor diminished with each successive day. This leads to the hoarding of hard assets, and then you will have completely lost all power to affect anything through more stimulus because your currency will not be taken seriously in the marketplace.
Is it any wonder why current economic policy decisions are being made when a marxist weasel like Krugman wins the Nobel prize?
One of the likely consolations of the coming hard times is that when true socialism gets revived in the US (probably in Michigan and Ohio when the auto industry goes under) I won't have to see ridiculous statements like this.
When the real Marxists are hurling invective at Krugman for opposing the nationalization of Microsoft, homebuilding, apartment complexes, railroads, trucking, and banks, inter alia maybe you'll see how crazy that is. A capitalist roader like Krugman would be fired and marginalized in a democratic Marxism and shot in a Leninist one.
If the country redirected the energy and resources of the war machine into technologies and practices to reduce global climate change, the USofA might lead the way toward saving humanity from itself (maybe).
But maybe humanity is not worth saving, either from itself or from anything else.
If humanity is a cosmic experiment (white mice?) testing, as I believe it does, whether life, per se, can withstand selfish intelligence, we may see the final results this iteration...
Also, the other way out of a liquidity trap is default.
Only if basically everybody defaults without liquidation, ie, jubilee. Not possible without truly massive and highly corruption-prone government action, or with the failure of the court system, which nobody here wants to see (hopefully?)
--
"As Mencken observed: The normal man must sometime yearn to spit on his hands, hoist the black flag, and go to cutting throats..."
woody (tokin librul),
Mencken would be banned today by the media Crooks.
It is very hard for born-and-bred American dope to grasp but many freedoms have been taken away, "legally," over time. And the dopes go on voting for these evildoers.
That puts the problem in focus: in the credit bubble, almost every business borrowed the future for present market volume. There is utterly NO option now but to wait that out. NONE.
That's not the liquidity trap. The liquidity trap is that when nominal interest rates drop below zero the credit markets come to a halt, causing serious deflation as everything unwinds. Business halts and you fall into a bottomless debt deflation. You can't wait it out, because it gets worse as you wait.
Almost all states have some form of balanced budget requirement. There is a lot of creative accounting in bad times, and many states will draw on reserve funds.
Still, it is far harder for states to run deficits than for the Federal govt. Typically, a state has to "pretend" in one way or another in order to run a deficit. They might mess with revenue forecasts to get things to balance. They might balance on a cash basis but have things getting much worse on an accrual basis, etc.
There are also what you might call "honest" deficits. A common example is what looked like a balanced budget runs into a large deficit when an economic downturn reduces revenues and increases expenses. This is part of what has happened to CA (but certainly not all of the problem).
Krugman doesn't mention it, but most governments also tend to spend every dollar (or more!) during economic booms.
And when recession hits, they 1) raise taxes and 2) make token cuts and/or slash services the public will whine about (beaches and pools, public transportation, parks, etc.) while 3) still awarding the public unions outrageous pay hikes in order to buy their votes at the next election. NJ is the poster boy for this, but CA is vying for the top slot.
"You need to speak with your congressman or senator about them....."
...have you ever tried to contact them? Try asking them what THEIR opinion is re. a certain topic - you won't get an answer - you will get the questioning: name, address, phone, what YOUR concern is....that's all, no answers.
It's too late in this game to do anything but pick up your chips and leave the table. Never play a game where the rules change mid-game....
deflation is like a great white shark, theirs blood and a sick economy in the water already but the shark is now heading to surface at 25 mph starting from 200 meters below and it can't be stopped...Get ready...
I'll try to give Krugman a more favorable interpretation.
States have to at least pretend they are balancing their budgets, and in bad recessions most states do not have enough set aside in reserve funds. Thus, they usually have to start cutting. Those cuts could be in employees, working hours, benefits, medicare, and many other places. However, states have a labrynth of constitutional restrictions, existing contracts, and federal subsidies and matching programs. Often, a state cutting $1 million in a particular program results in $500k-2 million in reduced federal assistance.
So, what to do? It's quite simple actually. The money comes from the Federal govt. A large number of programs have the ability to waive matching requirements. The Obama administration wants a big infrastructure building program. When states in trouble see new Federal money for one purpose, they redeploy state money for other purposes.
The Federal govt has also been looking at how it might help with municipal borrowing costs. There are at least four promising approaches: 1. Recapitalize the existing bond insurers. 2. Guarantee newly issued municipal bonds, subject to various constraints to prevent abuse. This would probably be done for a limited period of time. This is difficult to do under current law, but Congress might be convinced. 3. Start a Federally sponsored municipal bond insurer or reinsurer. This is has a LOT of potential. The Federal govt would collect premiums, similar to existing bond insureres. Their guarantee would be worth much more to the market in reduced interest. The process could be similar to existing bond insurance. It even might be created as bond reinsurance, with exisiting bond insurers taking a portion of the risk and premium.
One of the likely consolations of the coming hard times is that when true socialism gets revived in the US (probably in Michigan and Ohio when the auto industry goes under) I won't have to see ridiculous statements like this. Fair Economist | Homepage | 12.29.08 - 12:20 pm | #
Amen - current crop of wingers wouldn't know 'Real Marxists' even when they load them on the cattle cars for the trip to the Gulag.
I've always said the end result of neocon 'leadership' will be the rebirth of the Cult of Che [and others].
--
ALL OF THE AMERICA'S ECONOMIC PROBLEMS FOR THE PAST DOZEN YEARS CAN BE EXPLAINED BY MY 1998 SLOGAN:
IT IS THE DEBT, STUPID!
Jas
PS: The so-called stock market is a substitute debt market. America is ruled by known and proven Debt Pushers. It is finished as the leading economic power. Pushing Debt is evil, but how is BBAD to figure that out.
I've always said the end result of neocon 'leadership' will be the rebirth of the Cult of Che [and others].
dryfly
Neo-socialism. EU and S.America are decades ahead of the US in the regard of the new soci-economic model going forward. De-coupling occurs post global recession.
After working in a state government agency for 35 years (it was like hell on earth), I know first hand that politicians do not know what long range planning is about;they only care about the 'next election' so as CR states its spend, spend in the 'good times' and spend less (or worse borrow more) in the bad times!
Mike C
The biggest issue to keep in mind is this paragraph in page 9:
"Unlike private sector defined benefit plans which tend to be ânoncontributory" (i.e., do not require employees to contribute), public employees generally contribute to defined benefit plans at a fixed rate (typically a percentage of salary) that varies among different types of employees and retirement systems. In some cases, collective bargaining agreements may specify that employers pay employees' contributions for a period of time."
For me who is on 2.5%@55 plan, that's 8% of my pre-tax income.(Less than 15% of some people here, but that's still quite a bite.) My employer, a small special district that had contracted with CalPERS for retirement benefit, kick in another 15%, for the future benefit of current employees and people who had already retired. The state of California currently kick in about 10% of payroll for direct state employees. Or as the report states, had remain constant for 3.5%-4% of California state revenue for decades. Hardly a reason to panic.
'Mencken would be banned today by the media Crooks.
It is very hard for born-and-bred American dope to grasp but many freedoms have been taken away, "legally," over time.'
Jas, let's do a little history (yes, I know - a waste of time).
'...in 1926, reporter and literary critic H.L. Mencken was arrested on Boston Common for selling a magazine that had been banned by the New England Watch and Ward Society, the city's self-appointed moral censors. A fierce defender of free speech, Mencken had traveled to Boston with the express intention of getting himself arrested. The minute he sold a copy of the magazine, the vice squad took him into custody. Not everyone in Boston agreed with the Watch and Ward Society, and the next day a judge ruled in Mencken's favor. He was acquitted on all charges. The victory was short-lived, however. Boston continued to lead the nation in the banning of books for another 30 years.' Mass Moments: H.L. Mencken Arrested in Boston
In other words, we have more freedom than in Mencken's time, but we don't have more freedom than in Mencken's time if you actually know anything about his time.
Maybe you have heard of a certain Eugene Debs?
'On June 16, 1918, Debs made a speech in Canton, Ohio in opposition to World War I urging resistance to the military drafts of World War I. During the Palmer Raids, part of the First Red Scare in which people who were suspected of being radical leftists were arrested under fear that they would cause anarchism, Debs was arrested for violating the Espionage Act of 1917.[31] The period was characterized by supporters of communism and socialism being arrested and detained under suspicion of sedition. Deb's speeches against the Wilson administration and the war earned the undying enmity of President Woodrow Wilson, who later called Debs a "traitor to his country."[32]
I have yet to see any major political figures thrown into jail for speech alone during my lifetime - some were killed, of course, but neither Martin Luther King Jr nor Malcolm X were imprisoned for their politics in the sense of utterly destroying a political movement (Rev. King was briefly jailed for for not following the laws at the time - but then, so was Gandhi).
Your ignorance at times is just too much.
You seemed to have experienced America at its peak of comfort, and now seem to feel that America returning to its more historical norms is somehow the aberration.
Here, read what I said again, slowly this time: "This is the same theory as expressed in the aphorism from that ideologue Dick Cheney, which goes: "Deficits don't matter."
I never heard Krugman (PBUH) screaming for a decrease in the deficit or for a decrease in spending during the Bush years, nor during the Clinton years, nor during the Reagan years, when Krugman (PBUH) worked in the Reagan White House on the Council of Economic Advisers. Krugman never saw a deficit or a bailout he didn't really like. And I didn't hear any of the Democrats in the House or Senate in the past two years act on the belief that deficits were bad, or doing anything to reduce the Federal deficit, whether they thought the economy was in expansion or in contraction. As CR just said, state governments also usually spend everything in good times and in bad, as if they believed that deficits don't matter.
When was the last time our political class actually considered a viable budget? I speaking in terms of long term that considers ALL liabilities. MPinCO | 12.29.08 - 12:38 pm | #
I love your VERY selective phrasing but you DO understand trends, do you?
Krugman (PBUH) got the chance to help prove that the Bush deficits weren't a good idea by opposing TARP, but instead Krugman (PBUH) went along with Paulson, creating the biggest deficit in American history. When it came time for Krugman (PBUH) to say if he approved of the bailout, he lamely wrote, "Yuk. Phooey. I guess so."
Uh, federal debt as a percentage of GDP went down during the Clinton administration, so why would he complain?
Because Krugman (PBUH) should consistently oppose Cheney's idea that deficits don't matter. A deficit is a deficit, small or large, good times or bad. But as it turned out, there are times when Krugman (PBUH) doesn't mind deficits, like when Clinton had one, or when Paulson proposed increasing it with TARP, or now when Obama proposes increasing it by at least as much as Paulson. It looks like Krugman (PBUH) is not really uncomfortable with deficits, except when Bush ran one.
[I see the word "deficit" in only one of your four links, and only then when Krugman (PBUH) was quoting Cheney that "deficits don't matter".]
Unbelievable. That Krugman is asking such idiotic questions puts a question mark on the legitimacy of Nobel prizes. It's the same as asking a broke person why is he/she not buying a million dollar house. Hey Mr. Krugman- here is your Nobel prize worthy answer - states are not spending money because = drumroll - THEY DON'T HAVE ANY AND THEY CAN'T PRINT IT EITHER.
Trash Krugman all you want, people, but RTFA first. Geez.
When he's proven wrong can his nobel prize be forced to be returned?
This guy was on my reading list and then I deleted him because I found he has a nonsense streak and I then I found out he won a nobel prize, but I just can't keep him on my reading list.
"our disfunctional state gov't-more reps than populous california"from an earlier post.
If you want wretched excess in the number of reps, look at the UK. They seem to have hundreds going to Parliament representing small districts and getting paid for it. Scotland has its own legislature, so that Scots are paying double for their representation. Dopn't know about Wales. I'm sure local jurisdictions have their own reps as well.
Come to think of it, and building on the views of some posters here, if everyone held an elective office of some kind (The New Orleans model) then there would be no unemployment. And we would have lovely government facilities to boot.
Oh, I see your problem now. That sentence should have read, "I never heard Krugman (PBUH) screaming for a decrease in the deficit via a decrease in spending during the Bush years. . ."
Agreed in theory but state & local gov'ts do have rainy day funds that they can tap plus they do have the power to tax and if they have solid ratings they can borrow/float bonds to fill any gap needed to "balance the budget". Selling assets is another option, raising fees, e.g. tolls, car title/reg fees, in addition to "targeted cuts." If the Feds do bankroll several infrastructure projects that would have been state funded then that will free up cash for other parts of their budget.
Meanwhile I will continue to daydream about living in a country with sane transportation, health, and military policies. Don't know why I do that, might as well daydream about Megan Fox as the possiblities are dead equal.
a different chris
There are at least 180 countries on the planet, surely one of the others more closely meets your ideal than this one. Why not emigrate?
Only a couple of states can borrow to cover deficits. Rainy day funds generally are few and far between and puny at that. States will cut budgets dramatically. Local governments as well. Krugman is right on.
El Cliffo, you commit a common error, whereby stupid dullards enjoy conversing with the intelligent, and wrongly imagine that the intelligent enjoy conversing with them.
Mark W writes:
Krugman just said state governments can run up spending deficits just like the Fed can? Really? Thats pretty ignorant.
Mark W | 12.29.08 - 9:29 am | #
He said nothing of the sort, he argued that a big part of the stimulus package should be Federal aid to the states so that thye do not have to cut sharply in the face of economic downturn. Cutting spending is every bit as much of an economic drag as raising taxes, prehaps even more so given some propensity of people to save from a tax cut and not immediately invest or spend. Yes states should be more aggressive building up rainy day funds durring boom periods. However, they will blow it one way or another, either cutting taxes or boosting spending. Consumers are not spending, and as a result, businesses have no desire to invest, thus 2 or the 3 legs of demand are not working. As a result, the states have lowever revenues, afterall their main sources of revenue are real estate taxes and sales taxes. I does not make lots to sense to cut the final source of demand.
There are alternative to cutting services, raising taxes, or selling bonds. And the public will be the first to rally to their aid if they have the courage to lead with hope, rather than cut in fear.
Has this guy even read history? Herbert Hoover jacked taxes through the roof.
I keep hearing that WWII got us out of the great depression because it destroyed goods creating needs. BS. If destruction of goods created economic booms, the collapse of the Madoff pyramid scheme should have stimulated one. It didn't. Why not? Because investment, not spending, is what creates jobs and stimulates economic growth. And bad investments (and there were many frauds exposed in the pre-depression crash) detract from growth.
The reason that we are concerned with economic growth is stability.
With current negative growth and zero interest rates, the burden must fall on Fiscal Policy.
State and Local Governments will need to maintain their operating expenditure and increase capital expenditure to play their part in maintaining economic growth. This may be despite declining revenue.
If State and Local Governments are unable by law to borrow to fund their deficits or unable to fund deficits via traditional means it will be incumbent on the Federal Government to provide such funding via either grants or loans.
The choices are
1. To continue to borrow from the creditor countries of the world to maintain economic growth for as long as they are willing.
2. Balance an ever decreasing budget until stabilisation is reached at a much lower level of economic production.
"If it goes broke, we lose. As long as it is solvent, we receive a pension check. To my knowledge no taxpayer funds are involved as all. I really do not understand all the gov. pension bashing that goes on here. It really must be a sour grapes thing."
WTF?
Every dime contributed on your behalf was taxpayer funded.
Cutting spending is every bit as much of an economic drag as raising taxes, prehaps even more so given some propensity of people to save from a tax cut and not immediately invest or spend.
and
State and Local Governments will need to maintain their operating expenditure and increase capital expenditure to play their part in maintaining economic growth.
Huh? Kenysian economics is belief in magic. Sure, you can prop up the economy with federal spending in about the same way that you can prop it up with a pyramid scheme. But unless there's real growth, you just pay for it later. The only thing that sustainably increases people's quality of life is production of useful goods, which the government simply does not do.
Hiring someone to dig holes then fill them in or some other unproductive or inefficient government task does not "stimulate the economy through spending." It allocates good resources to a pointless, worthless task.
At least FDR built some hydroelectric dams at a time when businesses couldn't get loans to invest. That was one type of government investment that seemed to be actually beneficial. If we really need government spending, lets put it towards something useful like more nuclear power plants or some other investment, not lush government employee pension plans. And renegotiate the excessive labor contracts while we're at it.
We invest our way out of a recession. we don't spend our way out.
Currently Accounting wrote: "All this government borrowing is making the credit crunch more severe for the private sector."
On much the same lines, New Guy wrote: "They can only decide whether to spend in the private sector (stocks, corporate bonds, etc.) or the public sector (treasuries)."
These arguments would be somewhat more believable if the rate of return for Treasuries was comparable to that of other investments. However, as we are all well aware, the rates for short-term Treasuries are hovering around zero, with the occasional excursion into negative territory. Remember, too, that these rates are set by auctions. Investors are choosing, en masse, to receive no return on their investment, instead of any of the alternatives.
One might even argue that the situation is the opposite of that suggested above. Instead of a shortage of lenders, requiring the private and public sector to compete for the available dollars, there is a huge excess of lenders, all chasing a very few credit-worthy borrowers. We won't get out of this situation until other borrowers can demonstrate their credit-worthiness.
first
i can haz first?
sloppy thirds
Republicans and Democrats are both big spenders - they just spend on different things. Republicans still have the image of being fiscally conservative which often gives them a free pass on deficit spending (see Ethanol subsidies in the last 5 years). Fox news will be busy in 09.
Krugman is a member of the inflationist party.
What do you expect?
How's the view from your anus Mr. Krugman?
But State Governments can't "print" money like the Federal one can.
Jamie Galbraith in the Predator State:
Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals? Why keep liberal thought in the straitjacket of pay-as-you-go, of assigning inflation control to the Federal Reserve, of attempting to "make markets work"? Why not build a new economic policy based on what is really happening in this country?
so the advice is to spend more than you take in during the bad times...and then when its good times again, no one seems to mind continuing the over spending because 'hey man, its the good times, don't be a party pooper'. and the politicians wouldn't win re-election (huge percentage of the time) if they ran on a platform of reduced spending, they just wouldn't . man, when are people going to learn the bullet must be bit sometime. all makes perfect sense.
When what we really need is 50 more FDRs! 50 New Deals to choose from!
Fill your cravings at the circus of values!
WTF. Is this name that tune? "I can get to the Treasuries panic in 5 policy measures!"
Gov't can't expand forever. At some point they have to cut back, and I imagine at the point where gov't does cut back, people will bitch. But eventually gov't on all levels has to cut back and it isn't going to be pleasant, so no time like the present.
People need to save and invest in rebuilding US private-sector productive capability. All this government borrowing is making the credit crunch more severe for the private sector.
Also, Arnold did push a California spending limitation ballot measure that was crushed at the polls in 2005.
I am not Anonymous writes: Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals?
Or, to put it differently, why would the Democrats run conservative fiscal policies and generate budget surpluses, if the very next Republican administration will squander all of that?
Dear Mr. Nobel winner,
Maybe it is because they spent all our money during the boom days and now the well is dry.
MrM(Excellent) writes:
Or, to put it differently, why would the Democrats run conservative fiscal policies and generate budget surpluses, if the very next Republican administration will squander all of that?
And so we see how the conditions of weak states lead naturally to a "vicious cycle" where it is in fact in the best interest of the policymakers and their constituencies to engage in competitive looting of the state.
Republicans and Democrats are both big spenders - they just spend on different things...
They each spend on their constituents.
The farm subsidies flowing to the midwest are as insidious as inner city welfare...
If I have to pick between sacrificing my savings to either unemployment or inflation.
I choose unemployment, because at least then I may have a chance of getting some return on my money. I might have a chance of returning to work in an economy that has efficiently re-deployed its capital.
Inflationists are necrophiliacs.
It'd be nice if absolutely all gov't subsidies were eliminated. Wonder what the market would produce given natural incentives and clear rules. Wish in one hand, shit in the other, I guess.
IMO, one of the biggest problems we have as a country is more or less full time government. Politicians "in session" have to do something. I generally hate market analogies, but the rules for basketball, football, whatever, haven't changed significantly over time, so why does gov't think it has to keep modifying the rules? A clear set of rules with no favoritism (subsidies) by government seems optimal.
Good grief.
Most state budgets have to be balanced because of the constitutions.
Mr. Krugman might factor that into his consideration of the problem.
This blog might be advised to start paying attention to the growing disconnect between the effects of this depression on the equity of the 78% of workers in the private sector vs. those in the public sector. Pension and benefits for the public sector are off the charts, and when the full accounting of the excesses in this regard (as well as salaries) is known to the folks who are currently in extreme financial distress, expect a readjustment in the political landscape.
The unions and politicians (teachers, public employees) who have been negotiating these obscene contracts at taxpayers expense are in for a shock in the near future.
Unlike the federal government, the states do not have the budgetary leeway to just continue spending. They actually have to decide where to cut, where to charge more, and/or where to sell more bonds.
My company is seeing state and local governments cut way back(IT spending).
No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession.
Raising taxes at this point in time would be an attempt to bring the budget closer to balance.
People might start wondering whether Krugman really understands anything he says.
Well, for fiscal conservatives, the offset of federal level largesse by excessive cutting at local and state government should be a re-assuring mix.
Balancing the budget is critical for the long-term credibility of the united states as debtor. You cannot compare the 1930's situation with the current one. It is China that should stimulate domestic demand by providing longterm security to its inhabitants (pensions, social security,...), that will get the chinese spending and will help global recovery. US should focus on its industry (or what's left of it), spend in investment projects and cut some of its promises to citizens.
Krugman just said state governments can run up spending deficits just like the Fed can? Really? Thats pretty ignorant.
And another thing, if we don't cut defense spending as a country and reapportion that money to the things people say they want like infrastructure spending, etc., we won't improve our lives domestically. The build out that happened in the now more modern places in the world took place during the last 8 years we were playing war. If you want to know where gov't money disappeared to, look to the military. Remember Rumsfeld, the day before 9/11, announcing $2.3T had gone missing from the pentagon? As a country we need to choose our priorities.
If you feel like I do that there is now way out of this mess you might want to read this
Rioting at the Gates of Thermopylae: The Ramparts of the FED & Central Banks Shudder
Well I am saving all of Mr. Krugman's rants about more government spending and his continued lambasting of anyone who disagrees for my children when the ask why they have to pay 65% in taxes. The problem with the "we haven't spent enough" argument is that is right precisely until it is wrong, and when it is wrong everything blows up. I am sure he is worlds smarter than I am, but I am smart enough to see nobody can argue he is wrong in the way he has framed the debate.
Well, ideally, the States should have been running a surplus in the good times to allow to keep operations on a steady keel. Of course any such government would be demagogued for taking in more than it needed in the good times.
we are all screwed,
make that 92% tax rates like it's the 1950s. good times the 1950s.
--bh
Krugman thinks the Government and the States have money. They have none. They have future tax claims on our children.
Krugman wants to ruin the future to avoid a recession. He thinks the State can make and distribute goods. We all know the State can't do that. Krugman thinks he can sit in his office and remote-control the daily actions of 300 million people. He's got some serious nerve.
Krugman just said state governments can run up spending deficits just like the Fed can? Really? Thats pretty ignorant.
Sometimes it helps to actually read somebody's column before popping off.
state and local government revenues are plunging along with the economy and unlike the federal government, lower-level governments cant borrow their way through the crisis. Partly thats because these governments, unlike the feds, are subject to balanced-budget rules.
Krugman has changed recently. He is on a deliberate, bordering to provocative inflationist agenda.
The fact we have had a false economy from excess debt obviously created false employment, profits, Taxes to go with it. Government did as usual and pigged out on spending. Running up the government credit card more is as dumb as the Fed bailing out failing RE prices. Price discovery will take place no matter what. I live in a balance budget state and they even manage to spend every penny to keep us near the top of the states tax load. Krugman is for government control and cut freedom. I don't need a baby sitter. Let the economy find its self.
There's actually some legitimacy to Krugman's stance on the states policy - mandating a balanced budget is a bit like suggesting a company can't borrow during the hard times if they've been responsible during the good.
But at the same time Krugman handily illustrates the problem with politicizing economics:
By demonizing Hoover we obscure the fact that "Hoover economics" are exactly what we need during the good times if we propose to spend our way out of the bad.
I would suggest that by constantly attacking politicians who have advocated fiscally sound policies we may have taken the FDR style spending option away from ourselves.
It is good to see CR finally giving Pathos Paul the same treatment as Poor Gretchen as IMO he deserves it more. Nobel or no he's way out of his depth here. Perhaps if hecould honestly evaluate the situation by putting his politics aside he could do better but the fact that he cannot separate his emotions from his analysis is all the more reason to be critical of his "suggestions." In the classic economist ducking of responsibility his thesis can be summarized. "Spending too much got us into this mess and spending more will get us out and the only reason it won't work is the economists inability to force everyone to spend enough." Maybe low tax places like New York City are different but here in California I already see productivity strikes/slowdowns due to taxation reminescient of Great Britain of the 1970s. How'd that work out for the curtain call of a fading empire?
I think Krugman is in the Panic-nista camp of Inflation. Just Inflate dammit!
Don't worry, we will inflate, we will borrow at punerious rates, we will become a 2nd world nation.
Krugman is setting us up for another FED bail out with the or else we will collapse. Marketing for the new administration.
props to ac with a nice level-headed comment. fdr has been the rule not the exception.
But State Governments can't "print" money
Jean ValJean | 12.29.08 - 9:07 am | #
My thought, too.
Oddly Pennsylvania, with one of the most screwed-up Legislatures in the nation, has saved up a surplus:
The soft corruption of Harrisburg's slush fund
This has been a cause of endless whining, as you can get a whiff of from the link itself (heck, 4 paragraphs of whining goes by before the "set-aside" is mentioned). The Republicans always run against it as an example of the government "over-taxing", the Dems always are trying to spend it.
I swear no matter what you do in this insane country you can never satisfy more than a plurality. You know, it has been way, way ugly with the Gods/Guns/Gays thing, but I gotta admit the basic theory is smart: our democracy rests upon a foundation of hopeless idiots, who are just by nature agin' anything that doesn't actually put something into their perpeturally adolescent hands. So since you can never get a true 51% to back even a sure cure for cancer, you need a throwable bone for the people that are opposed to everything to chase so you have space to get your way.
Thus muslims, gay marriage, "cold dead hands". The Dems haven't been as clever at this, but sooner or later they'll figure it out.
Meanwhile I will continue to daydream about living in a country with sane transportation, health, and military policies. Don't know why I do that, might as well daydream about Megan Fox as the possiblities are dead equal.
Krugman-Dude,
Every country has a limited capital stock. They can only decide whether to spend in the private sector (stocks, corporate bonds, etc.) or the public sector (treasuries). Deficit spending is only crowding out private sector investment. Where's my stimulation, dude?
New Guy
Politicians benefit the most from taxpayer financed pension schemes. Florida is most generous:
Florida's payroll sees some triple-dip
Florida's payroll sees some triple-dip - St. Petersburg Times
NY is great too!
Pension creates 6-figure winners
Almost 900 people, ranging from former Gov. Pataki to state officials convicted of crimes to retired cops, earn more than $100,000 a year from system
Pension creates 6-figure winners -- Page 1 -- Times Union - Albany NY
Then there are federal congressional pensions:
Dole, Hayes to exit with pensions
Both lawmakers among wealthiest in Congress. A GOP colleague calls the plan a taxpayer ripoff.'
404
- CharlotteObserver.com
Rob Dawg writes:
It is good to see CR finally giving Pathos Paul the same treatment as Poor Gretchen as IMO he deserves it more.
Where? Bill's second comment is meant to reinforce Krugman's argument.
I just don't think it will work.
Why do so many persist in looking at people with decent benefits and wish mightly that those people would be pulled down to their level, instead of saying why the fuck don't I have the same thing.
You just play into the hands of the 1% that owns like half of everything when you do that.
ac,
Krugman isn't advocating borrowing in tough times. It's clear that borrowing is irrelevant at this point. He's advocating stimulus spending which is an entirely different animal. California is on the verge of perhaps 6 notches of credit downgrade due to our overspending policies not spending policies. That overspending didn't prevent this recession and won't get us out. The fact that the State and now Federal government are considering an ambitious series of high speed trains as a conduit of economic stimulus is evidence of what the economist Jagger referred to as a "19th Nervous Breakdown."
You better stop
Look around
Here it comes, here it comes, here it comes, here it comes
Here comes your nine-teenth nervous breakdown.
When you were a child
You were treated kind
But you were never brought up right.
You were always spoiled with a thousand toys
But still you cried all night.
Your mother who neglected you
Owes a million dollars tax.
And your fathers still perfecting ways of making ceiling wax.
So, if tax revenues are falling and states are unable to issue additional debt, but they lack a printing press....
Are they supposed to issue vouchers or something?
Enough with this farce.
Krugman is shilling for the banking industry, the only beneficiaries of state debt and inflation. The banks are bankrupt, and can only lend to the state the worthless funny-money they get for free from their fraudulent cartel, the FED.
Households are insolvent, and so is the state after years of deliberatedly destructive fiscal, credit, monetary, foreign and industrial policies; all in the benefit of the plutocrats.
He is saying that to save the present plutocracy, future generations must be further shackled in eternal bonds of servitude. Exponentially more debt for a country ruined by debt, yes, a great suggestion indeed!
The apparatchik-ideologues called professional economists are merely doing their jobs and facilitating a final feast by the parasites before they abandon the host's rotting cadaver.
Unbelievable. That Krugman is asking such idiotic questions puts a question mark on the legitimacy of Nobel prizes. It's the same as asking a broke person why is he/she not buying a million dollar house. Hey Mr. Krugman- here is your Nobel prize worthy answer - states are not spending money because = drumroll - THEY DON'T HAVE ANY AND THEY CAN'T PRINT IT EITHER.
Robdawg is right. Krugman doesn't think, he feels. In Krugman's own NYT's yesterday was a piece about the gathering doubt that printing dollars is necessarily the best prescription for a problem caused by printing dollars.
Krugman and Bernanke are like French generals in the face of the Nazi blitzkrieg, erecting the Maginot line to defend against Panzer divisions and Luftwafte aircraft that can just go around them. This is not the Great Depression. We are not on a gold standard. Gold is not flowing out of the treasury, causing prices to fall. Prices are falling because demand is collapsing, and demand is collapsing because it was an inflation-induced illusion to start with.
Besides that, none of the Keynesian prescriptions saved us from the Great Depression. Only a massive military mobilization did, complete with destruction of excess supply by bullets and bombs. Prices and employment stabilized about the time of the Pearl Harbor attack.
If Krugman really wants to fight the Great Depression over again, he should recommend a new world war. Short of that, this is gonna be a long slog, no matter how many dollars are printed.
"And so we see how the conditions of weak states lead naturally to a "vicious cycle" where it is in fact in the best interest of the policymakers and their constituencies to engage in competitive looting of the state."
By this criterion I've never thought of the US as a weak state. I can think of a number of possible futures. A period of disorder followed by an era of the strong man who gathers up the snapped reins?
It's only fiction - so far.
Persecuted Comrade Anonymouse writes:
Rob Dawg writes:
It is good to see CR finally giving Pathos Paul the same treatment as Poor Gretchen as IMO he deserves it more.
Where? Bill's second comment is meant to reinforce Krugman's argument.
Same treatment as in careful attention, not just blind criticism. We are adults and can come to different conclusions as long as we can defend those positions. I don't personally believe reductions in State spending "exacerbates" recessions so much as confirms and shortens recessions possibly at the cost of deeper and steeper but that's what makes a marketplace of ideas.
Bonds are the normal way but I don't have to tell any CR readers how well that isn't going at the moment. How is, say, Missouri going to compete with all the US Treasuries being issued when everybody cares nothing about returns, just the possiblity of default.
If that wasn't true it would be a great time to get cheap money.
Dickhead calling: I cannot but put out a personal take on this topic. My wife is shocked by how high is the annual tariff on any landowning person in the U.S. The overhang of excessive state and local spending is what's keeping this American abroad.
The federal deficit is a macro- abstraction, scary like dragons are scary. But closer to home, how could someone starting from square one, evaluating a new life in a new place, ignore the dire condition of local budgets?
I am flummoxed by this sort of news.
Per George, if we were to tax property (again) to enhance other revenue sources and balance budgets already bloated, how much more unattractive could any investment be?
I expect great political changes on all levels in the United States, but I cannot envision what they will be.
Krugman doesn't mention it, but most governments also tend to spend every dollar (or more!) during economic booms. Oh well ... CR
The 'Anti-Keynsians'
Are they supposed to issue vouchers or something?
Apparatchik ZackAttack
California is planning on exactly that:
Dec 9th
The legislature plans to hold budget hearings [mid Dec] and hopes to have a deal in place by Christmas [not]. The deal could include higher taxes and more program cuts. If the legislature fails again, then California is looking at issuing IOU's for only the second time in history.
state and local government revenues are plunging along with the economy â and unlike the federal government, lower-level governments can't borrow their way through the crisis. Partly that's because these governments, unlike the feds, are subject to balanced-budget rules.
Sufferin' Succotash | Homepage | 12.29.08 - 9:44 am | #
But if you read the article you can't be 'first'.
I understand Krugman's view & logic as an economist, but have little sympathy for him as a media figure. He needs to add paragraphs repudiating much orthodox economic theory (and therefore much of his life-long profession) each time he attempts to argue for gov't spending as a way out of deflation. Why? Because massive holes in economic theory allow a ginormous disconnect between 1) the need for balancing budgets and building savings in order to avoid dire consequences; versus 2) the need for $1 Trillion in deficit spending to avoid dire deflationary consequences, which is what he is arguing lately; versus 3) the unlikelihood that US workers, taxpayers & the economy will ever recover strongly enough to fund these newly-increased debts and budget deficits from #2. Lay people believe we will simply revert back to a heightened crisis version of #1, rather rapidly, if #2 is successful. Some solution that is.
Krugman is losing his audience & credibility because he lacks the courage to address #3 which coincidentally is a point that nags at the common sense of lay people and regular folks: Just how dreamy & rosy & idealistic are the forecasts for wage & productivity growth levels needed to repay all this new debt? It is point #3 that most hapless media figures run from while cheerleading for $1 Trillion in more debt disguised as a stimulus.
Worse are media heads who pull a NYT Friedman on us by saying a magical talisman will appear in our future in the form of some unidentified unknown future technological breakthrough (or global finance gimmick), via that vaunted human ingenuity, that will save all us and will raise our wages and increase our profit margins and allow us to pay off most household, corporate & public debt. A magical talisman that will ensure a happy ending is a big cop-out and is intellectual vacuous, but sadly, has become a new mainstay of frightened media figures.
Maybe it is because they spent all our money during the boom days and now the well is dry.
David | 12.29.08 - 9:12 am | #
That isn't what happens - they spend whatever they take in in BOTH BOOM & BUST - the difference is that they take a lot less in during a bust (tax revenue plunges) and have more requirements for it going out (welfare & other state run safety nets)... result is big deficits during the bust which needs to be cut and everyone a pony during the boom. The absolute worst of all worlds.
But if you read the article you can't be 'first'.
dryfly | 12.29.08 - 10:11 am | #
The paradox of swift?
If Krugman really wants to fight the Great Depression over again, he should recommend a new world war.
--Curmudgeon
I can't believe you are advocating war. The housing boom and buying stuff was so fun that you don't want it to end. When it does, you propose to go kill people so you can do it again. How about you just make do with less?
Once Gov. Bush went to DC Texas maintained a surplus thank you.
Historical correction:
In 1932, FDR campaigned on the promise that he would balance the federal budget. It was Herbert Hoover who had started the budget into deficit. FDR during the campaign made fun of Hoover's "irresponsible" fiscal policies, and I believe threatened to walk around the newly-built Commerce Department's building (14th-15th & Independence to E Streeta big sucker even today) to showcase the building as an example of Hoover's budgetary excesses.
Of course, when FDR was elected, he realized deficits were inevitable and tolerated thembut only up to 1937. His determination to arrive at a budget balance in that year is regarded as a move that prolonged the depression. So he was an on again off again fiscal conservative, unlike today's Democrats (and most Republicans) who are all on, all the time.
It appears some people are quite happy about the recession, specifically Bush 1's old pals from the S & L bailouts. They're giddy at how much money they are making helping the pigs to the trough..Disgusting
Veterans of '90s Bank Bailout See Opportunity in Current One - NY Times
Krugman is a strawman.
Next thread, please!
none of the Keynesian prescriptions saved us from the Great Depression. Only a massive military mobilization did,
Certainly one way to reduce the over-supply of labor.
The sad thing is that when the war was over, people came back to the same depressed economy. The government threw credit at the problem - "thanks for fighting for us, as a reward you get to go into debt, but at lower rates than ever before!!"
Same shit, different day. The fact is NOTHING has changed. All the country ever did during the Great Depression was kick the can down the road. And every time we eventually walked to that point in the road where the can was, we just kicked it again, only harder.
The link below was posted in response to questions I asked on the previous thread. I am reposting it as it is relevant in many ways to every thread.
The vultures are not even trying to hide it.
It is a good time to be me, said John L. Douglas, a partner in Atlanta at the law firm Paul Hastings and a former lawyer for bank regulators who helped create the agency that administered the last federal bailout, the Resolution Trust Corporation."
S.E.C. Elects to Keep Mark-to-Market Rules - NY Times
2...ref=todayspaper
trader walt | 12.29.08 - 7:30 am
LOL nova, I just posted the article two comments above...
I had read about the vouchers before, Rob, which was why I mentioned it.
I think all the roads lead to municipal debt being FDIC-insured.
Krugman has changed recently. He is on a deliberate, bordering to provocative inflationist agenda.
François | 12.29.08 - 9:45 am | #
He hasn't changed he was always there - it's the SITUATION that changed. In busts you run deficits - in booms you run surpluses... his bitch was that we never ran a surplus all through the last boom - a debt binge 'boom' at that. Now we face a bust so flood the place with dollars.
I get what he is saying - and I'm not terribly concerned about inflation in the short run (not in the face of ferocious deflation)... it's what happens AFTER the deflation is tamed, halted, whatever you call it - then what? I don't think they can stop on a dime, just halt there - my guess is it blows right on past in a decade of overshoot and then trying to get the inflation genie back in the bottle.
But they are prepared to worry about that bridge later... the one their on now is what consumes their effort now.
But they are prepared to worry about that bridge later... the one their on now is what consumes their effort now.
dryfly
Fear is consuming their efforts now. Don't fight the Fed.
Does anyone seem to think that Keynesian spending at the beginning of a pullback is a little different than Keynesian spending during the middle/end?
Let's face it, the economy is still nowhere near dust-bowl status...
Krugman's never seen a gov't spending initiative he didn't like. He's lovin' Ben & BO won't disappoint either.
The problem with those Hoovers' balance sheets is that on the left side nothing is right and on the right side nothing is left.
Of course, when FDR was elected, he realized deficits were inevitable and tolerated themâbut only up to 1937.
JohnR(DC) | 12.29.08 - 10:23 am | #
Not only tolerated them - his advisors completely 'turned' him toward massively inceasing the deficits - I don't recall if it was Hopkins or Roper or Perkins - but one of them said [in effect] just get money in their hands [unemployed] before we have a revolution, do it by whatever means possible. And they did.
A complete reversal of the platform he ran on.
I guess this is the latest variant of the Fifty Hitler Post.
The Krug in man is finally exposed.
And yes, it wants to spend.
Dryfly,
I'd characterize Krugman as "spend it all in the good times and spend even more in the bad." He really doesn't understand the dangers of creeping statist expansion.
Fear is consuming their efforts now. Don't fight the Fed.
I am not Anonymous | 12.29.08 - 10:30 am | #
I am NOT a rigid 'Austrian' or 'Keynesian'... I just wish they'd be a little more 'measured' and think 2-3 moves ahead. I think the repercussions from this AFTER the crisis are going to be worse than they imagine. JMHO.
(¨·.·´¨) .¸. (¨·.·´¨)
(¨·.·´·. ¸.·´ *·.¸.·´·.·´¨)
·.¸.·´ * I LOVE YOU! * ·.¸.·´
(¨ ·.· ´¨) (¨ ·.· ´¨)
·.¸ (¨ ·.· ´¨) ¸.·´
`·. ¸ .·´
Krugman never sees a bailout he doesn't like! Accountability is ignored - shovel the money out the door.
Who benefits and who loses from bailouts? The young will suffer and baby boomers will avoid loses for now. However, a cursory reading of economic history suggests that the future pain we will all experience will be severe.
When it comes to economics, American economics professors seem to believe in American exceptionalism.
How can someone criticize people who are called in to fix a mess like the S&L bankruptcies that began years earlier? Of course, money is made in bankruptcies. Are these people supposed to work for free?
Remember (Federal Reserve) Regulation Q, which kept interest rates on savings deposits so low for so long in order that S&L's could survive by borrowing short and lending long? Regulation Q controls were supported during the decades when Congress was overwhelmingly Democratic, because in the mantra of the time, S&L's needed to be protected from interest rate competition because they represented the virtues of "thrift and home ownership."
In reality, S&L's were built to fail and were only sustained by congressional intervention. They were politically untouchable. I know. I was there. The only people who were worried were Federal Reserve economists. They'd stop me in the hallway and express their worries. I told them there was nothing I could do. The intransigence of Congress on this issue cost taxpayers in the neighborhood of $150 billion. Bill Seidman did a good job at liquidating the congressionally-generated mess.
If it were all about making the books balance, all you fiscally-responsible guys would be right. Balance the budget, let the markets crash and burn freely until someday somebody builds from the wreckage. Take a seat in Andy Mellon's pew, sit back, and watch.
Unfortunately, the (eventually) tens of millions of people out of work, without healthcare, and/or newly homeless would have something to say about that.
Hamilton said it best, to Jefferson: "Your 'people,' sir, are a Great Beast."
Yes. We are. And that is why politicians will sacrifice currency over food on the plate every time. Because if you don't solve the Beast's immediate problems, it WILL eat you.
I'd characterize Krugman as "spend it all in the good times and spend even more in the bad." He really doesn't understand the dangers of creeping statist expansion.
Rob Dawg | Homepage | 12.29.08 - 10:36 am | #
I'm not going to speak for the guy but he did rail against Bush's deficits a few years ago - however he didn't make clear whether he preferred to raise taxes or cut spending. BTW - as a liberal - I think libs should be awfully cautious about 'state expansion'... as Bush Cheney proved there is more to state expansion than additional 'resources' for 'head start'. You can only imagine how I get reamed by my 'fellow libs' when I try to point that out [that you will not likely just get 'head start' unless you also accept 'homeland security' - history has proven that over and over]. Be careful what you wish for.
Wolfgang Munchau's column in today's Financial Times makes the interesting point (outside Krugman's ability to grasp) that The Obama team's policy responses so far are "narrow-minded" and will do little more than "blow even more money on infrastructure investments and on education. Whatever problem this is supposed to solve, it is a different problem from the one we need to solve right now."
I tend to agree.
I want a free pony, my plow horse is dead. I promise I will feed and care of it responsibly this time. Please?
I'm not going to speak for the guy but he did rail against Bush's deficits a few years ago
You're pissing into the wind here. Nothing rational is being said, so no discussion can be had.
Hamilton said it best, to Jefferson: "Your 'people,' sir, are a Great Beast."
Yes. We are. And that is why politicians will sacrifice currency over food on the plate every time. Because if you don't solve the Beast's immediate problems, it WILL eat you.
Bob Dobbs | Homepage | 12.29.08 - 10:40 am | #
Well there is always that too. FDR was the last one to face that kind of threat - the Big O might see it next, I hope not.
dryfly writes:
Fear is consuming their efforts now. Don't fight the Fed.
I am not Anonymous | 12.29.08 - 10:30 am | #
I am NOT a rigid 'Austrian' or 'Keynesian'... I just wish they'd be a little more 'measured' and think 2-3 moves ahead. I think the repercussions from this AFTER the crisis are going to be worse than they imagine. JMHO.
I wasn't attempting to classify you as anything. The Fed is back on their heels, operating from fear, reacting. Therefore they can't be measured or think 2-3 moves ahead. In their opinion they don't have that luxury.
Krugman did not advocate spending it all in good times. He was in favor of Gore's much-mocked lock box. Disagree with him if you like, but don't make up positions to disagree with.
You're pissing into the wind here.
Anonymous | 12.29.08 - 10:48 am | #
It beats pissing down my leg.
Krugman's a clown. Yep, lots of productivity gains with socialism. Here's the path. Tell them run up the fiscal deficits, expand, spend, expand, ....the fed's will bail you out with their fiscal programs. Ponies for everyone. Dig holes, fill out paper, get a check, spend.
Like the quote, 'Why can't we keep doing good things?'.
Oh those darn keynesians, they're so cute and lovable.
Ugg like Krugman.
Krugman soft and juicy.
Krugman stimulate Ugg hunger.
Ugg LIKE Krugman!
Slurp!
.
Jeffry Imelt at GE I think put it best. "this is not a cyclical problem this fundamentally a re -set."
Krugman and all the other economists (beware when that lot agrees on anything) are treating this as a cyclical problem and are using all the tools (albeit on steriods) that they would use for a cycle problem.
We need to re-set our economy.
I wasn't attempting to classify you as anything. The Fed is back on their heels, operating from fear, reacting. Therefore they can't be measured or think 2-3 moves ahead. In their opinion they don't have that luxury.
Anonymous | 12.29.08 - 10:48 am | #
I understood your point - mine was they better take a deep breath & control their fear or they'll be going from crisis to crisis. If they can't do that then they better heed the calls for them to step down.
Wow. The only way to describe the intellectual quality of comments on this blog is "cliff diving."
You can really see the difference when you click back to Tanta's old featured posts.
I want my Mommy
Krugman and all the other economists (beware when that lot agrees on anything) are treating this as a cyclical proble
Do you bother reading any of his columns or blog posts?
No need to answer.
You're pissing into the wind here. Nothing rational is being said, so no discussion can be had.
Anonymous
Don't mistake your anonymous reading comprehension issues for lack of content. The problem resides with the listener not the speakers.
We need to re-set our economy.
crazyvermonter | 12.29.08 - 10:52 am | #
Define reset. That's one of those terms thrown about that can mean a lot of different things to different people.
The only way to describe the intellectual quality of comments on this blog is "cliff diving."
Dude, consider the subject matter.
Krugman.
Let's see YOU defend him.
LOL nova, I just posted the article two comments above...
Comrade Kristina | 12.29.08 - 10:26 am
Didn't the smugness, the pure pigness of that article make you want to hurt them?
Dryfly - Did you get my comment about reading John Sandford? Its your part of the world. I just finished one, and now I want to go drive across the high plains.
Substantial inflationary deficit spending is the only choice now. We're in a nominal interest deflation, which means the credit markets don't work. You can't wait for the market to fix things when the market is broken. You can't inflate through monetary policy because the transmission mechanism for that, the banks, is broken too. So we have to inflate, just to have a market to do anything, and we have to do it through fiscal policy.
Different Chris:
As a resident of Pittsburgh I can attest to our disfunctional state gov't-more reps than populous california, in a system to ensure re-election. The voter backlash is still unfolding from a midnight pay raise of 16% that these folks voted themselves a couple years ago. There is much more, but I dont't know where to begin.
Balkanize
" Markel writes:
Wow. The only way to describe the intellectual quality of comments on this blog is "cliff diving."
You can really see the difference when you click back to Tanta's old featured posts.
Markel | 12.29.08 - 10:55 am | # "
Maybe we should ship CR a pair of bunny slippers.
all these comparisons to the great depression are getting tiring! In 1932 unemployment was 25%. The banks had all failed, there was no social security, medicaire, a huge defense budget etc.Given that government spending at all levels accounts for 40% of GDP the demand collapse of 1929-32 is just not possible. Even if assumed that the consumer went to 8% savings rate overnight and the elimination of home equity extraction this would cause a 10% decline in consumer spending. Bad but not catastrophic.
Now 10% unemployment may feel like a depression because we have gotten accustomed to living high but being and feeling are two different things.
You can really see the difference when you click back to Tanta's old featured posts.
Markel | 12.29.08 - 10:55 am | #
With volume comes noise - it was there on occasion even when T ruled the roost - we just never hit 300-500 posts ever let alone in 3-4 hours.
The pot is bubbling...interstate conflict:
SCENARIOS: Assessing risks of India, Pakistan confrontation
SCENARIOS: Assessing risks of India, Pakistan confrontation
| Reuters
Turkey warns Gaza crisis could escalate
502 Proxy Error
Iranian group registers volunteers to fight Israel
Yahoo! 404 - Page Not Found
Dryfly - Did you get my comment about reading John Sandford? Its your part of the world. I just finished one, and now I want to go drive across the high plains.
nova | Homepage | 12.29.08 - 10:57 am | #
Ya - I made a note - I'm going to look him ip. Thx.
Let's see YOU defend him.
There is nothing to defend. State governments are currently adding to demand destruction because they can't borrow. In addition, some of their budget cuts maximize social costs because they target the most vulnerable. A news report last week discussed cuts in Medicaid payments to nursing homes. Some homes may close, throwing out on the street bedridden elderly residents whose assets have already been depleted by said homes.
These are the facts. Anybody who has an "alternative view" shouldn't be wasting any money on a Mensa application.
Dec. 29 (Bloomberg) -- GMAC LLC, the financing arm of General Motors Corp., is still tabulating the results of its debt exchange with bondholders, a company spokeswoman said.
Did they do this in Florida? We have a chad problem here? Or are they unhappy with the way the numbers are trending and trying to "fix" it.
Krugman could get up to $5 trillion in bailouts/handouts in the Obama years. But he will also get that inflation he seems to want so bad. I've been reading up on South American-style hyperinflation. My understanding is that my 30-year mortage fixed at 5.75% will stay the same even if inflation reaches, say, 800%. So there's nothing stopping me in a few years from skipping Starbucks some morning and instead using that $150,000 to pay off the mortgage. Am I correct in this thinking?
My prev post was only partly in jest. Every minute a child with special needs is born. Every minute, people contract ailments that leave them unable to fend for themselves (hell, I may be next).
Most of the world does not (mainly because they cannot) take take of their weakest, and these are the types of places is where I've spent most of my adult life.
This is the human condition, as is our empathy. I haven't spent much time on budgetary details of local govts but they loom large now, don't they.
For PK to exhort more now from the Federal Gov't is kind of, uh, misplaced? Since much of what Washington is extracting from us and our creditors in interest payments, re-disribution and foreign adventures is an excercise too far. and haven't we been dumping on state and local to sweep things up as the feds build their empire, just to keep services flowing as folks are accustomed to seeing them come in.
Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire.
Did they do this in Florida? We have a chad problem here? Or are they unhappy with the way the numbers are trending and trying to "fix" it.
nova | Homepage | 12.29.08 - 11:03 am | #
If they did it here in Minnesota they'd be waiting a lot longer than if it was done in Florida... but then if done in Florida they could just take it to the supreme court. Problem solved.
GMAC/Pimco watch.
Do I see Minnesota?
GMAC Debt Swap Results Still Being Tabulated, Company Says
2008-12-29 15:26:39GMT
Dec. 29 (Bloomberg) -- GMAC LLC, the financing arm of General Motors Corp., is still tabulating the results of its debt exchange with bondholders, a company spokeswoman said.
The auto lender needed investors holding 75 percent of its $38 billion in bonds to exchange the notes and complete the transaction. The offer expired on Dec. 26.
Once the results are inalized, we will disclose that information, Gina Proia, a spokeswoman for Detroit-based GMAC, said in a telephone interview.
Now 10% unemployment may feel like a depression because we have gotten accustomed to living high but being and feeling are two different things.
crazyvermonter
U-6 is the closest measure of how unemployment was calculated in the '30's. Last time I checked it was pushing 13%. If the Labor dept. releases 9-10%, U-6 will be in the mid-high teens. But, at the time of GD, US was the worlds largest exporter, manuf. and creditor nation. Inverse of where we are today. China would mirror the US during the GD much closer.
citizen energyecon, since the pot is indeed bubbling what about Kuwaitis refusing to finance Dow. Will the arab fatcat sovereign funds bail us out if Israel stays off the leash?
Anybody who has an "alternative view" shouldn't be wasting any money on a Mensa application
As a former Mensa member, I am offended that you've chosen to arbitrarily drag that fine yet boring organization into a "cliff diving Krugman" thread.
"How rude" - C3PO.
These are the facts. Anybody who has an "alternative view" shouldn't be wasting any money on a Mensa application.
The facts are you and old kruggie are advocating spending money you don't have lent to you by people whom you already owe.
Deficits you see DO matter.
I can't foresee a good outcome.
Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire.
Anak | 12.29.08 - 11:05 am | #
Then you don't understand what Krugman is saying - he is saying locals can't print money so in a collapse they contract & exacerbate the collapse. It has nothing to do with who would provide services better and doesn't speak to preferences for monolithic empire or small princely states. I'm sure he has an opinion regarding central vs distributed gov't and don't doubt your impression of him might be right but that ISN'T the dish he served with this column.
Were there not more agencies, at a state or county level, in place in the 80's recession? Social service type agencies that could respond when given increased federal funding?
These are mostly gone, at least in Virginia. The safety net is "Faith based." The states spent on other types of services an infrastructure. Very nice local gov buildings and a paramilitary police force come to mind.
Did not the level of federal funding decrease dramatically for state governments? There is not a lot of slack left.
The pot is bubbling..
Litttle bland. Throw in more dollar seasoning!
Krugman is clueless as always. It's always about spending just a little bit more for our salvation. Only a complete moron, that's you Paul, would believe that you can get yourself out of a credit bubble by trying to reflate it over and over again. I guess the dumbasses that taught Paul never learned about the absolute limits of exponential credit and money growth before it blows sky high. Popcorn time is coming Paul!
This blog might be advised to start paying attention to the growing disconnect between the effects of this depression on the equity of the 78% of workers in the private sector vs. those in the public sector. Pension and benefits for the public sector are off the charts, and when the full accounting of the excesses in this regard (as well as salaries) is known to the folks who are currently in extreme financial distress, expect a readjustment in the political landscape.
The unions and politicians (teachers, public employees) who have been negotiating these obscene contracts at taxpayers expense are in for a shock in the near future.
kstills | 12.29.08 - 9:25 am | #
Ya know, you might want to fact check before posting. I worked a gov. job for 20+ years. I contributed 15% of every dollar I earned to my pension fund during that time. I now draw a nice check from that fund every month. The check is a result of the contributions I made and return on the investment. If the DC politicians would have raided my investment fund as they did YOUR SS funds, I would not have a pension. You need to speak with your congressman or senator about them putting SS revenues into the Gen Fund - don't bash gov. employees that have a system that works. BTW, as I did not contribute, I do not draw a SS check.
Sigh.
I've had some experience with employment in both state and federal governments. Cutting wasteful spending would go a long way to balancing budgets. I don't expect it to happen in my lifetime.
"Shrink the feds, empower the locals might me the answer. Krugman seems to be saying locals will mess it up. This man is a creature of the empire.
Anak | 12.29.08 - 11:05 am | # "
Now you're on my territory. I believe the Feds should set national priorities for initiatives, and provide funding down to the state/local level. And the programs should be conceived of and executed by local gov't, with federal oversight. I was a tiny cog in such a fed program, and it worked pretty well.
The Reagan years looked like what you were talking about, but in those days the feds passed the responsibility back to the states -- but cut much of the money, and removed most of the targeting. They knew what would happen.
You need a Fed/local partnership. Concentrating all power in the Fed means that you end up with one-size-fits all programs that don't work very well. You also end up with pork and corruption, because concentrating all power at one point makes that point easier to control by special interests.
Concentrating all power/money at the local level is madness, too. Some of the proposals that local gov'ts put to us were crazy in the extreme, and some were outright conflicts of interest.
No. Federal guidelines and oversight with local execution works -- well, better than anything else I've seen for a large-scale initiative.
ova writes:
Were there not more agencies, at a state or county level, in place in the 80's recession? Social service type agencies that could respond when given increased federal funding?
These are mostly gone, at least in Virginia. The safety net is "Faith based."
Unless you want to get extremely pissed off, don't research the role of faith based entities in N.O. post-Katrina. Billing the govt. at $40 hr.+ for labor and more for per diem, hiring illegals at less than $10 hr., warehousing them in mold ridden, flooded out homes. But, it was done in the name of God so I guess it's alright.
don't bash gov. employees that have a system that works. BTW, as I did not contribute, I do not draw a SS check.
Anon. | 12.29.08 - 11:15 am
a system working for the system eaters, and a failure for the useless eaters...win/lose..
all these comparisons to the great depression are getting tiring! In 1932 unemployment was 25%.
The point is to prevent things from matching or exceeding the worst ever experienced in America. You want to turn the wheel before you smash the guardrail and go over the cliff.
"he is saying locals can't print money so in a collapse they contract & exacerbate the collapse"
Yes, that is what he's saying, and thanks for the emphasis.
Only the federal government of a dominant state that prints fiat currency that happens to make up the bulk of the reserves of surplus countries around the world has the power to pull the particular stop on this pipe organ. For now.
But Dryfly, don't you think Krugman, like the lot of the NY/Beltway courtier establishment, is overreaching on what's achieveable in terms of fiscal something out of nothign?
Only someone who has never really worked a job where you can actually be fired can come up with a bullshit piece like Krugman. Paul, most of us living on this planet must live within our means, not spend more than we make, but you have no worries because you work in acedemics where you can get all those mushhy heads up to their eyeballs in debt with student loans you sorry POS. The states are toast moron. Who will buy their Bonds Paul? Oh that's right, the FEDS can pick this tab up too you jackass.
It's time to grow up you spoiled silver spooned POS who works in La-La Land University where up is down and down is up. You can't spend your way out of a liquidity trap schmuck!!
The check is a result of the contributions I made and return on the investment. If the DC politicians would have raided my investment fund as they did YOUR SS funds, I would not have a pension. You need to speak with your congressman or senator about them putting SS revenues into the Gen Fund - don't bash gov. employees that have a system that works. BTW, as I did not contribute, I do not draw a SS check.
Anon. | 12.29.08 - 11:15 am | #
Is it a separate fund you control [like an annuity or like an IRA] or does the check come from a gov't agency? I ask because there never was anyway to make SS truly 'separate' - there never was a lock box - that was just a figment of political imagination - money is fungible and once inside the walls of the castle it is basically all in the same chest whether called that or not.
Not trying to pick a fight - just understand how some of these work - I don't get to see all the sausage being made.
You can't spend your way out of a liquidity trap schmuck!!
Actually not only can you spend your way out of a liquidity trap it's basically the only way out of a liquidity trap.
You can't spend your way out of a liquidity trap schmuck!!
SPECTRE of Deflation | 12.29.08 - 11:25 am | #
I'm pretty sure he thinks that the only way out of a liquidity trap is more spending.
Can I ask a question without getting completely flamed? I'm one of those "mushhy heads up to their eyeballs in debt with student loans" that you reference. Also, I can get fired. I see alot of anger at the proposed stimulus package, and I understand the fear of additional deficits - but what is the alternative? Just waiting for the whole economic swamp to drain and then rebuilding? Why is that better than the risk of additional federal debt? I'm not trying to pick a fight, I honestly want to know what the alternatives are.
But Dryfly, don't you think Krugman, like the lot of the NY/Beltway courtier establishment, is overreaching on what's achieveable in terms of fiscal something out of nothign?
Anak | 12.29.08 - 11:24 am | #
Yes - I think they are both panicking [because they see THEIR ox getting gored - coastal finance & RE - and not just fly over oxes] and not considering down stream consequences. But that isn't the same as saying I'm against measured deficit spending. I have no problem with fiat - it's what we got, it's what I want us to have. For those who don't like it - buy PM & don't own fiat - plenty here do. But I believe fiat based Keynesian responses are powerful medicine - there is a fine line between appropriate prescription and drug abuse. I think we have been slipping farther into the latter than I am comfortable with.
SPECTRE of Deflation,
Terrific job calling other people names. Way to go!
Where did you get your Ph.D? What was your disertation on? How many years did you teach at an Ivy League University before you began calling people names? Please cite your references.
Oh, never mind....
FDIC: Enforcement Decisions and Orders - Recent Orders and Decisions
Recent FDIC Enforcement Decisions and Orders
Time to revise my banner to add Paul K.:
'Ben B., Tim G., and Paul K.: if you give us inflation, we will give you Kristallnacht.'
Maybe then they will realize that hoi polloi do not like, do not tolerate, and will overthrow the established order in the face of rabid, rapid inflation.
Actually not only can you spend your way out of a liquidity trap it's basically the only way out of a liquidity trap.
Fair Economist | Homepage | 12.29.08 - 11:28 am | #
They are locked into the 'monetarist' view only - they'll know all about the fiscal options in about a year from now. Think they are unhappy now - just wait.
OT-I think oil is going to need more than an Isreal vs hamas war to push up..initial run up looks tired on way back down...deflation has firm control of the lead before halftime...
Interesting to see how the adjustments work....
'Ben B., Tim G., and Paul K.: if you give us inflation, we will give you Kristallnacht.'
Comrade-Dope jg (jg) | 12.29.08 - 11:36 am | #
If they don't we storm the Winter Palace. Pick your poison.
Is it any wonder why current economic policy decisions are being made when a marxist weasel like Krugman wins the Nobel prize?
Spending is the option the Japanese have chosen also. I think it is called "going fiscal." At least that what the news articles are reading like.
I think that for many in positions of power an influence, coming up with a viable policy for averting what is happening is something they are not equipped to do. CYA, incoming admin, personal income, and being a go to media person has them blocked in on all sides.
Like people I have worked with who are "job scared" so too are they.
don't states have to balance the budget...???
Dry, thanks. It's late and I am quite drunk.
Interesting when our overlords are in such a state...
May your flyover ox stay upstream, ungorged!
Or at least nicked for local causes, not gorged for banking elites and empire building.
d-, there was no storming of the Winter Palace in our '30s Lesser Deflationary Depression. There was isolated violence, and a march and demand for Veteran's bonuses.
The Bonus Army March (Memory): American Treasures of the Library of Congress
No, it is rabid, rapid inflation and its aftermath that brings prolonged violence and scapegoating.
Watch your monetary and fiscal steps, Ben, Tim, and Paul.
All the malinvestment will and must be wiped out before we can begin to talk about moving forward. They can play hide the sausage all they like but the bill must be paid. For those that believe you can increase ever bigger deficits without ANY associated problems has zero understanding of history and how Empires fail. I keep hearing about the Great Depression as an example of our current ills, but very sad to say we were in a much stronger position last time, and we have no such luxury this time. For those that think that the only way out of a liquidity trap is to spend ever more, you will be punished because you believe we live in a vacuum where an object once started will go into infinity because there's no friction to slow anything down. WRONG! The virtuous cycle turns into the vicious cycle that we now find ourselves in. Each time they create an additional Program to bail someone out, we are digging a bigger hole for our children and grandchildren. Are you all so self absorbed that you don't care about how your children will live with the debt we have saddled them with? The ME Generation makes me sick!
--
Krugman is an agent of the Crooks.
Economists are part of the problem and should not be allowed to be part of the solution, but in a system of the Crooks, by the Crooks and for the Crooks what choice do the American People have.
The soap opera continues.
Jas
The ME Generation makes me sick!
SPECTRE of Deflation | 12.29.08 - 11:50 am
Well, poorly cooked lamb makes me sick sometimes.
d-, there was no storming of the Winter Palace in our '30s Lesser Deflationary Depression. There was isolated violence, and a march and demand for Veteran's bonuses.
Comrade-Dope jg (jg) | 12.29.08 - 11:48 am | #
Thanks to FDR. He might not have ended the depression but did end the panic... plus put millions to work doing whatever they could think up. Idle minds are the devil's play ground... idle minds attached to empty stomachs all the more so.
BTW - my father remembered seeing both 'reds' and 'American Bund' on the streets in the 30s - it was closer to blowing up than we today realize.
Jesus Christ, the level of ignorance in this thread has reached a new record.
Save for a few, e.g. sufferin' succotash and markel, it's a circle jerk of cretins in here today.
Dry, it's really hard to get a man to refocus while he is busy masturbating. But good luck.
On another note, Krugman's column suggests a clever idea. The states are rattling their cups at the feds looking for grants to keep programs running. Now is an ideal time to get a quid pro quo: A federal requirement that states who get cash now establish an automatic rainy day fund for the good times. This would help move the states toward productive countercyclical spending, plus avoid the trap Krugman talks about, of overpaying for infrastructure when the economy is strong.
[You want to turn the wheel before you smash the guardrail and go over the cliff.
Fair Economist]
The cliff is on both sides of the road, the road's getting narrower and the road goes off a cliff just over the next hill. Time to slow down.
trader walt writes:
...How many years did you teach at an Ivy League University...
You are talking about the ones which endowed america with Greenspan, Bernanke et al ?
OT Housekeeping: Have we not seen ac post lately?
Quanmastive Easturbation!
Multiple countries busy stimulating themselves!
Jeebus, Jas und Werner. Gott in Himmel!
Krugman doesn't have rose colored glasses on. He's not the one saying everyone will have a pony in the future and all our lives will be beautiful.
Only his critics are saying this as they find knocking down straw men much easier than having a real discussion about the issues we face and best solutions. Many of them are limited to labelling and party lines.
There are plenty of reasonable arguments why Krugman is wrong, but they start with the understanding that we are dealing with the lesser of two evils principle. We're in bad shape and there is no quick fix, Krugman is not arguing he has one only what he thinks gives us the best way out eventually.
@ Dryfly I draw from a state PERA account. Much like CalPERS but the fund is not guaranteed by our state taxpayers. NM public employees contribute to the fund, it is run by people we elect to the board, and we are paid a defined benefit. If it goes broke, we lose. As long as it is solvent, we receive a pension check. To my knowledge no taxpayer funds are involved as all. I really do not understand all the gov. pension bashing that goes on here. It really must be a sour grapes thing.
TraderWalt, F*** a PhD! Do you really think those assholes have a clue? Paul must of studied Botany because a Money Tree is the only you can spend more than you make for an extended period of time without facing default.
Let's have Paul's state start sending him IOUs just like CA, and then he can deal with his finances like everyone else. Paul, just tell them to take it out of the TARP Money.
In Tropic Thunder parlance, this thread has gone "full retard". I'm out.
Most state governments are prohibited by law from running deficits, so Krugman really doesn't know what he is talking about. If he is advocating that the Fed hand money to the states, OK (though I don't think that's as wise as Krugman thinks - personally, I don't think bailing out the present mess is worth paying the future for).
The bigger problem is this: how many future Presidents will repeat Bush's mistakes of 2000-2007 because economists who advise them have no clue what happended? I'd tell Krugman: get your own house in order first.
Fair Economist,
Your line of thinking bothers me the most. You argue that hyperinflation is absolutely the only option and at this point we just have to do it. But that only favors banks at the expense of savers. In the absence of worthwhile production, all stimulus will do is keep pushing more people to the periphery. We have been trying your massive stimulus idea for at least a decade. Now you want more massive. I don't want to live in your country.
Werner writes:
trader walt writes:
...How many years did you teach at an Ivy League University...
You are talking about the ones which endowed america with Greenspan, Bernanke et al ?
Werner | 12.29.08 - 11:54 am | #---------------------------------------
If I'm not mistaken, Greenspan neither taught nor earned a degree from an Ivy League school (except perhaps for an honorary one). I believe he attended Columbia, however.
Also not reported: a lot of states are required by their state constitutions to 'balance' their budgets...
"If the legislature fails again, then California is looking at issuing IOU's for only the second time in history."
The Constitution has something to say about this, if anyone still cares about the Constitution, that is.
Article I, Section 10
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
I give the new admin 9 months before we get the mother of all hoopajoop, complex, arbitrary programs proffered.
Krugman, in his attic, sits night after night, preparing his version of this program. Dreaming of his name being added to the history books under the aegis of the "economic dream team" of the early 21st century much as his heroes of the Depression were ensconced.
Somewhere, Carl Jung smiles.
Pensions are very much a long term problem. Consider GM legacy cost today and look at ratio of working employees to retired. No way possible to continue to pay the retires as promised. Conversion to a 401K style is the only way to protect the employee in the long run. SS and Medicare are on the same path of destruction. Things change and some one is going to lose. We as a country have to spend less (especially government)then we make. The government can't just print endless money as they are doing.
--
Gary: "Jesus Christ, the level of ignorance in this thread has reached a new record."
Dopes love to identify themselves at every opportunity. Dopes also love to blame other dopes and are intolerant.
Jas
Spectre-
Each time they create an additional Program to bail someone out, we are digging a bigger hole for our children and grandchildren. Are you all so self absorbed that you don't care about how your children will live with the debt we have saddled them with? The ME Generation makes me sick!
It's making me sick...Thus why I quote Twain...
"I am said to be a revolutionist in my sympathies, by birth, by breeding and by principle. I am always on the side of the revolutionists, because there never was a revolution unless there were some oppressive and intolerable conditions against which to revolute"
"In the beginning of a change the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot"
many of the smart posters here tend to side with the peaceful approach to fight this disease at the top. I'm rational to a point. Then I think of my daughter. The hopes and dreams that you preached could come true via hard work, tolerance for others, love and giving even if it's a smile.
I as a father need nothing, I could live on a beach in baja out of a tent as long as their were waves, fish, lobster and water. Who cares about stuff?
the looting will continue...until the pigmen are displaced...sitting on a pc will not do it...been to the SF fed 2 x protesting, called and emailed congress, built email campaigns to inform friends and relatives of the deception and lies...
A lot of great minds here..Many patriots...I agree with most what is written..but tend to lean towards 1800 justice and sex pistols mentality....
"Substantial inflationary deficit spending is the only choice now."
You really need to think it through more deeply than this. First, get away from the bank-centric idea. Banks don't create business, business creates banks. Then: what business would you feel secure about backing today: airlines? transportation? real estate development? retail? energy? manufacturing? homebuilding? agriculture? consumer products?
That puts the problem in focus: in the credit bubble, almost every business borrowed the future for present market volume. There is utterly NO option now but to wait that out. NONE. No government stimulus, no credit market 'jolt'... NONE. If you have followed this blog you know that it is true of housing. If you think it through you see why it is true of other industries, too.
FE,
Also, the other way out of a liquidity trap is default. Printing money only presents itself as a solution when a gov't is bankrupt. Printing money then means that market participants paid in dollars have the value of their labor diminished with each successive day. This leads to the hoarding of hard assets, and then you will have completely lost all power to affect anything through more stimulus because your currency will not be taken seriously in the marketplace.
Is it any wonder why current economic policy decisions are being made when a marxist weasel like Krugman wins the Nobel prize?
One of the likely consolations of the coming hard times is that when true socialism gets revived in the US (probably in Michigan and Ohio when the auto industry goes under) I won't have to see ridiculous statements like this.
When the real Marxists are hurling invective at Krugman for opposing the nationalization of Microsoft, homebuilding, apartment complexes, railroads, trucking, and banks, inter alia maybe you'll see how crazy that is. A capitalist roader like Krugman would be fired and marginalized in a democratic Marxism and shot in a Leninist one.
If the country redirected the energy and resources of the war machine into technologies and practices to reduce global climate change, the USofA might lead the way toward saving humanity from itself (maybe).
But maybe humanity is not worth saving, either from itself or from anything else.
If humanity is a cosmic experiment (white mice?) testing, as I believe it does, whether life, per se, can withstand selfish intelligence, we may see the final results this iteration...
but tend to lean towards 1800 justice and sex pistols mentality....
cd | 12.29.08 - 12:17 pm
As Mencken observed: The normal man must sometime yearn to spit on his hands, hoist the black flag, and go to cutting throats...
Also, the other way out of a liquidity trap is default.
Only if basically everybody defaults without liquidation, ie, jubilee. Not possible without truly massive and highly corruption-prone government action, or with the failure of the court system, which nobody here wants to see (hopefully?)
--
"As Mencken observed: The normal man must sometime yearn to spit on his hands, hoist the black flag, and go to cutting throats..."
woody (tokin librul),
Mencken would be banned today by the media Crooks.
It is very hard for born-and-bred American dope to grasp but many freedoms have been taken away, "legally," over time. And the dopes go on voting for these evildoers.
Jas
--
Darth Paulson: "Krugman is a member of the inflationist party."
And which party is that? In the last 40 years, the White House was occupied by a Republican, no?
Partisan dopes are the easiest to identify BBAD.
A former Republican dope,
Jas
I would get along with that Mencken guy...
That puts the problem in focus: in the credit bubble, almost every business borrowed the future for present market volume. There is utterly NO option now but to wait that out. NONE.
That's not the liquidity trap. The liquidity trap is that when nominal interest rates drop below zero the credit markets come to a halt, causing serious deflation as everything unwinds. Business halts and you fall into a bottomless debt deflation. You can't wait it out, because it gets worse as you wait.
Almost all states have some form of balanced budget requirement. There is a lot of creative accounting in bad times, and many states will draw on reserve funds.
Still, it is far harder for states to run deficits than for the Federal govt. Typically, a state has to "pretend" in one way or another in order to run a deficit. They might mess with revenue forecasts to get things to balance. They might balance on a cash basis but have things getting much worse on an accrual basis, etc.
There are also what you might call "honest" deficits. A common example is what looked like a balanced budget runs into a large deficit when an economic downturn reduces revenues and increases expenses. This is part of what has happened to CA (but certainly not all of the problem).
Krugman doesn't mention it, but most governments also tend to spend every dollar (or more!) during economic booms.
And when recession hits, they 1) raise taxes and 2) make token cuts and/or slash services the public will whine about (beaches and pools, public transportation, parks, etc.) while 3) still awarding the public unions outrageous pay hikes in order to buy their votes at the next election. NJ is the poster boy for this, but CA is vying for the top slot.
Krugman has changed recently. He is on a deliberate, bordering to provocative inflationist agenda.
François | 12.29.08 - 9:45 am | #
He is smart enough to realize the mess we are in and to be scared spitless. In desparation, he will try anything.
Neither the Bush administration or Obama care about deficits.
Bush administration - "deficits don't matter"
Obama - "nows not the time to worry about deficits"
"CHANGE" = more of the same.
When was the last time our political class actually considered a viable budget? I speaking in terms of long term that considers ALL liabilities.
"You need to speak with your congressman or senator about them....."
...have you ever tried to contact them? Try asking them what THEIR opinion is re. a certain topic - you won't get an answer - you will get the questioning: name, address, phone, what YOUR concern is....that's all, no answers.
It's too late in this game to do anything but pick up your chips and leave the table. Never play a game where the rules change mid-game....
deflation is like a great white shark, theirs blood and a sick economy in the water already but the shark is now heading to surface at 25 mph starting from 200 meters below and it can't be stopped...Get ready...
YouTube - Shark attack
"That's not the liquidity trap."
Bingo.
Is Timothy Geithner Jewish? No.
Talmudic Blogger
So the invocation of Kristalnacht is not even good hogwash.
I"m just waiting for Conjure's clock to say it's
either Howdy Doody time or midnight.
I'll try to give Krugman a more favorable interpretation.
States have to at least pretend they are balancing their budgets, and in bad recessions most states do not have enough set aside in reserve funds. Thus, they usually have to start cutting. Those cuts could be in employees, working hours, benefits, medicare, and many other places. However, states have a labrynth of constitutional restrictions, existing contracts, and federal subsidies and matching programs. Often, a state cutting $1 million in a particular program results in $500k-2 million in reduced federal assistance.
So, what to do? It's quite simple actually. The money comes from the Federal govt. A large number of programs have the ability to waive matching requirements. The Obama administration wants a big infrastructure building program. When states in trouble see new Federal money for one purpose, they redeploy state money for other purposes.
The Federal govt has also been looking at how it might help with municipal borrowing costs. There are at least four promising approaches: 1. Recapitalize the existing bond insurers. 2. Guarantee newly issued municipal bonds, subject to various constraints to prevent abuse. This would probably be done for a limited period of time. This is difficult to do under current law, but Congress might be convinced. 3. Start a Federally sponsored municipal bond insurer or reinsurer. This is has a LOT of potential. The Federal govt would collect premiums, similar to existing bond insureres. Their guarantee would be worth much more to the market in reduced interest. The process could be similar to existing bond insurance. It even might be created as bond reinsurance, with exisiting bond insurers taking a portion of the risk and premium.
One of the likely consolations of the coming hard times is that when true socialism gets revived in the US (probably in Michigan and Ohio when the auto industry goes under) I won't have to see ridiculous statements like this.
Fair Economist | Homepage | 12.29.08 - 12:20 pm | #
Amen - current crop of wingers wouldn't know 'Real Marxists' even when they load them on the cattle cars for the trip to the Gulag.
I've always said the end result of neocon 'leadership' will be the rebirth of the Cult of Che [and others].
--
ALL OF THE AMERICA'S ECONOMIC PROBLEMS FOR THE PAST DOZEN YEARS CAN BE EXPLAINED BY MY 1998 SLOGAN:
IT IS THE DEBT, STUPID!
Jas
PS: The so-called stock market is a substitute debt market. America is ruled by known and proven Debt Pushers. It is finished as the leading economic power. Pushing Debt is evil, but how is BBAD to figure that out.
I've always said the end result of neocon 'leadership' will be the rebirth of the Cult of Che [and others].
dryfly
Neo-socialism. EU and S.America are decades ahead of the US in the regard of the new soci-economic model going forward. De-coupling occurs post global recession.
After working in a state government agency for 35 years (it was like hell on earth), I know first hand that politicians do not know what long range planning is about;they only care about the 'next election' so as CR states its spend, spend in the 'good times' and spend less (or worse borrow more) in the bad times!
Mike C
"When was the last time our political class actually considered a viable budget? I speaking in terms of long term that considers ALL liabilities."
8 years ago under Clinton.
Increases in the National Debt Chart
Geez the guy doesn't submit anything at all to the thread, shows up late and annonuces everybody is a retard, and then flounces off.
What a diva.
'Geez the guy doesn't submit anything at all to the thread, shows up late and annonuces everybody is a retard, and then flounces off.'
Gary is high in the Born & Bred Dopes pecking order, jus sayin.
Krugman (PBUH) says:
"The Obama administration will put deficit concerns on hold while it fights the economic crisis"
This is the same theory as expressed in the aphorism from that ideologue Dick Cheney, which goes: "Deficits don't matter."
@Dryfly
If you are interested, this is a very readable 25 pages CRB report on the public sector in California.
http://www.library.ca.gov/crb/07/07-014.pdf
The biggest issue to keep in mind is this paragraph in page 9:
"Unlike private sector defined benefit plans which tend to be ânoncontributory"
(i.e., do not require employees to contribute), public
employees generally contribute to defined benefit plans at a fixed
rate (typically a percentage of salary) that varies among different
types of employees and retirement systems. In some cases,
collective bargaining agreements may specify that employers pay
employees' contributions for a period of time."
For me who is on 2.5%@55 plan, that's 8% of my pre-tax income.(Less than 15% of some people here, but that's still quite a bite.) My employer, a small special district that had contracted with CalPERS for retirement benefit, kick in another 15%, for the future benefit of current employees and people who had already retired. The state of California currently kick in about 10% of payroll for direct state employees. Or as the report states, had remain constant for 3.5%-4% of California state revenue for decades. Hardly a reason to panic.
This is the same theory as expressed in the aphorism from that ideologue Dick Cheney, which goes: "Deficits don't matter."
Yes, deficit spending during a "recovery" is exactly the same as deficit spending during a deflationary depression cycle.
Better to keep your mouth shut, and have others think you a fool, than to open it and remove all doubt.
Krugman is safely stored away where he can do the least harm..in academia.
Them that can do...
Them that can't teach...
'Mencken would be banned today by the media Crooks.
It is very hard for born-and-bred American dope to grasp but many freedoms have been taken away, "legally," over time.'
Jas, let's do a little history (yes, I know - a waste of time).
'...in 1926, reporter and literary critic H.L. Mencken was arrested on Boston Common for selling a magazine that had been banned by the New England Watch and Ward Society, the city's self-appointed moral censors. A fierce defender of free speech, Mencken had traveled to Boston with the express intention of getting himself arrested. The minute he sold a copy of the magazine, the vice squad took him into custody. Not everyone in Boston agreed with the Watch and Ward Society, and the next day a judge ruled in Mencken's favor. He was acquitted on all charges. The victory was short-lived, however. Boston continued to lead the nation in the banning of books for another 30 years.'
Mass Moments: H.L. Mencken Arrested in Boston
In other words, we have more freedom than in Mencken's time, but we don't have more freedom than in Mencken's time if you actually know anything about his time.
Maybe you have heard of a certain Eugene Debs?
'On June 16, 1918, Debs made a speech in Canton, Ohio in opposition to World War I urging resistance to the military drafts of World War I. During the Palmer Raids, part of the First Red Scare in which people who were suspected of being radical leftists were arrested under fear that they would cause anarchism, Debs was arrested for violating the Espionage Act of 1917.[31] The period was characterized by supporters of communism and socialism being arrested and detained under suspicion of sedition. Deb's speeches against the Wilson administration and the war earned the undying enmity of President Woodrow Wilson, who later called Debs a "traitor to his country."[32]
Debs was convicted and sentenced to serve ten years in prison. He was also disenfranchised for life.'
Eugene V. Debs - Wikipedia, the free encyclopedia
I have yet to see any major political figures thrown into jail for speech alone during my lifetime - some were killed, of course, but neither Martin Luther King Jr nor Malcolm X were imprisoned for their politics in the sense of utterly destroying a political movement (Rev. King was briefly jailed for for not following the laws at the time - but then, so was Gandhi).
Your ignorance at times is just too much.
You seemed to have experienced America at its peak of comfort, and now seem to feel that America returning to its more historical norms is somehow the aberration.
The Bush/GOP Crime Syndicate makes Hoover look like Mother Theresa.
Them that can do...
Them that can't teach... - BIT
Spoken like a Mozillo or Chuck Prince.
Here, read what I said again, slowly this time: "This is the same theory as expressed in the aphorism from that ideologue Dick Cheney, which goes: "Deficits don't matter."
I never heard Krugman (PBUH) screaming for a decrease in the deficit or for a decrease in spending during the Bush years, nor during the Clinton years, nor during the Reagan years, when Krugman (PBUH) worked in the Reagan White House on the Council of Economic Advisers. Krugman never saw a deficit or a bailout he didn't really like. And I didn't hear any of the Democrats in the House or Senate in the past two years act on the belief that deficits were bad, or doing anything to reduce the Federal deficit, whether they thought the economy was in expansion or in contraction. As CR just said, state governments also usually spend everything in good times and in bad, as if they believed that deficits don't matter.
Better for Markel to keep his mouth shut.
Fifty Hoovers would make a giant sucking sound.
'Krugman never saw a deficit or a bailout he didn't really like. '
In this situation, he needs to finally admit to the public that the stimulus is needed to replace the Theft & Fraud Gap in the GDP.
When was the last time our political class actually considered a viable budget? I speaking in terms of long term that considers ALL liabilities.
MPinCO | 12.29.08 - 12:38 pm | #
I love your VERY selective phrasing but you DO understand trends, do you?
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2678226
Haha I just shit my pants.
Now what?
Krugman (PBUH) got the chance to help prove that the Bush deficits weren't a good idea by opposing TARP, but instead Krugman (PBUH) went along with Paulson, creating the biggest deficit in American history. When it came time for Krugman (PBUH) to say if he approved of the bailout, he lamely wrote, "Yuk. Phooey. I guess so."
I never heard Krugman (PBUH) screaming for a decrease in the deficit or for a decrease in spending during the Bush years
Probably because you were too busy carrying water for Dear Leader. The Unofficial Paul Krugman Web Page The Unofficial Paul Krugman Web Page The Unofficial Paul Krugman Web Page The Unofficial Paul Krugman Web Page
nor during the Clinton years
Uh, federal debt as a percentage of GDP went down during the Clinton administration, so why would he complain?
Better for El Cliffo to keep his mouth shut.
Fixed.
Markel, is that you?
Uh, federal debt as a percentage of GDP went down during the Clinton administration, so why would he complain?
Because Krugman (PBUH) should consistently oppose Cheney's idea that deficits don't matter. A deficit is a deficit, small or large, good times or bad. But as it turned out, there are times when Krugman (PBUH) doesn't mind deficits, like when Clinton had one, or when Paulson proposed increasing it with TARP, or now when Obama proposes increasing it by at least as much as Paulson. It looks like Krugman (PBUH) is not really uncomfortable with deficits, except when Bush ran one.
[I see the word "deficit" in only one of your four links, and only then when Krugman (PBUH) was quoting Cheney that "deficits don't matter".]
Unbelievable. That Krugman is asking such idiotic questions puts a question mark on the legitimacy of Nobel prizes. It's the same as asking a broke person why is he/she not buying a million dollar house. Hey Mr. Krugman- here is your Nobel prize worthy answer - states are not spending money because = drumroll - THEY DON'T HAVE ANY AND THEY CAN'T PRINT IT EITHER.
Trash Krugman all you want, people, but RTFA first. Geez.
When he's proven wrong can his nobel prize be forced to be returned?
This guy was on my reading list and then I deleted him because I found he has a nonsense streak and I then I found out he won a nobel prize, but I just can't keep him on my reading list.
I get too disgusted ...
It is going to be be awfully difficult to collect tax revenues to fund everything in a Barter Economy.
"Fifty Herbert Hoovers"?
Is that like "Thirty Helens"?
"our disfunctional state gov't-more reps than populous california"from an earlier post.
If you want wretched excess in the number of reps, look at the UK. They seem to have hundreds going to Parliament representing small districts and getting paid for it. Scotland has its own legislature, so that Scots are paying double for their representation. Dopn't know about Wales. I'm sure local jurisdictions have their own reps as well.
Come to think of it, and building on the views of some posters here, if everyone held an elective office of some kind (The New Orleans model) then there would be no unemployment. And we would have lovely government facilities to boot.
Works for me.
Maybe the Brits are on to something.
Oh, I see your problem now. That sentence should have read, "I never heard Krugman (PBUH) screaming for a decrease in the deficit via a decrease in spending during the Bush years. . ."
Agreed in theory but state & local gov'ts do have rainy day funds that they can tap plus they do have the power to tax and if they have solid ratings they can borrow/float bonds to fill any gap needed to "balance the budget". Selling assets is another option, raising fees, e.g. tolls, car title/reg fees, in addition to "targeted cuts." If the Feds do bankroll several infrastructure projects that would have been state funded then that will free up cash for other parts of their budget.
Meanwhile I will continue to daydream about living in a country with sane transportation, health, and military policies. Don't know why I do that, might as well daydream about Megan Fox as the possiblities are dead equal.
a different chris
There are at least 180 countries on the planet, surely one of the others more closely meets your ideal than this one. Why not emigrate?
Only a couple of states can borrow to cover deficits. Rainy day funds generally are few and far between and puny at that. States will cut budgets dramatically. Local governments as well. Krugman is right on.
El Cliffo, you commit a common error, whereby stupid dullards enjoy conversing with the intelligent, and wrongly imagine that the intelligent enjoy conversing with them.
Mark W writes:
Krugman just said state governments can run up spending deficits just like the Fed can? Really? Thats pretty ignorant.
Mark W | 12.29.08 - 9:29 am | #
He said nothing of the sort, he argued that a big part of the stimulus package should be Federal aid to the states so that thye do not have to cut sharply in the face of economic downturn. Cutting spending is every bit as much of an economic drag as raising taxes, prehaps even more so given some propensity of people to save from a tax cut and not immediately invest or spend. Yes states should be more aggressive building up rainy day funds durring boom periods. However, they will blow it one way or another, either cutting taxes or boosting spending. Consumers are not spending, and as a result, businesses have no desire to invest, thus 2 or the 3 legs of demand are not working. As a result, the states have lowever revenues, afterall their main sources of revenue are real estate taxes and sales taxes. I does not make lots to sense to cut the final source of demand.
Krugman is a credentialled idiot.
Earlier in the day I sent a link to all of the folks on my city council as well as my state reps...
And cherry picked some good news charts for them to view at
http://www.goodnewseconomist.com
There are alternative to cutting services, raising taxes, or selling bonds. And the public will be the first to rally to their aid if they have the courage to lead with hope, rather than cut in fear.
NUREG,
I'd rather be lucky than good.
GNE
http://www.goodnewseconomist.com
Has this guy even read history? Herbert Hoover jacked taxes through the roof.
I keep hearing that WWII got us out of the great depression because it destroyed goods creating needs. BS. If destruction of goods created economic booms, the collapse of the Madoff pyramid scheme should have stimulated one. It didn't. Why not? Because investment, not spending, is what creates jobs and stimulates economic growth. And bad investments (and there were many frauds exposed in the pre-depression crash) detract from growth.
The reason that we are concerned with economic growth is stability.
With current negative growth and zero interest rates, the burden must fall on Fiscal Policy.
State and Local Governments will need to maintain their operating expenditure and increase capital expenditure to play their part in maintaining economic growth. This may be despite declining revenue.
If State and Local Governments are unable by law to borrow to fund their deficits or unable to fund deficits via traditional means it will be incumbent on the Federal Government to provide such funding via either grants or loans.
The choices are
1. To continue to borrow from the creditor countries of the world to maintain economic growth for as long as they are willing.
2. Balance an ever decreasing budget until stabilisation is reached at a much lower level of economic production.
"If it goes broke, we lose. As long as it is solvent, we receive a pension check. To my knowledge no taxpayer funds are involved as all. I really do not understand all the gov. pension bashing that goes on here. It really must be a sour grapes thing."
WTF?
Every dime contributed on your behalf was taxpayer funded.
Commenters have posted;
Cutting spending is every bit as much of an economic drag as raising taxes, prehaps even more so given some propensity of people to save from a tax cut and not immediately invest or spend.
and
State and Local Governments will need to maintain their operating expenditure and increase capital expenditure to play their part in maintaining economic growth.
Huh? Kenysian economics is belief in magic. Sure, you can prop up the economy with federal spending in about the same way that you can prop it up with a pyramid scheme. But unless there's real growth, you just pay for it later. The only thing that sustainably increases people's quality of life is production of useful goods, which the government simply does not do.
Hiring someone to dig holes then fill them in or some other unproductive or inefficient government task does not "stimulate the economy through spending." It allocates good resources to a pointless, worthless task.
At least FDR built some hydroelectric dams at a time when businesses couldn't get loans to invest. That was one type of government investment that seemed to be actually beneficial. If we really need government spending, lets put it towards something useful like more nuclear power plants or some other investment, not lush government employee pension plans. And renegotiate the excessive labor contracts while we're at it.
We invest our way out of a recession. we don't spend our way out.
Krugman fails to mention that most governors are compelled by state constitutions to balance the budget.
Currently Accounting wrote: "All this government borrowing is making the credit crunch more severe for the private sector."
On much the same lines, New Guy wrote: "They can only decide whether to spend in the private sector (stocks, corporate bonds, etc.) or the public sector (treasuries)."
These arguments would be somewhat more believable if the rate of return for Treasuries was comparable to that of other investments. However, as we are all well aware, the rates for short-term Treasuries are hovering around zero, with the occasional excursion into negative territory. Remember, too, that these rates are set by auctions. Investors are choosing, en masse, to receive no return on their investment, instead of any of the alternatives.
One might even argue that the situation is the opposite of that suggested above. Instead of a shortage of lenders, requiring the private and public sector to compete for the available dollars, there is a huge excess of lenders, all chasing a very few credit-worthy borrowers. We won't get out of this situation until other borrowers can demonstrate their credit-worthiness.