Quote of the Day

“And then there is Paul Krugman, who would be the most influential columnist in the country if it weren’t for the fact that elected officials routinely refuse to listen to him. Poor Paul Krugman, our Sisyphus of elite opinion, eternally doomed to the same arguments with the same people, forever.”

Alex Pareene, Salon, in an article arguing that the NYT should dump its op-ed writers and start over.

Quote of the Day

“The wrong turn we’ve taken in economic policy — our obsession with debt and ‘entitlements,’ when we should have been focused on jobs and opportunity– was of course, driven in part by the power of wealthy vested interest.  but it wasn’t just raw power.  The fiscal scolds also benefited from a sort of ideological monopoly:  for several years you just weren’t considered serious in Washington unless you worshipped at the altar of Simpson and Bowles.

“Now, however, we have the president of the United States breaking ranks, finally sounding like the progressive many of his supporters thought they were backing in 2008.  This is going to change the discourse — and, eventually, I believe, actual policy.”

Paul Krugman, “Obama Gets Real,” NYT

It’s been so frustrating to me that during and since the Great Recession, we’ve sacrificed growth by focusing too much on each year’s deficit and the national debt.  Of course, deficits were going to spike when unemployment was so high and we were paying out so much more for unemployment benefits, food stamps, Medicaid, etc. and taking in so much less in revenues.  But we behaved as if that was not just a temporary circumstance, but our long-term destiny, and thus prolonged and deepened that temporary state, weakening us as a country and cruelly crushing a whole lot of families unnecessarily.  Keynes is (still) right, Paul Ryan is wrong, and Ayn Rand was a novelist, not an economist.  It’s time for the Prez and the Dems to lead us out of this economic wilderness.

“An Almost Pathological Meanspiritedness”

From “Hunger Games, U.S.A.,” Paul Krugman, NYT:

“Something terrible has happened to the soul of the Republican Party. We’ve gone beyond bad economic doctrine. We’ve even gone beyond selfishness and special interests. At this point we’re talking about a state of mind that takes positive glee in inflicting further suffering on the already miserable.

“The occasion for these observations is, as you may have guessed, the monstrous farm bill the House passed last week.

“House Republicans voted to maintain farm subsidies — at a higher level than either the Senate or the White House proposed — while completely eliminating food stamps from the bill.

“To fully appreciate what just went down, listen to the rhetoric conservatives often use to justify eliminating safety-net programs. It goes something like this: ‘You’re personally free to help the poor. But the government has no right to take people’s money’ — frequently, at this point, they add the words ‘at the point of a gun’ — ‘and force them to give it to the poor.’

“It is, however, apparently perfectly O.K. to take people’s money at the point of a gun and force them to give it to agribusinesses and the wealthy.

“Food stamp usage has indeed soared in recent years, with the percentage of the population receiving stamps rising from 8.7 in 2007 to 15.2 in the most recent data. There is, however, no mystery here. SNAP is supposed to help families in distress, and lately a lot of families have been in distress.

“In fact, SNAP usage tends to track broad measures of unemployment, like U6, which includes the underemployed and workers who have temporarily given up active job search. And U6 more than doubled in the crisis, from about 8 percent before the Great Recession to 17 percent in early 2010. It’s true that broad unemployment has since declined slightly, while food stamp numbers have continued to rise — but there’s normally some lag in the relationship, and it’s probably also true that some families have been forced to take food stamps by sharp cuts in unemployment benefits.

“What about the theory, common on the right, that it’s the other way around — that we have so much unemployment thanks to government programs that, in effect, pay people not to work? (Soup kitchens caused the Great Depression!) The basic answer is, you have to be kidding. Do you really believe that Americans are living lives of leisure on $134 a month, the average SNAP benefit?

“Still, let’s pretend to take this seriously. If employment is down because government aid is inducing people to stay home, reducing the labor force, then the law of supply and demand should apply: withdrawing all those workers should be causing labor shortages and rising wages, especially among the low-paid workers most likely to receive aid. In reality, of course, wages are stagnant or declining — and that’s especially true for the groups that benefit most from food stamps.

“Somehow, one of our nation’s two great parties has become infected by an almost pathological meanspiritedness….  If you’re an American, and you’re down on your luck, these people don’t want to help; they want to give you an extra kick. I don’t fully understand it, but it’s a terrible thing to behold.”

GOP Death Panels

In his column* today, Paul Krugman points to a RAND corporation study that found if 14 states whose GOP governors were opposed to the Medicaid expansion ultimately refused to adopt it, it would cause about 19,000 deaths a year.

Right now, it looks as if more than 14 states, more like 24 or 25, won’t expand Medicaid under Obamacare, so that means even more deaths.

* “The Spite Club,” NYT

Policy of the One Percent, by the One Percent, for the One Percent

From “The 1 Percent’s Solution,” Paul Krugman, NYT:

“Thus, the average American is somewhat worried about budget  deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face.  And how should the budget deficit be brought down?  The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.

“You get the idea:  The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor.  What the top 1 percent wants becomes what economic science says we must do.

“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.

“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make.  To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”

 

The Fog of Fiscal Flimflam

From “After the Flimflam,” Paul Krugman, NYT:

So we could definitely do worse than the Senate Democratic [budget] plan, and we probably will. It is, however, an extremely cautious proposal, one that doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy — which they are — then the plan really should be calling for substantial though temporary spending increases. It doesn’t.

But there’s a plan that does: the proposal from the Congressional Progressive Caucus titled ‘Back to Work,’ which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution.

“I’ve seen some people describe the caucus proposal as a ‘Ryan plan of the left,’ but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And ‘Back to Work’ rests on solid macroeconomic analysis, not the fantasy ‘expansionary austerity’ economics — the claim that slashing spending in a depressed economy somehow promotes job growth rather than deepening the depression — that Mr. Ryan continues to espouse despite the doctrine’s total failure in Europe.

“So where is this all going? Realistically, we aren’t likely to get a Grand Bargain any time soon. Nonetheless, my sense is that there is some real movement here, and it’s in a direction conservatives won’t like.

“Mr. Ryan’s efforts are finally starting to get the derision they deserve, while progressives seem, at long last, to be finding their voice. Little by little, Washington’s fog of fiscal flimflam seems to be lifting.”

I’m not as optimistic as Krugman about the fog lifting — I think we’re going to be socked in for some time to come — but I hope he’s right.  Maybe the Progressive Caucus will steal in on little cat feet.

Scolding the Scolds

From “Deficit Hawks Down,” Paul Krugman, NYT:

“President Obama’s second Inaugural Address offered a lot for progressives to like. … But arguably the most encouraging thing of all was what he didn’t say: He barely mentioned the budget deficit.

Why have the deficit scolds lost their grip? I’d suggest four interrelated reasons.

First, they have cried wolf too many times. They’ve spent three years warning of imminent crisis — if we don’t slash the deficit now now now, we’ll turn into Greece, Greece, I tell you. It is, for example, almost two years since Alan Simpson and Erskine Bowles declared that we should expect a fiscal crisis within, um, two years.

“But that crisis keeps not happening. The still-depressed economy has kept interest rates at near-record lows despite large government borrowing, just as Keynesian economists predicted all along. So the credibility of the scolds has taken an understandable, and well-deserved, hit.

Second, both deficits and public spending as a share of G.D.P. have started to decline — again, just as those who never bought into the deficit hysteria predicted all along.

“The truth is that the budget deficits of the past four years were mainly a temporary consequence of the financial crisis, which sent the economy into a tailspin — and which, therefore, led both to low tax receipts and to a rise in unemployment benefits and other government expenses.

“And it was, in fact, a good thing that the deficit was allowed to rise as the economy slumped. With private spending plunging as the housing bubble popped and cash-strapped families cut back, the willingness of the government to keep spending was one of the main reasons we didn’t experience a full replay of the Great Depression. Which brings me to the third reason the deficit scolds have lost influence: the contrary doctrine, the claim that we need to practice fiscal austerity even in a depressed economy, has failed decisively in practice.

Consider, in particular, the case of Britain. In 2010, when the new government of Prime Minister David Cameron turned to austerity policies, it received fulsome praise from many people on this side of the Atlantic. For example, the late David Broder urged President Obama to “do a Cameron”; he particularly commended Mr. Cameron for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.”

“Sure enough, the sudden, severe medicine cut short Britain’s economic recovery, and threw the nation back into recession.

“At this point, then, it’s clear that the deficit-scold movement was based on bad economic analysis. But that’s not all: there was also clearly a lot of bad faith involved, as the scolds tried to exploit an economic (not fiscal) crisis on behalf of a political agenda that had nothing to do with deficits. And the growing transparency of that agenda is the fourth reason the deficit scolds have lost their clout.”  Emphasis added.

The Deficit? Fuhgeddaboudit.

A little Krugman* to get your weekend off to a good start:

“The budget deficit isn’t our biggest problem, by a long shot.  Furthermore, it’s a problem that is already, to a large degree, solved.  The medium-term budget outlook is great, but it’s not terrible either — and the long-term outlook gets much more attention than it should.

“Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions:  the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year.  What the center finds is a budget outlook, that, as I said, isn’t great but isn’t terrible:  It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.

“The center calls for another $1.4 trillion in deficit reduction, which would completely stabilize the debt ratio; President Obama has called for roughly the same amount.  Even without such actions, however, the budget outlook for the next 10 years doesn’t look at all alarming.

“Now, projections that run further into the future do suggest trouble, as an aging population and rising health care costs continue to push federal spending higher.  But here’s a question you almost never see seriously addressed:  Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?

“It’s time to focus on other stuff — like the still-depressed state of the economy and the still-terrible problem of long-term unemployment.”

Instead of wringing our hands about the deficit/national debt, we need to roll up our sleeves and focus on growth and good jobs.  That’s the best thing we can do for the 2030s right now.

* “The Dwindling Deficit,” NYT