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I don't agree that we can afford to spend more. However, I think that Krugman's basic point is that the type of massive cuts in spending advocated by tea party types are going to lead to further harm. Reductions in government spending will lead to lower demand by both the public and private sectors. Lower demand isn't going to reduce unemployment and it isn't going to increase GDP.
There is a lot of frustration in this country right now. I will submit that we are probably doing as well as we can right now. Unemployment is too high, but we are creating jobs. If revisions in the unemployment figures are included, we are averaging about 200,000 new jobs per month. This number will gradually reduce unemployment. The reality is it probably will take until 2014 to get back on track when it comes to pre-recession employment levels. As unemployment falls, GDP will rise. As GDP rises tax collections will rise and the deficit will fall.
Folks, there is no "magic bullet" out there. There are some policies that are better than other policies. What we are doing right now is not what Krugman advocates, nor is it what the tea party types advocate either. Its a centrist policy. Its not going to win any awards, but it will eventually suffice. As a country, we need to look at some issues like long term entitlement reform (particularly medicare). What is needed badly now is some patience. Things aren't good, but they could be a heck of a lot worse than they are. What we don't need are radical ideas from either end of the political spectrum.
I don't agree that we can afford to spend more. However, I think that Krugman's basic point is that the type of massive cuts in spending advocated by tea party types are going to lead to further harm. Reductions in government spending will lead to lower demand by both the public and private sectors. Lower demand isn't going to reduce unemployment and it isn't going to increase GDP.
There is a lot of frustration in this country right now. I will submit that we are probably doing as well as we can right now. Unemployment is too high, but we are creating jobs. If revisions in the unemployment figures are included, we are averaging about 200,000 new jobs per month. This number will gradually reduce unemployment. The reality is it probably will take until 2014 to get back on track when it comes to pre-recession employment levels. As unemployment falls, GDP will rise. As GDP rises tax collections will rise and the deficit will fall.
Folks, there is no "magic bullet" out there. There are some policies that are better than other policies. What we are doing right now is not what Krugman advocates, nor is it what the tea party types advocate either. Its a centrist policy. Its not going to win any awards, but it will eventually suffice. As a country, we need to look at some issues like long term entitlement reform (particularly medicare). What is needed badly now is some patience. Things aren't good, but they could be a heck of a lot worse than they are. What we don't need are radical ideas from either end of the political spectrum.
In general, I agree, especially the part about Medicare reform. As I've been saying, what we really need is FOOD REFORM. I recently learned that a lot of the foods sold in American grocery stores are banned in other countries. For example, most of our breads, pastas, and cereals have been stropped of their nutrients and dietary fiber. The overprocessing and lack of fiber in these staple foods leads to weight gain and diabetes and the super high health care costs that go with it.
just like all the investing and spending has made the US economy come back?
OK, maybe corporations are sitting on more cash but they still really are not hiring and unemployment still high.
The government investment here slowed the "crash" a couple years ago and has brought things up slowly- with unemployment a couple points lower now than it was at the depths. Many economists agree with Krugman that MORE government investment would have been needed to turn things around faster here. (for example, helping states fund public sector jobs such as teachers and government workers so that they are not laid off en masse as they have been- which has added to the unemployment figures and taken more spending money out of the local economies (those people have no more money to spend, so that money is not put into local retailers, and in turn local governments collect less sales tax).
That is one aspect to it. The other things he says are that this government investment would need to go towards new technologies, and work on infrastructure that needs to be done anyway (and can be done cheaper now than in the future due to lower cost of supplies, labor, and lower interest rates right now on bonds), which would get those items done for cheaper and would put even more people to work, which of course as mentioned above pumps more money into the economy.
He actually makes a lot of sense. He says all you have to do is look at the struggling nations in Europe right now that have decided to try to "cut" their way out of this economic crisis- all it has done is sink them deeper into trouble because there is even less investment going on to spark any kind of a come-back. What he's saying is that investment is what spurs growth.
I'm sorry, but I think you have this backwards. The nations in Europe are struggling because they spent themselves into this pickle, not because their governments suddenly began implementing fiscal austerity. The austerity was a response to the fiscal crises, not the cause of them.
Back to Krugman. In the early part of the previous decade he was the one egging on the real estate bubble. Never saw the bubble coming, even though any number of informed people did. Heck, I saw it coming and advised all my real estate clients to get out as early as late 2006. The ones that did grumbled a bit, but are now glad they listened.
Politicians are deeply affected by economic pressure. If things do not improve they will be sent packing, regardless of why or how we got into this mess. If the economy does not improve after the election, whoever is in office will be forced to do something. Whether that entails deficit spending or some form of tax cuts that decrease revenues (leading to more debt) is inconsequential. No matter who wins in November, they will succomb to the pressure to do something. Which may well make this all a moot point.
So, what are the pros and cons of cutting taxes versus stimulus spending? If the tax cuts are targeted to the same industries and individuals as the the stimulus spending, I suspect not much difference either way. If the tax cuts are targeted at big business and the wealthiest individuals to spur venture capital, investment and hiring and rely on trickle down theory, I would expect not much to happen from it. Except more debt and more bloated corporate balance sheets. Corporations will not change their hiring practices if we throw even more money at them without improving confidence and the concentration of wealth over the past 30 years suggests that trickle down theory is a complete bust.
But, if you support extending the Bush tax cuts, which will add to our national debt, then how is giving vs not taking any different?
I believe that what will help our economy is for business and individuals to see movement in the direction of reducing debt and balancing our budget via even-handed across-the-board reductions. Medicare need to be adjusted to meet our changing demographics, defense needs to be trimmed to our new realities and the backlog of foreclosures needs to clear the system. These events and measures will restore confidence that the two parties in Washington have shoved aside the extreme elements at the fringe and are working towards the common interests of the majority. That will restore confidence and both hiring and consumer spending will accomplish the rest.
Last edited by shaker281; 05-09-2012 at 10:58 PM..
The government investment here slowed the "crash" a couple years ago and has brought things up slowly- with unemployment a couple points lower now than it was at the depths. Many economists agree with Krugman that MORE government investment would have been needed to turn things around faster here. (for example, helping states fund public sector jobs such as teachers and government workers so that they are not laid off en masse as they have been- which has added to the unemployment figures and taken more spending money out of the local economies (those people have no more money to spend, so that money is not put into local retailers, and in turn local governments collect less sales tax).
That is one aspect to it. The other things he says are that this government investment would need to go towards new technologies, and work on infrastructure that needs to be done anyway (and can be done cheaper now than in the future due to lower cost of supplies, labor, and lower interest rates right now on bonds), which would get those items done for cheaper and would put even more people to work, which of course as mentioned above pumps more money into the economy.
Deer sheep.... DEBT is not Investment. Spending is not prosperity.
Well we do not have an economy like we did back then. We now have a global economy with maybe double the population. So I cannot see the economics of the past being applied to whats happening today. Everyone mentions corporate greed as part of it but austerity has lots to say as well. Every State, NJ is a good example, cut benefits packages, retirement pay and the list goes on. WHAT HAS THE FED DONE? Nothing.
Krugman is a shill for the globalist view that more debt is good. He had to remove his blog comments because his economic policy was getting skewered.
He is a horrible economist.
I've yet to see the man make an accurate prediction.
In fact, that's really the problem with economics being defined as a science. It is not a science. It is a pseudoscience, chiefly because it utterly lacks a predictive ability. The systems are far too complex and there are too many variables and unpredictable elements in play for any economist to look at the data and say, "Yep. This will happen."
When the near collapse occurred in 2008, the monetarists and the Keynesians were pretty much caught flat-footed. None of them were even remotely aware that the economy was teetering until Bear Stearns fell apart in February of that year. The only ones who were remotely correct were the Austrians, that that could be termed a true economic school. And those guys don't work from data.
This guys has been around along time. He was on Cspan this morning preaching more spending and borrowing to get us out of a recession.
He claims it worked in WW11 and beyond but those were different times.
Hid ideology seems pretty far left..I dont believe more debt will get us to a better company despite having low inflation./ interest rates.
the key thing to remember, from the Economists' standpoint, is that debt to gdp is what's important, not simply "more debt". This is the same thing that was argued while GWB was running up the absolute debt. Cheney famously made some comments on it. The issue is, you can only spend so much, before that ratio turns against you.
You have to realize, whether you politically believe it or not, government spending is a big part of the economy. Look to Europe to see the impact of austerity on the economies there. It's a fine line and takes careful balancing. There's bad spending though. We'll see. They also can't really raise taxes to cover the spending, so it's a difficult topic.
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