NORTON META TAG

Showing posts with label Paul Krugman. Show all posts
Showing posts with label Paul Krugman. Show all posts

24 April 2014

DAILY KOS RECOMMENDED 19-23APR14

Posted by at No comments:
Labels: , , , , , , , , , , , , , ,

29 April 2013

Wonkbook: With sequestration, everyone loses. Even Republicans. 29APR13

FROM Ezra Klein's Wonkbook column in the Washington Post, a really informative look at sequestration. I have to agree with him, with sequestration and the state of politics in Congress and across the nation, we are all losers......

On Friday, I wrote that Democrats have lost the fight to replace sequestration. In agreeing to the FAA fix, they showed that in any case where the political pain caused by sequestration becomes unbearable, they will agree to cancel that particular piece of the bill while leaving the rest of the law untouched. That means their leverage is effectively nil. Game over.
Washington being what it is, Democrats losing on sequestration is taken to mean that Republicans have won on sequestration. But that’s a conceptual error wrapped in a sad commentary about modern-day politics. The sequester isn’t a zero-sum policy, where one side wins and the other side loses. It’s a negative-sum policy. Its persistence means both political parties lose. As does the rest of the country.
That, of course, was the whole point of the sequester. It was meant to be such terrible policy that neither side would permit it to go into effect. Back then, House Speaker John Boehner called the cuts “devastating,” and promised they’d never go into effect. “Devastating” was also the wordchosen by Rep. Paul Ryan.
But after losing the 2012 election, Republicans executed an impressive tactical reversal on sequestration. Aware that the fiscal cliff was a loser and the debt ceiling would be a disaster, Boehner began working to persuade his members that the sequester represented their real opportunity.
“The Republicans’ stronger card, Mr. Boehner believes, will be the automatic spending sequester trigger that trims all discretionary programs--defense and domestic,” reported the Wall Street Journal after an interview with the Speaker. “It now appears that the president made a severe political miscalculation when he came up with the sequester idea in 2011.”
This was a backflip on the high beam. And Boehner pulled it off. House Republicans went from running against the sequester to defending it as preferable to any possible compromise. Any remaining dissension dissipated under the sheer partisan glee Republicans felt watching Democrats rage impotently against the policy. Washington is a town where one party only believes it’s winning if the other party believes it’s losing. And so, as Democrats began acting like they were losing, Republicans became all the more convinced they were winning — and they dug in deeper.
But from a policy perspective, Republicans are losing right alongside Democrats.
Republicans wanted entitlement cuts. They’re not getting them. They wanted to protect defense spending. Instead, the Pentagon is getting gutted while Medicare and Social Security are left mostly untouched. They had an eye towards tax reform. Nuh-uh.
Sequestration also includes one huge, but little-noticed, downside for the deficit-conscious Republicans. As any good budget wonk knows, our debt problems are much worse in the coming decades than in this decade. But most deficit-reduction policies save much more money in the second decade than in the first. Chained-CPI, for instance, cuts Social Security benefits by a bit more than $100 billion in this decade, but by hundreds of billions in the next decade (my own note here, chained-cpi is not good for Social Security or for the nation. Find more on just how evil this proposal is by doing a search on this blog for post on chained cpi and / or Social Security). The White House’s proposals to further means-test Medicare save tens of billions in the first decade, but around $200 billion in the second decade.
As Marc Goldwein of the Committee for a Responsible Federal Budget points out, sequestration ends after 10 years. It just shuts off. So rather than putting deficit-reduction policies in place now that will grow later, sequestration puts policies in place now that will vanish later. So where a bigger budget deal would start slowly to protect the economy and then ramp up as our debt problems worsen, sequestration will start fast, hurting the economy, and then disappear as our debt problems are entering a more critical phase.
This is, for Republicans, a win only insofar as Democrats feel it a loss. But that’s a very narrow and depressing definition of what it means to “win.” Sequestration was built to punish both parties, as well as the voters who support them. If left in place, it will do its job. Republicans may feel like they’re winning. But really, we’re all losing.
Wonkbook’s Number of the Day: 1.2 percent. That’s the year-over-year change in the personal consumption expenditure price index, which the Fed uses as the basis for its 2-percent annual inflation target. Significantly below-target inflation may keep the Fed in a more accommodative mood in the coming months. More below.
Wonkbook’s Top 5 Stories: 1) a politics, and public policy, that thinks beyond austerity; 2) racial wealth disparities widen; 3) gun control tries to reboot; 4) the unglamorous way to save money on Medicare; and 5) an overview of the White House Correspondents Dinner.
1) Top story: Austerity is dead. Long live austerity.
Democrats ask: What debt crisis? “[T]hen there are the other Democrats -- the ones who reject the entire premise of the current high-stakes fiscal fight. There's no short-term deficit problem, they say, and there isn't even an urgent debt crisis that requires immediate attention…[A]ided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.” Ben White and Tarini Parti in Politico.
…And the GOP is stepping away from entitlement reform and towards a tax overhaul. “With another fight over the national debt brewing this summer, congressional Republicans are de-emphasizing their demand for politically painful cuts to retirement programs and focusing on a more popular prize: a thorough rewrite of the U.S. tax code. Reining in spending on Social Security and Medicare remains an important policy goal for the GOP. But House leaders launched a series of meetings last week aimed at convincing rank-and-file lawmakers that tax reform is both wise policy and good politics and should be their top priority heading into talks with Democrats over the need to raise the federal debt limit.” Lori Montgomery in The Washington Post.
@tylercowen: Still way too many tweets and posts not facing up to how much the “austerity” debate, esp. in Europe, is really about distribution.
Defense cuts pose economic quandary for liberals. “Liberals are increasingly facing a conundrum as the Pentagon experiences the deepest cuts in a generation: The significant reductions in military spending that they have long sought are also taking a huge bite out of economic growth. Liberal lawmakers and others on the left have argued for years that the military budget is bloated and should be dramatically scaled back. At the same time, they have been major advocates of government spending to help drive economic growth and create jobs.” Zachary A. Goldfarb in The Washington Post.
…And at the Pentagon, the need for furloughs varies. “The Navy has said it can make the cuts needed without furloughs, while the Army thinks the war in Afghanistan and other priorities make it nearly impossible to make the cuts without furloughs. The Pentagon, focused on maintaining rough consistency in furloughs across the department, is trying to figure out how to balance the services' varied perspectives.” Steve Vogel in The Washington Post.
@ryanavent: Funny thing is, austerity impact in Q1 was supposed to be payroll tax, but PCE is ok. Sequester in Q2 and beyond. What to expect from that?
How austerity, a bad economic idea, won over the West. “[A] modified form of the austerity that has characterized policymaking in Europe since 2010 is coming to the United States as well; the only questions are how big the hit will end up being and who will bear the brunt. What makes all this so absurd is that the European experience has shown yet again why joining the austerity club is exactly the wrong thing for a struggling economy to do.” Mark Blyth in Foreign Affairs.
@Neil_Irwin: Another steep decline in government spending, off 8.4%, including 11.5% defense spending drop. Looks like austerity is the culprit.
Debate: Chris Giles and Robin Harding, economic writers for The Financial Times, argue over the merits of austerity in depressed economies.
KLEIN: Reinhart and Rogoff aren’t the problem. The Republican Party is. “The real debate right now is with a Republican Party that won't permit any more stimulus, won't permit any more deficit reduction if it includes tax revenues, and won't even permit the federal government to make it easier for people to refinance their homes. That's a position that often gets called "austerity," and so cloaks itself in the work of more serious deficit hawks, but it's actually something very different, and much less coherent. And it's not the position of Reinhart and Rogoff, or Krugman, or even Joe Scarborough. In fact, it's not even obviously bridgeable with the positions of Reinhart, Rogoff and Krugman.” Ezra Klein in The Washington Post.
DIONNE: The economic whodunit. “The policy mystery of our time is why politicians in the United States and across much of the democratic world are so obsessed with deficits, when their primary mission ought to be bringing down high and debilitating rates of unemployment…[D]eficits don't really matter to many of the ideological conservatives shouting so loudly about them now. Their central goal is to hack away at government.” E.J. Dionne in The Washington Post.
KRUGMAN: The austerity narrative unravels. “Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.” Paul Krugman in The New York Times.
EICHENGREEN: Central bank easing isn’t a currency war. It’s stimulus. “The BoJ and Fed were criticised for unleashing a torrent of capital flows into emerging markets. Now, in contrast, officials in other countries, while still less than fully comfortable about the consequences, realise that they would be even worse off had the Fed and the BoJ responded to them.” Barry Eichengreen in The Financial Times.
STEVENSON AND WOLFERS: Refereeing the Reinhart-Rogoff debate. “Lost in all this sound and fury is the real question that we should be debating: Is it appropriate to infer that high debt is driving slower growth, and hence governments need to take greater care before taking on debt? Or is lower GDP growth, or perhaps some other factor, the reason that debt burdens rise? If the observed correlations reflect the latter reason (and there are hints that it may), then the whole exercise has little relevance to public policy.”Betsey Stevenson and Justin Wolfers in Bloomberg.
MCNABB: Costs of uncertainty. “Our economists at Vanguard isolated changes in the U.S. economy that we determined were specifically due to increases in policy uncertainty…This gave us a picture of what the economy might look like if the shocks from policy uncertainty had not occurred. We estimate that since 2011 the rise in overall policy uncertainty has created a $261 billion cumulative drag on the economy…Without this uncertainty tax, real U.S. GDP could have grown an average 3% per year since 2011…In addition, the U.S. labor market would have added roughly 45,000 more jobs per month over the past two years. That adds up to more than one million jobs that we could have had by now, but don’t.” Bill McNabb in The Wall Street Journal.
Music recommendations interlude: Jesse Cook, “Havana.”
Top op-eds
BOWLES AND SIMPSON: We still want a grand bargain. “While the president's budget represents a significant step forward, it does not go as far as necessary to keep our debt declining as a percent of our economy…The plan we propose would achieve $2.5 trillion in deficit reduction through 2023, replacing the immediate, mindless cuts of the sequester with smarter, more gradual deficit reduction that would avoid disrupting a fragile economic recovery while putting the debt on a clear downward path relative to the economy over the next 10 years and beyond. Importantly, the plan would achieve this deficit reduction while respecting the principles and priorities of both parties.” Erskine Bowles and Alan Simpson in The Washington Post.
JOHNSON: Brown-Vitter remakes reform battlefield. “[S]mall banks are increasingly focused on the ways megabanks have achieved an unfair competitive advantage — primarily through implicit government subsidies. The most compelling voice at the forum last week was Terry Jorde, a senior executive vice president of the Independent Community Bankers of America. She made clear that small banks are being undermined by the reckless behavior of megabanks that are seen as "too big to fail.”" Simon Johnson inBloomberg.
REARDON: No rich child left behind. “What is news is that in the United States over the last few decades these differences in educational success between high- and lower-income students have grown substantially. One way to see this is to look at the scores of rich and poor students on standardized math and reading tests over the last 50 years. When I did this using information from a dozen large national studies conducted between 1960 and 2010, I found that the rich-poor gap in test scores is about 40 percent larger now than it was 30 years ago.” Sean F. Reardon in The New York Times.
LUCE: The age of impasse. “Barack Obama has not yet clocked up 100 days - he hits that milestone on Wednesday. Yet there is already an air of resignation about how the next four years are likely to play out. A large share of it comes from the realisation that the Republican party is not for turning after all.” Edward Luce in The Financial Times.
SHARKEY: The urban fire next time. “For the past several years all the ingredients have been in place for an urban crisis. Unemployment has hovered above 15 percent in many of our most distressed cities. High-poverty neighborhoods have spread beyond cities and into the suburbs. The housing collapse has left large sections of communities boarded up. And yet our cities have been relatively quiet…The question is, what comes next, now that the stimulus is over? A historical perspective on urban policy reveals a cycle in which periods of major investment are followed by periods of neglect, disinvestment and decline. This pattern is in the process of repeating.” Patrick Sharkey in The New York Times.
2) Racial wealth disparity widens
Tame inflation means continued Fed easing. “Federal Reserve officials are likely to continue their easy-money policies at the central bank’s policy meeting on Tuesday and Wednesday, in part because several recent inflation measures have fallen well below the Fed’s 2% target…The Commerce Department reported Friday that its personal consumption expenditure price index--one of the Fed’s favored measures of consumer price inflation--was up 1.2% in the first quarter from a year earlier, well below the central bank’s target.” Jon Hilsenrath in The Wall Street Journal.
It’s Bernanke versus austerity. “We rarely get to see a major, nationwide economic experiment at work, but so far 2013 has been one of those experiments -- specifically, an experiment to try and do exactly what Beckworth and Ponnuru proposed. If you look at macroeconomic policy since last fall, there have been two big moves. The Federal Reserve has committed to much bolder action in adopting the Evans Rule and QE3. At the same time, the country has entered a period of fiscal austerity. Was the Fed action enough to offset the contraction? It's still very early, and economists will probably debate this for a generation, but, especially after the stagnating GDP report yesterday, it looks as though fiscal policy is the winner.” Milke Konczal in The Washington Post.
Explainer: Economic data for the week ahead. Amrita Jayakumar in The Washington Post.
Obama finalizes economic-policy roster. “Barack Obama has cemented the elevation of trade in his second-term agenda with the expected appointment of his top White House adviser on the global economy as the new US trade representative. Michael Froman, 50, who had initially been expected to stay on as Mr Obama's chief adviser for international economic affairs in the White House, will take over a significantly expanded trade agenda as the USTR.” Richard McGregor in The Financial Times.
Wealth gap between races has widened since the recession. “As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth -- as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances -- white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute's analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.” Annie Lowrey in The New York Times.
Report: Hidden overseas accounts quietly rising to surface. “The Internal Revenue Service has recouped more than $5.5 billion under a series of programs that offered reduced penalties and no jail time to people who voluntarily disclosed assets they were hiding overseas, government investigators said Friday. In all, more than 39,000 tax cheats have come clean under the programs. Government investigators suspect that thousands of other taxpayers have quietly started reporting foreign accounts without paying any penalties or interest. The number of people reporting foreign accounts to the IRS nearly doubled from 2007 to 2010, to 516,000 accounts, a report by the Government Accountability Office said.” Stephen Ohlemacher in The Washington Post.
…And nations take a hard look at tax competition. “Across the world, the ability of multinationals to exploit cracks in the international tax system has ignited intense anger from an austerity-weary public…There has been a blurring of the distinctions between tax havens and larger industrialised countries that use fiscal measures as a source of competitive advantage to secure investment, jobs and revenues.” Vanessa Houlder in The Financial Times.
Measuring GDP is an art, not a science. “The change was long planned - changing anything in the national accounts takes a lot of planning - and reflects an international agreement in 2008. But the sudden appearance of an extra $500bn or so of GDP, an extra Belgium, understandably makes people a little queasy. The revisions are a reminder that while GDP may be the universal measure of economic success, like Olympic gold medals in sport, it is a mutable and arbitrary indicator. Nor is it the only way to measure economic output.” Robin Harding in The Financial Times.
Posted by at No comments:
Labels: , , , , , , , , , , , , ,

02 February 2013

Paul Krugman Battles 'Beltway Deficit Feedback Loop,' And Not By Himself 2FEB13

AS I said before, Pres Obama wold have done well to nominate Paul Krugman as his Sec of Treasury, it his kind of thinking and independence from the monied interest that control Washington that would provide the leadership to guide us out of this recession. Unfortunately is it doubtful Mr Krugman would have been approved as Treasury Secretary. Look at what Chuck Hagel is going through just because he is speaking the truth, imagine what the Senate would do to Paul Krugman. Still, this is an important piece, and reinforces what the American people already know, we have to fix our economy and get out of the recession before dealing with our national debt. From HuffPost....
Click here to tell Congress to protect Medicare, Medicaid, the Affordable Care Act and Social Security!
Paul Krugman Deficit Hawks

Paul Krugman is no stranger to going on teevee and encountering, well, people of an addled aspect -- he's done "Squawk Box", after all! But there was something very special about one of his most recent appearances on MSNBC. You thought that Felix Baumgartner dude who fell to earth for Red Bull was extreme? Take a seat, balloon boy. Paul Krugman has become the first human I've ever witnessed escaping from the gravitational pull of something with black hole-like density: Joe Scarborough and his gang of deficit hacks.
Krugman has this interesting thesis about the way "thinking" congeals among media elites. He thinks that they are overly obsessed with a deficit crisis that is decades from happening, if it happens at all. He observes that in this time of widespread unemployment and grievous economic dislocation -- a continuing condition of the lightly tended to 2008 economic calamity -- and against all evidence, the media elites have become convinced that the long-term budget deficit is the actual crisis that's emerged in America, to claim its future. And then you get a cycle -- blather, wince, repeat -- in which all of these cosseted simps reinforce one another until this bizarre line of thinking is deeply entrenched and inalterable.
It's an old yarn, and Krugman's far from the first person to notice. Greg Sargent calls it the "Beltway Deficit Feedback Loop," and as the National Journal reported back in May of 2011, it's been unfolding within the media and distorting its coverage -- mostly to the expense of the more serious unemployment crisis. (There is no comparable feedback loop on the unemployment crisis. Aside from occasionally speculating on how high unemployment rates could affect the electoral hopes of prominent political celebrities seeking re-election, it's almost never discussed.)
But, as with any theory, it's always great to observe the Feedback Loop in nature, and that's what Krugman's journey to MSNBC's blasé kaffeeklatsch successfully revealed -- proof of this thesis.
The best part of the exchange comes after Ed Rendell attempts to invoke the talismanic power of the Simpson-Bowles Commission, which media elites believe is somehow magical, (and more often than not evince no awareness of what the Simpson-Bowles plan called for) but is better known as one of the links in a long-running failure chain that eventually resulted in our current regime of continual, self-engineered fiscal crises.
KRUGMAN: So two guys can write a report that calls for all kinds of good stuff and they can’t even get their own commission to agree on the report. And you’re saying this should be our policy? We need to focus on what is urgent right now, which is creating jobs and getting this economy back to full employment.
RENDELL: But the way you do that is to build a political coalition to do something about the long-term debt.
KRUGMAN: Have you been living in the same country as I have these past five years?
SCARBOROUGH: My message is, we’ve got a coming collapse if we don’t take care of our entitlements.
KRUGMAN: It’s a long way off, it’s not necessarily even true.
What follows from there is a strained comparison between the deficit and climate change, and some concern trolling over the S&P downgrade, which affected the U.S. bond market nary a whit. Eventually Richard Haass levels this strange accusation at Krugman, "You’re basically willing take enormous risks with the American economy."
KRUGMAN: People like me have been saying for five years, don’t worry about these deficit things for the time being, they’re a non-issue. Other people have been saying, ‘Imminent crisis, imminent crisis!’ How many times do they have to be wrong and do people like me have to be right before people start to believe this?
HAASS: You’re right until the day you’re wrong, and that’s a bad day.
If pure bafflegab could power manned space flight vehicles, we'd be establishing the first colony on Mars this very week. The notion that the guy urging the mitigation of the unemployment crisis is the one taking enormous risks with the economy is simply astonishing. "You're right until the day you're wrong and that's a bad day," isn't even an argument. You could say the same thing to the gravitational constant, if it were a living thing that could walk onto a teevee set and get ridiculed by pedants. I'm quite sure that Nate Silver remembers the time that the Morning Joe crew predicted he'd be on the business end of a similar comeuppance.
Haass' position, that not fixing the debt will precipitate some epic crisis, is also way overstated. It's plausible that we could see rising interest rates or inflation at some point. And that would be bad for the economy (though the Federal Reserve could treat these conditions), it's not necessarily going to set off some sort of global run on the dollar or a big financial crash. Of course, even if we did, its major adverse effect on the real world would be mass unemployment, which we're facing right now. So what Haass is actually saying is that we cannot afford to fix the massive unemployment crisis now, because it could result in some future massive unemployment crisis. That's a decidedly oddball position to take.
But the most purely risible thing that was uttered was Ed Rendell's contention that the way you solve the unemployment problem is by first "building a political coalition to do something about the long-term debt." The need to do something about the long-term debt is a matter of concern, but it's not nearly as urgent as the unemployment crisis. What's more, this is wrong way to link these two concerns -- Rendell's prescription is the equivalent of a captain of a capsizing luxury liner calling for immediate swimming lessons on the Lido Deck.
But beyond that, if the current economic emergencies can only be solved by building a political coalition around solving the long-term budget trajectory, then that is basically like saying that there will be no relief for our current economic emergency, because if there's one thing Washington has not been able to do since the financial crisis is form any sort of coalition around the debt.
We've tracked this: the efforts began with a Senate Deficit Commission (which died after its GOP co-sponsores bailed), to President Barack Obama creating the Simpson-Bowles Commission (which failed to form a coalition), to the Super Committee (which failed in similar fashion), to the current budget sequester (which would make steep cuts in spending, but not the ones the fiscal hacks want). We've been trying to form this magical political coalition for years and the efforts have only made things worse.
The problem of long-term health care costs are real. The concerns that Medicare and Medicaid need significant attention to remain robust programs are not mislaid. But making steep cuts to those earned benefit programs don't actually fix health care costs, they merely get the government off the hook for health care spending, and put the pressure on the private sector (creating a drag on growth) or individuals (creating impoverishment and death). This tactic absolutely will reduce government spending, in the same way that you can reduce spending right now by not paying your rent.
It's time to table the notion that long-term deficits are cause for immediate alarm. The fact of the matter is that interest rates are low, U.S. Treasurys are strong, there's no reason why we can't spend productively, put people back to work, solve the crisis of aggregate demand that's crippling growth, and arrest the deepening hysteresisthat's threatening our fragile recovery.
Moreover, we should probably take a break from all the breathless blather about impending bond meltdowns or America turning into the next Greece. As Neil Irwin points out, these fears stem from the weird crisis mythologizing of the pundit class, against the evidence in which economists are steeped:
A persistent fear is that investors will at some point decide that the U.S. government’s finances are a mess and/or inflation is at risk of getting out of control, and shun U.S. treasury bonds. This could cause a spike in interest rates and, for the Treasury, trouble rolling over the debt. The thing is, there is not even a shadow of a hint of this risk priced into financial markets. Treasury borrowing costs are extraordinarily low, as are market expectations of inflation. In traditional economic models, inflation can only really take hold if and when the economy is getting back close to its full economic capacity -- and if that happens, it would also mean a rapidly falling budget deficit.
That last point is key, because the good news is that solving the unemployment crisis first is the proper way of arranging the cart and the horse. Over at Business Insider, Joe Wiesenthal presents the case for fixing the debt by first solving the unemployment crisis pretty effectively, noting that the "primary driver of deficits is a lack of growth"and getting people back to work would provide that growth, new revenues, and deficit reduction. And he points out that there is an observable 60-year trend in which deficits rise and fall according to the civilian employment rate:
deficits and unemployment
Wiesenthal's meticulous argument deserves to be read in full, so go do that. I'll simply note here that he goes on to lay out how 'over the last few years, the deficit as a percent of GDP has been falling at its fastest pace since WWII, all thanks to people re-entering the workforce, and the pain of the economy being reduced," which means we're accomplishing something to shore up the deficit right now, and doing so without the European-style "belt-tightening" which is driving nations like the United Kingdom into deeper and deeper economic misery. He also has great advice to anyone who wants to take up this argument and drive it home like a boss:
In the debate over fiscal policy, you frequently hear liberals argue: "It's not time to deal with the deficit, we need to fix the economy first and then fix the deficit when the economy is stronger." While this has merit as a political concept, it's actually giving into a false frame that dealing with the deficit and dealing with unemployment are two separate things that you do at different times. Steps you take to improve unemployment are deficit reduction measures ... While the government has done, technically, nothing to address the deficit in the last few years, the deficit is shrinking (relative to GDP) merely because the economy has improved, and more people are going back to work. If unemployment drops to 7 percent, or 6.5 percent, or 6 percent, we'll get quite a bit of deficit reduction then.
None of this is some sort of otherworldly, out-of-the-mainstream thinking, and it dovetails pretty neatly with what Krugman has been arguing for years. But the deadweight Washington consensus on junk economics is powerful. Scarborough, after subjecting Krugman to a thorough helping of debt hack tautologies on his show, went back for a second helping in a slapdash Politico column (another feature of deficit hackery is the constant need to repeat the same arguments, as if they aren't getting a sufficient hearing), in which he reiterates that all the evidence he needs to support the claim is just the fact that he talks to a lot of people who agree with him, and that, in addition, he's been making the same claims over and over again, so -- ipso facto -- they must be true.
It's not clear that Scarborough is paying close attention to what Krugman was actually saying on his show, because right up at the top of his piece, he hilariously misrepresents Krugman's basic position, claiming that that Krugman believes "Americans would be better off if its government ran deeper deficits and ignored its longterm debt." Actually, Krugman said, right to Scarborough's face, "Give me something that looks like a normal employment situation and I'll become a deficit hawk."
There is further nonsense about Krugman taking a firm on ignoring "Medicare and Medicaid shortfalls," but he similarly said no such thing: "Yeah, there is [a long structural problem with Medicare and Medicaid]," Krugman says, "but you've got to ask, why is it urgent that we address that problem right now." He then went on to suggest that in the short-term, there are many ways to reduce health care costs so that the future isn't so bleak. None of this is "ignoring," it's simply about setting priorities, and -- once again -- favoring the amelioration of the unemployment crisis right away. (Scarborough himself framed the "structural Medicare" problem as something that was 20 years out, so why Krugman is suddenly not allowed to play by the same rules in his response is just an example of Beltway pundit Calvinball.)
But the most ignorant claim Scarborough makes is the one embedded in his headline, "Paul Krugman vs. the world," which advances the thesis that Krugman is all on his lonesome, with an off-planet explanation of how the economy works.
It's simply not true! For example, here's the decidedly non-obscure Alan Blinder, making the same argument, perhaps even more pointedly than Krugman. To his estimation, the proper way to solve the deficit problem is to tackle it in "three parts ... one for right now, one for the next decade, and the last for the very long run:"
RIGHT NOW: With the economy still so weak, the case for near-term fiscal contraction is weak as well. We shouldn't kick away the fiscal crutch until the patient is ready to walk. If I am allowed to indulge in wishful thinking, a two-pronged policy that combines modest fiscal stimulus up front with serious deficit reduction thereafter would be even better.
THE NEXT DECADE: Strange as it may seem with trillion-dollar-plus deficits for four years running, the U.S. government still has no short-run borrowing problem. On the contrary, investors all over the world are still clambering to lend us money at negative real interest rates. In purchasing power terms, they are willing -- nay, eager -- to pay our government to borrow from them!
According to Congressional Budget Office January 2012 projections, the federal deficit as a share of GDP will shrink from 9 percent of GDP in fiscal 2011 to roughly 5 percent of GDP in fiscal years 2015-2018, without any further policy actions. To be sure, 5 percent of GDP is still too high. But coming from the stunning 10 percent of GDP in 2009, it's a long way down. A reasonable target for deficit reduction over the next decade might be 2 percent to 3 percent of GDP, starting perhaps in fiscal 2014.
THE VERY LONG RUN: The truly horrendous budget problems come in the 2020s, 2030s, and beyond. But while the long-run budget problem is vastly larger, it is also far simpler, for two reasons. The first is that the projected deficits are so huge that filling most of the hole with higher revenue is simply out of the question. Spending cuts must bear most of the burden. The second is that there is only one overwhelmingly important factor pushing federal spending up and up and up: rising health care costs.
That's just one of the many people who echo the same remedy as Krugman. In a separate post, the aforementioned Wiesenthal collects a roster of similar-minded people, who range from liberal to conservative and economist to policymaker. That's important to note: this is not an issue of right-versus-left ideological conflicts. This is a right-versus-wrong conflict, pure and simple. It's a Beltway bubble versus real-world conflict. It's a data-tested versus magical-thinking conflict.
The good news is that the American people haven't bought into the nonsense, and inpoll after poll favor solving the more pressing unemployment crisis over fixing the long-term budget trajectory. And even those who want action taken on the deficit do not favor major cuts to earned benefit programs like Social Security or Medicare. (Social Security, which can be provided with greater solvency simply by loosening or discarding the current income caps on contributions, needn't even be part of the larger long-term deficit discussion.)
These are understandable positions for anyone who actually knows an unemployed person, or who lives through the grind of our demand crisis on a daily basis, but media elites don't know or desire "access" to unemployed people and can't appreciate the day-to-day problems that millions of Americans face in getting their households through another week of survival. According to a new report from the Corporation for Enterprise Development, "almost half (43.9%) of U.S. households are living on the edge of financial collapse with almost no savings to fall back on in the event of a job loss, health crisis or other income-depleting emergency." This is not a populace that can currently power economic growth on its own, and until its members get help, deficits will persist. Further cuts in the short-term that extract further wealth from the economy will only deepen the risks that millions of Americans face.
It's popular to say things like, "Well, if we don't figure out how to right-size the budget, what are we going to do in 20 years when the next Hurricane Sandy hits?" Well, remember, we're still dealing with the first Hurricane Sandy, and our faltering efforts to bring relief to those affected has been hopelessly scrambled by the inane Beltway Deficit Feedback Loop. We just came very close -- too close! -- to simply not providing any Hurricane relief at all. At the very least, what would normally be an easy call became much more complicated as we debated whether we could authorize relief money.
I guess the thinking was, "Hey, it's too bad you are freezing to death in the Rockaways right now, but maybe you can comfort yourselves in the knowledge that the FY 2025 budget trajectory will be incrementally better!" That's the actual weirdo thinking in this debate. It's destructive and embarrassing, and the favor bestowed on the goofy little clique that espouses it, forsaking all logic, is a continual bafflement.
[Would you like to follow me on Twitter? Because why not?]
What The GOP Doesn't Want You To Know About The Deficit
1 of 12
AP
  • Next

Posted by at No comments:
Labels: , , , , , , , ,

01 December 2012

Class Wars of 2012 30NOV12

WORDS of wisdom from Paul Krugman on the CLASS WARFARE being waged in America. The gop and tea-baggers and their plutocrat owners will wail how wrong it is to promote the concept of class warfare in our country, describing it as deceptive, manipulative, based on fear and so very uncivil and the perfect example of what is wrong with America and why any agreement hasn't been achieved on avoiding going over the fiscal cliff. THE fact is these are the people who have been waging this war on the majority of Americans for at least the past generation. They are shameless liars and use deception, manipulation, fear, misrepresentation and racism to take more and more from the majority of Americans to feed their immoral, wanton greed for more wealth and power. They expected this years presidential election to provide a major step to establishing the Plutocratic States of America. We, the people, defeated them on 6NOV12, but the battle is far from over and we can not, in the words of Paul Krugman, allow them to snatch victory from the jaws of defeat.

On Election Day, The Boston Globe reported, Logan International Airport in Boston was running short of parking spaces. Not for cars — for private jets. Big donors were flooding into the city to attend Mitt Romney’s victory party.
Fred R. Conrad/The New York Times
Paul Krugman
They were, it turned out, misinformed about political reality. But the disappointed plutocrats weren’t wrong about who was on their side. This was very much an election pitting the interests of the very rich against those of the middle class and the poor.
And the Obama campaign won largely by disregarding the warnings of squeamish “centrists” and embracing that reality, stressing the class-war aspect of the confrontation. This ensured not only that President Obama won by huge margins among lower-income voters, but that those voters turned out in large numbers, sealing his victory.
The important thing to understand now is that while the election is over, the class war isn’t. The same people who bet big on Mr. Romney, and lost, are now trying to win by stealth — in the name of fiscal responsibility — the ground they failed to gain in an open election.
Before I get there, a word about the actual vote. Obviously, narrow economic self-interest doesn’t explain everything about how individuals, or even broad demographic groups, cast their ballots. Asian-Americans are a relatively affluent group, yet they went for President Obama by 3 to 1. Whites in Mississippi, on the other hand, aren’t especially well off, yet Mr. Obama received only 10 percent of their votes.
These anomalies, however, weren’t enough to change the overall pattern. Meanwhile, Democrats seem to have neutralized the traditional G.O.P. advantage on social issues, so that the election really was a referendum on economic policy. And what voters said, clearly, was no to tax cuts for the rich, no to benefit cuts for the middle class and the poor. So what’s a top-down class warrior to do?
The answer, as I have already suggested, is to rely on stealth — to smuggle in plutocrat-friendly policies under the pretense that they’re just sensible responses to the budget deficit.
Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we’re told — after all, life expectancy has risen, so shouldn’t we all retire later? In reality, however, it would be a hugely regressive policy change, imposing severe burdens on lower- and middle-income Americans while barely affecting the wealthy. Why? First of all, the increase in life expectancy is concentrated among the affluent; why should janitors have to retire later because lawyers are living longer? Second, both Social Security and Medicare are much more important, relative to income, to less-affluent Americans, so delaying their availability would be a far more severe hit to ordinary families than to the top 1 percent.
Or take a subtler example, the insistence that any revenue increases should come from limiting deductions rather than from higher tax rates. The key thing to realize here is that the math just doesn’t work; there is, in fact, no way limits on deductions can raise as much revenue from the wealthy as you can get simply by letting the relevant parts of the Bush-era tax cuts expire. So any proposal to avoid a rate increase is, whatever its proponents may say, a proposal that we let the 1 percent off the hook and shift the burden, one way or another, to the middle class or the poor.
The point is that the class war is still on, this time with an added dose of deception. And this, in turn, means that you need to look very closely at any proposals coming from the usual suspects, even — or rather especially — if the proposal is being represented as a bipartisan, common-sense solution. In particular, whenever some deficit-scold group talks about “shared sacrifice,” you need to ask, sacrifice relative to what?
As regular readers may know, I’m not a fan of the Bowles-Simpson report on deficit reduction that laid out a poorly designed plan that for some reason has achieved near-sacred status among the Beltway elite. Still, at least you can say this for Bowles-Simpson: When it talked about shared sacrifice, it started from a “baseline” that already assumed the end of the high-end Bush tax cuts. At this point, however, just about all the deficit scolds seem to want us to count the expiration of those cuts — which were sold on false pretenses, and were never affordable — as some kind of big giveback by the rich. It isn’t.
So keep your eyes open as the fiscal game of chicken continues. It’s an uncomfortable but real truth that we are not all in this together; America’s top-down class warriors lost big in the election, but now they’re trying to use the pretense of concern about the deficit to snatch victory from the jaws of defeat. Let’s not let them pull it off. 
Posted by at No comments:
Labels: , , , , , , , , ,
Subscribe to: Posts (Atom)