Krugman on Stimulus

[bradleybadly]

Yeah mpjh, I didn't think you had an answer for where the money was going to come from either, but I thought I'd give it a shot.

[SgtMadDog]

We never should have gone in, we got our asses whooped, we got out in the dead of night with our tail between our legs with just enough lying to call it peace. More people die everyday from war in Iraq than do in Afghanistan.

What a lying Coward! I'm in California and you embarrass me.
I'm guessing you must work for either the UC system or the LAUSD.

[mpjh]

I am retired -- did my time in the US Navy long enough to know a lost war when I see one.

[Phatscotty]

Krugman prediction for 2008: Europe, the comeback continent!

let me guess. 10 trillion wasn't enough? This can go on forever. It's actually a pretty old tactic. What you guys are saying is "throw more money at it!"

gov't still wastes 30-50% of every single dollar. Krugman, who's only goal in life is to take money out of the economy and funnel it into the gov't, needs to explain the waste problem. I work too hard to have the gov't waste half of what they take out of my pocket.

King George would not have dared.

[Phatscotty]

Next week, President Obama is scheduled to propose new measures to boost the economy. I hope they’re bold and substantive, since the Republicans will oppose him regardless — if he came out for motherhood, the G.O.P. would declare motherhood un-American. So he should put them on the spot for standing in the way of real action.

But let’s put politics aside and talk about what we’ve actually learned about economic policy over the past 20 months.

When Mr. Obama first proposed $800 billion in fiscal stimulus, there were two groups of critics. Both argued that unemployment would stay high — but for very different reasons.

One group — the group that got almost all the attention — declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.

The other group, which included yours truly, warned that the plan was much too small given the economic forecasts then available. As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole.

Critics in the second camp were particularly worried about what would happen this year, since the stimulus would have its maximum effect on growth in late 2009 then gradually fade out. Last year, many of us were already warning that the economy might stall in the second half of 2010.

So what actually happened? The administration’s optimistic forecast was wrong, but which group of pessimists was right about the reasons for that error?

Start with interest rates. Those who said the stimulus was too big predicted sharply rising rates. When rates rose in early 2009, The Wall Street Journal published an editorial titled “The Bond Vigilantes: The disciplinarians of U.S. policy makers return.” The editorial declared that it was all about fear of deficits, and concluded, “When in doubt, bet on the markets.”

But those who said the stimulus was too small argued that temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go. Interest rates, we said, would fluctuate with optimism or pessimism about future growth, not with government borrowing.

When in doubt, bet on the markets. The 10-year bond rate was over 3.7 percent when The Journal published that editorial; it’s under 2.7 percent now.

What about inflation? Amid the inflation hysteria of early 2009, the inadequate-stimulus critics pointed out that inflation always falls during sustained periods of high unemployment, and that this time should be no different. Sure enough, key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.

Meanwhile, the timing of recent economic growth strongly supports the notion that stimulus does, indeed, boost the economy: growth accelerated last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

Oh, and don’t tell me that Germany proves that austerity, not stimulus, is the way to go. Germany actually did quite a lot of stimulus — the austerity is all in the future. Also, it never had a housing bubble that burst. And with all that, German G.D.P. is still further below its precrisis peak than American G.D.P. True, Germany has done better in terms of employment — but that’s because strong unions and government policy have prevented American-style mass layoffs.

The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.

I know that getting that round is unlikely: Republicans and conservative Democrats won’t stand for it. And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we’ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.

But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors; unfortunately, Mr. Obama, for whatever reason — yes, I’m aware that there were political constraints — initially offered a plan that was much too cautious given the scale of the economy’s problems.

So, as I said, here’s hoping that Mr. Obama goes big next week. If he does, he’ll have the facts on his side.

This entire thing is a perception-forming piece. Every freakin line of it! one line of BS builds support onto the next one. Scare stories of the stimulus? the stimulus WAS the scare story!

"we need stimulus....OR ELSE" end quote!

[Night Strike]

We never should have gone in, we got our asses whooped, we got out in the dead of night with our tail between our legs with just enough lying to call it peace. More people die everyday from war in Iraq than do in Afghanistan.

Whether we should have gone in is debatable, but even if we shouldn't have, you can't just leave a country in shambles. That's not how America operates. And you are incredibly blinded by politics if you think we got our asses whooped. Thank goodness the facts oppose your opinion. We toppled Saddam's government in two months, captured him in ten months, and when we failed to initially account for the insurgency, we sent in a surge of troops to secure the country. If we ran out with our tail between our legs (which we didn't), it's because the Democrats were too scared to work towards victory. More people are killed per attack in Iraq because the population is much more localized in the cities; the population of Afghanistan is much more spread out throughout the countryside and mountains.

[InkL0sed]

It greatly disappoints me to have to conclude that not a single critic of Krugman in this thread has made a single argument not ultimately ad hominem.

This is a travesty.

[Night Strike]

It greatly disappoints me to have to conclude that not a single critic of Krugman in this thread has made a single argument not ultimately ad hominem.

This is a travesty.

Probably because all the arguments against him have already been made and succeeded in the non-CC world.

[HapSmo19]

I am retired -- did my time in the US Navy long enough to know a lost war when I see one.

Didn't you say you got kicked out of the US Navy?

[mpjh]

I spoke out against the war in Viet Nam while in uniform. For that they provided me with an honorable discharge.

[DangerBoy]

It greatly disappoints me to have to conclude that not a single critic of Krugman in this thread has made a single argument not ultimately ad hominem.

This is a travesty.

I thought I did so without attacking him personally.

[Phatscotty]

It greatly disappoints me to have to conclude that not a single critic of Krugman in this thread has made a single argument not ultimately ad hominem.

This is a travesty.

Krugman had his time. He is history.
.
Here's my argument. Krugman has never been right. All Krugman is saying lately is why he was wrong. Take his word for it...

Done

[HapSmo19]

I spoke out against the war in Viet Nam while in uniform. For that they provided me with an honorable discharge.

Ah, that was it.

So, being a pro-communist, you naturally had zero tolerance and compassion for the South Vietnamese people that didn't want to live under communist rule?

I know I'm derailing this but, you know.

[Phatscotty]

How this thread started, and how it ended

[mpjh]

I spoke out against the war in Viet Nam while in uniform. For that they provided me with an honorable discharge.

Ah, that was it.

So, being a pro-communist, you naturally had zero tolerance and compassion for the South Vietnamese people that didn't want to live under communist rule?

I know I'm derailing this but, you know.

lol -- like rewriting history do you?

[tzor]

So, being a pro-communist, you naturally had zero tolerance and compassion for the South Vietnamese people that didn't want to live under communist rule?

NPR recently had a great series on the USS Kirk that rescued many people after the fall of Saigon. At one point people were literally dropping babies to the crew below because the ship was too small to land the massive helicopter. They were having reunions recently between the crew and all the people they helped save.

[Metsfanmax]

Well, now that we've shaken out all of that ghastly ad hominem out of our systems, I'd love to hear your well-reasoned, rational rebuttals of his points. I am all ears.

Any nation which does not restrain its spending budget will eventually have to deal with a vicious cycle of rising borrowing costs, more debt and deficit, and worse credit risks. Krugman seems to think that doing more spending will somehow not lead to these things. How do you argue against someone who wants to exceed what has already been shown to be a failure? Are we really to believe that a deficit of about 3 times more than what we had in 2009 would bring about a healthy economy!

Just out of curiosity - do you think that the people who supported the stimulus bill didn't consider this?

[Phatscotty]

Well, now that we've shaken out all of that ghastly ad hominem out of our systems, I'd love to hear your well-reasoned, rational rebuttals of his points. I am all ears.

Any nation which does not restrain its spending budget will eventually have to deal with a vicious cycle of rising borrowing costs, more debt and deficit, and worse credit risks. Krugman seems to think that doing more spending will somehow not lead to these things. How do you argue against someone who wants to exceed what has already been shown to be a failure? Are we really to believe that a deficit of about 3 times more than what we had in 2009 would bring about a healthy economy!

Just out of curiosity - do you think that the people who supported the stimulus bill didn't consider this?

they thought they could control the outcome, keep unemployment under 8%, etc... They were wrong. 10% unemployment not only meant less revenues than the gov't expected, but even more benefits outgoing than expected.

This did a double whammy on "the stimulus plan" results

[mpjh]

sarcasm alert - just so you know

Obama now says (as late as a day ago) that we are moving in the right direction. Problem is that we are moving at the rate of a banana slug.

Prediction -- just so you know

The Republicans will take control of the house and senate. They will craft legislation that will cut taxes, cut entitlement programs, and change the health care law so that it is even more beneficial to the insurance companies. The consequence will be deflation, and we have seen that story before. (check back in a year)

[HapSmo19]

I spoke out against the war in Viet Nam while in uniform. For that they provided me with an honorable discharge.

Ah, that was it.

So, being a pro-communist, you naturally had zero tolerance and compassion for the South Vietnamese people that didn't want to live under communist rule?

I know I'm derailing this but, you know.

lol -- like rewriting history do you?

In which history book did you find that all south vietnamese loved communism?

[mpjh]

In the one where they won the war.

[tzor]

Obama now says (as late as a day ago) that we are moving in the right direction. Problem is that we are moving at the rate of a banana slug.

Obama lies. Clearly we are moving in the left direction.