Tag: Paul Krugman

The economist has been a vocal critic of Ryan’s budget. On Wednesday, he appeared on Current TV to analyze the plan with Al Gore – who is hosting the network’s coverage of the conventions – and hosts Eliot Spitzer and Jennifer Granholm.

Krugman said that Ryan’s plan would leave “tens of millions” of people without health insurance. Gore said that his understanding is that it would take money from the poor and give it to the rich while increasing the budget deficit.

Krugman said that was indeed the case. “How can [Ryan] get away with this?” he asked incredulously. “World’s greatest nation falls for this flimflam?”

Paul Ryan’s speech Wednesday night may have accomplished one good thing: It finally may have dispelled the myth that he is a Serious, Honest Conservative. Indeed, Mr. Ryan’s brazen dishonesty left even his critics breathless. [..]

But Mr. Ryan’s big lie – and, yes, it deserves that designation – was his claim that “a Romney-Ryan administration will protect and strengthen Medicare.” Actually, it would kill the program. [..]

The Republican Party is now firmly committed to replacing Medicare with what we might call Vouchercare. The government would no longer pay your major medical bills; instead, it would give you a voucher that could be applied to the purchase of private insurance. And, if the voucher proved insufficient to buy decent coverage, hey, that would be your problem.

Moreover, the vouchers almost certainly would be inadequate; their value would be set by a formula taking no account of likely increases in health care costs. [..]

The question now is whether voters will understand what’s really going on (which depends to a large extent on whether the news media do their jobs). Mr. Ryan and his party are betting that they can bluster their way through this, pretending that they are the real defenders of Medicare even as they work to kill it. Will they get away with it?

You should realize you’ve screwed up when your own paid shills call out your lies:

According to Fox News columnist Sally Kohn, vice presidential nominee Paul Ryan’s speech at the Republican National Convention on Wednesday “was an apparent attempt to set the world record for the greatest number of blatant lies and misrepresentations slipped into a single political speech.”

“On this measure, while it was Romney who ran the Olympics, Ryan earned the gold,” Kohn wrote. [..]

In her column, Kohn called out four lies in Ryan’s speech. She critcized Ryan for blaming President Obama for the shutdown of a General Motors plant in Janesville, Wis., that actually was closed during the Bush administration. She also knocked Ryan for pinning the blame for S&P’s downgrade of U.S. debt on Obama, when Republicans in Congress helped precipitate the downgrade by threatening to refuse to raise the debt ceiling.

“The good news is that the Romney-Ryan campaign has likely created dozens of new jobs among the legions of additional fact checkers that media outlets are rushing to hire to sift through the mountain of cow dung that flowed from Ryan’s mouth,” Kohn wrote.

But they will continue to repeat this litany of lies and the people will believe. Hallelujah! Amen!

Message to Romney and Obama: Keep Your Hands Off Medicare

On the PBS News Hour, Nobel Prize winning economist, Paul Krugman and Martin Feldstein, a professor of economy at Harvard University and former chair of Reagan’s Council of Economic Advisers, discussed the failure of the Deficit Super Committee (click here for the transcript) :

What stands out is what was not mentioned by either Krugman or Feldstein, the Bush tax cuts, which the Republicans insisted be made permanent in exchange for any tax revenues no matter how meager. In the light of the Republican objection to an extension of the 2% payroll tax cut because of the $250 billion dollar per year cost, it is laughable in the face of the fact that just extending the tax cuts another 10 years would cost $5.4 trillion in revenue losses., four times as much as the payroll tax cuts. But not a peep from either man or the interviewer.

Krugman was correct in stating that the Democrats were far too generous and, as John Aravosis has pointed out in the past, they are lousy negotiators, always starting from their bottom line. However, Dana Milbank in his the Washington Post opinion makes clear that this committee was doomed from the start by the mere presence of one man, Sen. Jon Kyl (R-AZ), an immovable object when it comes to tax increases, “doing Norquist’s bidding in killing any notion of higher taxes”:

The sabotage began on the very first day the supercommittee met. While other members from both parties spoke optimistically about the need to put everything on the table, Kyl gave a gloomy opening statement. “I think a dose of realism is called for here,” he said. That same day, he went to a luncheon organized by conservative think tanks and threatened to walk (“I’m off the committee”) if there were further defense cuts.

When Democrats floated their proposal combining tax increases and spending cuts, Kyl rejected it out of hand, citing Republicans’ pledge to activist Grover Norquist not to raise taxes. Kyl’s constant invocation of the Norquist pledge provoked Senate Majority Leader Harry Reid (D-Nev.) to snap at Kyl during a private meeting: “What is this, high school?” [..]

Norquist, who worked to defeat a compromise, brags about his control over Kyl. When Kyl made remarks in May that appeared to leave open the possibility of tax increases, Norquist called Kyl and adopted “the tone of a teacher scolding a second grader as he recalled the conversation,” Politico reported. Norquist boasted to the publication that, after he upbraided Kyl, the senator “went down on the floor and he gave a colloquy about how we’re against any tax increases of any sort. Boom!”

It is fairly obvious that the Senate Republicans under the leadership of Sen. Mitch McConnell and Norqist’s Svengali-like control, are willing to risk the stabilization of the economy and kill any job creation bills to defeat President Obama and gain control of both houses. As Aravosis points out in his article today the best that Feldstein could do was blame both parties equally. Perhaps over the next year, the Democrats and President Obama should continue to put forth really bold bills, bolder than the President’s last job proposal, to further demonstrate the intransigence of the Republicans. It might go a long way to shed the image that Democrats are the party of capitulation.  

Washington Post columnist, Ezra Klein wonders “Could this time have been different?”

Christina Romer had traveled to Chicago to perform an unpleasant task: she needed to scare her new boss. David Axelrod, Barack Obama’s top political adviser, had been very clear about that. He thought the president-elect needed to know exactly what he would be walking into when he took the oath of office in January. But it fell to Romer to deliver the bad news.

So Romer, a preternaturally cheerful economist whose expertise on the Great Depression made her an obvious choice to head the Council of Economic Advisers, gathered her tables and her charts and, on a snowy day in mid-December, sat down to explain to the next President of the United States of America exactly what sort of mess he was inheriting.

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By that point, the shape of the crisis was clear: The housing bubble had burst, and it was taking the banks that held the loans, and the households that did the borrowing, down with it. Romer estimated that the damage would be about $2 trillion over the next two years and recommended a $1.2 trillion stimulus plan. The political team balked at that price tag, but with the support of Larry Summers, the former Treasury secretary who would soon lead the National Economic Council, she persuaded the administration to support an $800 billion plan.

The next challenge was to persuade Congress. There had never been a stimulus that big, and there hadn’t been many financial crises this severe.

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Romer and Bernstein gathered data from the Federal Reserve, from Mark Zandi at Moody’s, from anywhere they could think of. The incoming administration loved their report and wanted to release it publicly. Romer took it home over Christmas to double-check, rewrite and pick over. At 6 a.m. Jan. 10, just days before Obama would be sworn in as president, his transition team lifted the embargo on “The Job Impact of the American Recovery and Reinvestment Act.” It was a smash hit.

“It will be a joy to argue policy with an administration that provides comprehensible, honest reports,” enthused columnist Paul Krugman in the New York Times.

There was only one problem: It was wrong.

In his assessment of Klein’s review of why we are still in an economic quagmire, Paul Krugman generally agrees except:

Ezra Klein has a generally reasonable analysis of the Obama administration’s failure to respond with sufficient force to the economic crisis. Broadly speaking, he’s saying that the eurovenn applied: an economically adequate response lay beyond the bounds of the politically feasible.

In general, I’m trying not to do too much looking back; the question is what to do now. Still, I guess this needs addressing.

There’s certainly a lot to Ezra’s thesis. Yet I think he lets Obama and company off the hook too much.

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Now, Ezra may be right that none of this would have made much difference. But the White House was weak and confused in the face of a political and economic debacle, when it should have gone all out.

And you know what? It should still go all out. The chances of success are lower than they would have been if it had taken a strong position two years ago, but it ain’t over until it’s over.

h/t Meteor Blades

New Tork Times columnist and Nobel Prize winning Economist, Paul Krugman was a guest on This Week with Christiane Amanpour participating in a rountable discussion with Jared Bernstein, Doug Holtz-Eakin, and Carol Lee on jobs.  Sounds like Dr. Krugman had a lousy morning.

Boy, that was a morning of the undead.

First, we had DeMint assuring us that businessmen he talks to say that fear of regulation – and the National Labor Relations Board!- is holding them back.

Then Douglas Holtz-Eakin repeated the claim, and also did the “we’re about to be Greece” thing after a week in which the 10-year Treasury fell to 2 percent.

OK, that’s what happens with zombie ideas- no matter how often you kill them, they keep coming back. But don’t these people ever get embarrassed?

Dr. Krugman links to an article in McClatchy that debunks the argument that regulations, taxes are killing small business, the owners say they aren’t:

WASHINGTON – Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation.

snip

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.

Umm. Yes, he’s right these people are zombies. You can’t kill them or their lies.  

Nobel Prize winning Economist and New York Times columnist Paul Krugman has nailed Barack Obama’s economic polices and his penchant for feeding the right wing economic fallacies, as “the false government-family equivalence, the myth of expansionary austerity, and the confidence fairy” and, as Dr. Krugman points out, Obama did it in two sentences:

Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.

Dr. Krugman has already debunked both the myths of government-family equivalence and expansionary austerity. Yet the President still thinks that by caving to the right wing Hoover economic policies the economy will get better. This appears to be a signal that he is about to cave to Republicans once again on spending cuts and no new revenue sources that has led will further slow the economy and may spiral the US into a second recession or worse.  

This video of an interview with Dean Baker, co-director for the Center for Economic Policy and Research, discussing the debt ceiling and holding the federal budget hostage is a good discussion of what could happen if the debt ceiling is not raised. Baker  clearly in the side of raising the debt ceiling but if it comes down to a choice of default and Social Security, he would choose saving Social Security.

There are those who are convinced that the GOP will not allow a default to happen and there has been a lot of pressure from Wall St and banking lobbyists to not play games with this. There is a lot of mistrust that Obama is playing some game that will end up slicing deeply into Social Security and Medicare to make it look as though he had no choice. He does have a choice to insist on a clean bill to raise the debt ceiling and take Social Security and Medicare off the bargaining table. If he doesn’t, as Paul Krugman said, “he might as well move out of the White House, and hand the keys over to the Tea Party.”

Obama is just caving to the hostage takers again like he did with health care. He just continues to lie and throw the true Democratic principle under the bus.

From James K. Galbraith

Whose side is the White House on anyway?

The president should know that, as Lincoln told Congress in 1862, he “cannot escape history”

This isn’t a parlor game. The outcome isn’t destined to be alright. It will not necessarily end in progress whatever happens. What we do, how we proceed, and how we effectively resist what is plainly about to happen, matters very greatly for the future of our country, of our children, and of another generation to come. We need to lose our fear, our hesitation, and our unwillingness to face the facts. If we thereby lose some of our hopes, let’s remember the dictum of William of Orange that “it is not necessary to hope in order to persevere.”

The president should know that, as Lincoln said to the Congress in the dark winter of 1862, he “cannot escape history.” And we are heading now into a very dark time, so let’s face it with eyes open. And if we must, let’s seek leadership that shares our values, fights for our principles, and deserves our trust.

History will not judge this President kindly.

I agree with Atrios and David Dayen, this is an absolute must read to clearly understand the basis for the current jobs and economics crises.

We believe that the relative absence of proposals to deal with mass unemployment is a case of “self-induced paralysis”-a phrase that Federal Reserve Chairman Ben Bernanke used a decade ago, when he was a researcher criticizing policymakers from the outside. There is room for action, both monetary and fiscal. But politicians, government officials, and economists alike have suffered a failure of nerve-a failure for which millions of workers will pay a heavy price.

   Our guess is that the bubble got started largely thanks to the global savings glut, but that it developed a momentum of its own-which is what bubbles do. Financial innovations such as the securitization of mortgages may have made it easier for the bubble to inflate-but European banks managed to extend too much credit without such frills. However, it is clear that there were major failures in oversight. In particular, Ben Bernanke has admitted that the Fed failed to use its regulatory powers to rein in the excesses of the mortgage lenders-a tragic oversight. Greenspan disregarded the clear warning by a member of the Fed board that mortgage lending had become dangerously excessive. And the widespread securitizing of mortgage loans has made the mess much harder to clean up.

   In a housing market that is now depressed throughout the economy, mortgage holders and troubled borrowers would both be better off if they were able to renegotiate their loans and avoid foreclosure. But when mortgages have been sliced and diced into pools and then sold off internationally so that no investor holds more than a fraction of any one mortgage, such negotiations are impossible. And because of the financial industry lobbying that prevented mortgages from being covered by personal bankruptcy proceedings, no judge can impose a solution. The phenomenon of securitization, created in the belief that a large-scale housing crash would never happen, has trapped investors and troubled borrowers in a mutually destructive downward spiral.

Richard) Koo is the chief economist at the Nomura Research Institute. Much of his book (The Holy Grail of Macroeconomics) is devoted to Japan’s long era of stagnation from the early 1990s onward. This stagnation, he argues, mainly reflected the balance sheet problems of nonfinancial corporations, which were stranded with high levels of debt after the Japanese real estate bubble of the 1980s burst. He argues that the United States now faces a similar problem, with debt problems concentrated not among corporations but among home owners, who ran up large debts both in the course of buying houses and through using them as ATMs-that is, using refinancing to extract cash from rising home values, and spending that cash on higher consumption.

In Koo’s analysis, simultaneous attempts by many private players to pay down their debts lead to a “fallacy of composition” that’s closely related to the famous (but too often overlooked) “paradox of thrift.” Each individual corporation or household cuts back on spending in an effort to reduce debt; but these spending cuts reduce everyone’s income and keep the economy persistently depressed.

These broader problems of debt and deleveraging arguably explain why the successful stabilization of the financial industry has done no more than pull the economy back from the brink, without producing a strong recovery. The economy is hamstrung-still crippled by a debt overhang. That is, the simultaneous efforts of so many people to pay down debt at the same time are keeping the economy depressed.

Tanks to David Dayen for his excellent choice of excerpts from the article and this comment at the end

It’s pretty obvious that Krugman and Wells are suggesting that government borrow, to sop up the paying down of debt from everyone else in the economy and cancel it out. Only this will create the kind of demand needed; in fact, Krugman and Wells assert that global budget deficits had more to do with averting a Depression than any financial bailout. But these mainly came from a crash in revenues through taxes and automatic stabilizers, not fiscal stimulus, which was too small. The writers put off their solutions for economic recovery until a future article, but you can pretty well figure out what they are.

I am looking forward to the article on their solutions, as should Obama and his economics team.

Peter Daou points out that the White House is bringing Paul Krugman to tears with its political strategy that has been a failure:

Look: early on the administration had a political theory: it would win bipartisan legislative victories, and each success would make Republicans who voted no feel left out, so that they would vote for the next initiative, and so on. (By the way, read that article and weep: “The massive resistance Republicans posed to Clinton in 1993 is impossible to imagine today.” They really believed that.)

This theory led to a strategy of playing it safe: never put forward proposals that might fail to pass, avoid highlighting the philosophical differences between the parties. There was never an appreciation of the risks of having policies too weak to do the job.

And then it led the administration to keep claiming that the legislation it had gotten through was just right, long past the point when it was obvious that the policies were inadequate.

(emphasis mine)

Keeping the same failed strategy and repeating the same mistake is just absurd. It is a given that when you are so far down in the polls that it time for something daring, yet, as Jonathan Cohn points out, “it depends on who’s talking”:

in Economics.

This is one of the untold tales of the mess we’re in. Contrary to what you may have heard, there’s very little that’s baffling about our problems – at least not if you knew basic, old-fashioned macroeconomics. In fact, someone who learned economics from the original 1948 edition of Samuelson’s textbook would feel pretty much at home in today’s world. If economists seem totally at sea, it’s because they have carefully unlearned the old wisdom. If policy has failed, it’s because policy makers chose not to believe their own models.

On the analytical front: many economists these days reject out of hand the Keynesian model, preferring to believe that a fall in supply rather than a fall in demand is what causes recessions. But there are clear implications of these rival approaches. If the slump reflects some kind of supply shock, the monetary and fiscal policies followed since the beginning of 2008 would have the effects predicted in a supply-constrained world: large expansion of the monetary base should have led to high inflation, large budget deficits should have driven interest rates way up. And as you may recall, a lot of people did make exactly that prediction. A Keynesian approach, on the other hand, said that inflation would fall and interest rates stay low as long as the economy remained depressed. Guess what happened?

On the policy front: there’s certainly a real debate over whether Obama could have gotten a bigger stimulus. What we do know, however, is that his top advisers did not frame the argument for a small stimulus compared with the projected slump purely in political terms. Instead, they argued that too big a plan would alarm the bond markets, and that anyway fiscal stimulus was only needed as an insurance policy. Neither of these arguments came from macroeconomic theory; they were doctrines invented on the fly. Samuelson 1948 would have said to provide a stimulus big enough to restore full employment – full stop.