By the power vested in me by the blogosphere, I, a mere armchair economist, hereby take issue with a Nobel Prize-winning economist (and New York Times columnist), Paul Krugman. For what it’s worth (in fairness to me), let’s remember that the credibility of an expert is based not only on his expertise, but also on his objectivity and his sincerity. It is possible that Mr. Krugman is deliberately distorting the picture a bit (or more) due to partisanship in support of policies he advocates (and/or the party or president-elect he supports) for reasons other than the pure economic argument that he makes in the column in question.
In his 12/1/08 column "Deficits and the Future" http://www.nytimes.com/2008/12/01/opinion/01krugman.html?ref=opinion 
, Krugman makes the argument that dramatically increased deficit spending in the short term would not come at the expense of the long-term, but rather would actually improve our economy in long run as well as in the short term. This is an answer to a question I have been asking myself and others lately, and it is a more explicit and clear-cut (although, IMHO, dubious) bottom-line answer than I’ve found from most other sources.
There seems to be a fairly strong consensus among economists across a broad ideological spectrum (and economics schools of thought) that significantly increased deficit-spending is the right short-term policy, particularly given that the Fed may be running out of ammunition to mitigate/shorten the recession via monetary policy, with short-term interest rates already at 1.0%. But what is seldom, if ever, laid out is (1) whether or not (or to what extent) this short-term expansion of our debt-to-GDP* is likely to boost GDP to such an extent that it actually generates a better outlook for long-term debt-to-GDP (i.e., lower long-term debt-to-GDP), or (2) whether or not (or to what extent) the long-term economic outlook would be better by some other, perhaps broader and ultimate measure of standard of living (on average, leaving aside issues of distribution), such as a higher long-term GDP over several decades despite a somewhat higher debt-to-GDP during much of that period. If the answer to both is "not", fiscal stimulus still may be justified, but as a trade-off, sacrificing the long-term in order to mitigate pain in the short-term, and of course such a trade-off should be very carefully considered and calculated as we decide the magnitude and form of stimulus.
Krugman does not specify which of the above two he is contending, although it sound like at least the latter, and perhaps both. He writes:
the deficit worriers have it all wrong. Under current conditions, there’s no trade-off between what’s good in the short run and what’s good for the long run; strong fiscal expansion would actually enhance the economy’s long-run prospects.
He then sets up what seems to be a straw man:
The claim that budget deficits make the economy poorer in the long run is based on the belief that government borrowing “crowds out” private investment — that the government, by issuing lots of debt, drives up interest rates, which makes businesses unwilling to spend on new plant and equipment, and that this in turn reduces the economy’s long-run rate of growth. Under normal circumstances there’s a lot to this argument.
But, his argument goes, under our current abnormal circumstances, scaling back Obama’s planned dramatic increase in deficit spending could not boost private investment next year, and, in turn, GDP presumably over some short/medium-term. He points out that the Fed has no room to further lower short-term interest rates and that the Fed is highly likely to maintain that policy next year, and that “fiscal austerity” can only bring down long-term interest rates “by creating expectations that the economy would remain deeply depressed for a long time, which would reduce, not increase, private investment.”
Thus, per Krugman, increasing our debt (and by extension our short-run debt-to-GDP) through a dramatic, deliberate increase in short-run deficits, is not a trade-off between short-term and long-term, but rather a win-win: we are better off even in the long-term with such deficit increases than without them.
And he adds, just as icing on the cake (emphasis mine):
One more thing: Fiscal expansion will be even better for America’s future if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run.
Did you catch that? “One more thing”. “Even better”. His argument that our long term economic outlook is better with dramatically increased short-term deficits is not even dependent on the assumption that we will spend in ways he considers most conducive to long-term growth. In other words, even if the deficit-spending is mostly on short-term consumption rather than long-term investment (e.g., infrastructure; technology), we’ll still be better off in the long-term as well as the short-term via this scale of deficit-spending. But if we do spend largely on such investments, it’s an even bigger win-win. Wow – it’s like Ron Popeil offering us a product that is better, faster and cheaper than our alternatives, and then throwing in some free steak knives if we order right now.
OK, so what problem do I have with Krugman’s argument? Well, his argument seems to be that even if we do not dramatically increase deficits next year, private investment next year won’t be higher anyway, and indeed, per his argument, will actually be lower than if we proceed with the much higher deficits being planned by Obama. OK, I’ll accept that, at least arguendo, but I think it’s a weasely, sleight of hand argument. Dramatically higher deficits next year – which will probably not be scaled back nearly as quickly as they were scaled up, meaning higher deficits in subsequent years as well – adds to our debt-to-GDP, something I assume Krugman would not dispute. But here’s my problem with Krugman’s argument: This increase in debt, and in debt-to-GDP, will remain far beyond the current crisis and far beyond current interest rate conditions, thus creating upward pressure on interest rates well into the future, crowding out private investment as well as adding to the taxpayers’ interest expense. Krugman seems to be arguing (1) that scaling back President-elect Obama’s plans for deficit-spending would not generate higher private investment over the next year (and would actually lower it) because short-term interest rates can’t go lower over the next year and long-term interest rates can only come down over the next year if the fiscal restraint makes the business world pessimistic, thus discouraging private investment, AND (2) that all of the above assumptions regarding the next year apply to the long term. They don’t. And my (admittedly non-expert) sense is that, five, ten and twenty years from now or longer, we will still probably have an incrementally worse (i.e., higher) debt-to-GDP as a result of this short-term deficit expansion, and if Krugman has an argument to the contrary, he hasn’t made it in this column, and instead he is apparently making an argument that, at least to this armchair economist, doesn’t hold water.
Oh, and Krugman, surprisingly for a Nobel Prize-winning economist (hmm, sincerity questionable?) adds:
public debt isn’t as bad a thing as many people believe — it’s basically money we owe to ourselves
Huh? That is a remarkable statement, and “remarkable” in this case is me at my most diplomatic. First, I know Mr. Krugman knows that nearly 50% of our publicly-held national debt is foreign-owned, and that the foreign-owned portion is growing markedly. Put differently, our current publicly-held debt is about $6.3 trillion, which translates into about $21,000 per U.S. resident (per capita) and about $54,000 per household, and about $10,000 of that $21,000 per capita (and $26,000 of that $54,000 per household) is owed to foreign holders of our federal debt. As noted in my section on "The Big Picture" below, our deficits as a percent of GDP and our debt-to-GDP is projected to worsen greatly under current policies or even with moderate sacrifices on the tax and spending sides. And the portion of our debt that is foreign owned will also be greater. We should, therefore, bear in mind (notwithstanding Mr. Krugman's odd assertion) that as we, our children and grandchildren service our federal debt (interest expense) and eventually start paying down our federal debt (as a percent of GDP), that much of the taxes paid to do so will flow to foreign central governments and other foreign holders of our debt, not recirculated within the United States (other than indirectly to the extent that they reinvest in more of our debt and to a limited extent in purchases of our exports), as Krugman would have you believe.
Second, when Krugman says “we owe to ourselves”, who exactly are “we"? I know Krugman doesn’t assume that people aren’t born, don’t age and don’t die, and that people don't, over the course of that process, go through a life cycle of varying needs, productivity and tax burden. So why does he imply such a pretense? Put simply, the set of taxpayers today is not the same as the set of taxpayers in ten years or twenty or forty, and the set of beneficiaries of a dramatic increase in short-term deficits is not the same as the set of taxpayers at those future points who will be stuck with paying down our debt.
Other than alllll that, yeah, great point, Paul. Your Nobel Prize-winning work must have been much better. But you must already know that.
I am not opposed to a policy of increased deficits at this time. In fact, given the favorable view that most economists apparently share, I favor it, at least if geared toward long-term investments of the sort Krugman mentions. My point here is only that we – the public, and perhaps economists and policy-makers themselves – need to have a better idea of the presence and degree of any trade-offs between the short and long term. It’s possible that there is no trade-off, although I’m intuitively skeptical. But I have yet to see the answer to this question spelled out, let alone quantified (via scenarios showing the likely/potential impact of policy alternatives on long-term GDP and long-term debt-to-GDP). And as always, we citizens need to be particularly vigilant and inquisitive when presented with a counterintuitive win-win, “have our cake and eat it, too” argument, particularly when coming from someone who is arguably a partisan.
Personally, I lean toward the thoughts and sentiments expressed by (prominent) economist Greg Mankiw in a NYT Op-Ed the other day:
The fly in the ointment — or perhaps it is more an elephant — is the long-term fiscal picture. Increased government spending may be a good short-run fix, but it would add to the budget deficit. The baby boomers are now starting to retire and claim Social Security and Medicare 
benefits. Any increase in the national debt will make fulfilling those unfunded promises harder in coming years.
Keynesian economists often dismiss these long-run concerns when the economy has short-run problems. “In the long run we are all dead,” Keynes famously quipped.
The longer-term problem we now face, however, may be more serious than any that Keynes ever envisioned. Passing a larger national debt to the next generation may look attractive to those without children. (Keynes himself was childless.) But the rest of us cannot feel much comfort knowing that, in the long run, when we are dead, our children and grandchildren will be dealing with our fiscal legacy. http://www.nytimes.com/2008/11/30/business/economy/30view.html?scp=1&sq=keynes&st=cse
The Big Picture – Why Does This All Matter So Much?
Our current debt and debt-to-GDP are not, in themselves the problem. The problem is that costs for entitlements – primarily Medicare, Social Security and Medicaid – are projected to grow enormously over the next few decades due to the retirement of the baby boomers and to the rate of healthcare inflation (see chart below, courtesy of The Heritage Foundation, but using CBO data). On our current policy course, even if the Bush tax cuts were allowed to expire completely (which won’t happen) and even with significant reductions in Defense spending as a percent of GDP, this growth in entitlement spending is projected to drive unsustainably large deficits and debt-to-GDP over the next couple of decades, and we will have no choice but to eventually bring down our debt-to-GDP via painful sacrifices – much more painful and much more abrupt than would have been necessary had we contained our deficits and debt-to-GDP sooner. We will have to very substantially increase tax rates, very substantially cut spending (and I mean cuts that hurt a lot of people, not some innocuous “elimination of pork and waste”), or (most likely) both, which, along with high interest rates, much lower GDP growth, and possibly high inflation** -- – will mean a much lower standard of living than future Americans would have under a scenario of lower deficits (And when I say “future Americans”, that includes us, but also includes our children and grandchildren who will justifiable glare at us in a manner that conveys, whether spoken aloud or not, “How the hell could you have let this get so out of control?!! Thanks a pantload for thinking ahead and for thinking of me – NOT!”).
Chart below from the Heritage Foundation website. Uses data from CBO Long-Term Budget Outlook, 12/2007:
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If the 2001 and 2003 tax cuts expire and the AMT is not fixed, taxes will soon grow to unprecedented levels. This will not solve the spending imbalance driven by Medicare, Medicaid, and Social Security.
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Federal Spending as a Percentage of GDP Using CBO Extended Baseline, 2000–2082
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Source: Spending and Revenues from CBO Long-Term Budget Outlook, December 2007 (Extended Baseline Scenario).
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* When I refer to “debt-to-GDP”, I am speaking of the publicly-held debt-to-GDP, which excludes debt owed by one part of the government to another, mostly in the form of (the poorly-named) “trust funds”, most notably the Social Security Trust Fund. The projected long-term trend of our publicly-held debt-to-GDP is the better gauge of the strength/weakness of our fiscal outlook. The trust funds merely represent minimum amounts we must spend over time on particular costs, but they are all part of the whole (the whole being projected total revenues, projected total spending, projected total deficits), and it is the publicly-held debt-to-GDP that must be financed by government borrowing and that thus impacts interest rates and interest expense. Additionally, if we are looking at projected trend lines for total revenues, total spending and total deficits as a percent of GDP, and considering those deficit figures as adding to the numerator of debt-to-GDP, if we included the trust funds as part of our debt-to-GDP we would be double counting those trust funds, since the total spending line already includes spending (e.g., on Social Security) that includes repayment of trust fund (intra-governmental) debt.
** Inflation could be very high if the Fed “monetizes” the debt to a substantial degree by buying Treasuries to finance the debt – “printing money”, so to speak.
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Comments :
TANSTAAFL always applies
Krugman seems to me to have a regrettable tendency to mix partisan politics with economic expertise, resulting in biased analysis.
This conclusion seems quite right to me. If we must put in a little cash (what's a few hundred billion dollars between friends, anyway?) to jump-start our stalling economy, at least let's get something concrete out of it.
It does seem troublingly easy for the present generation to borrow against the assets of future generations, something that has been basically ongoing because those future generations don't vote. It also seems like the system is set up to reward irresponsible spending (and too-low taxation) and punish those who attempt to be more responsible with political defeat. Not like these flaws are new or anything, but the current financial crisis kind of brings them to the fore again.
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Well said (although there are
Well said (although there are exceptions to the TANSTAAFL rule).
Hey, was "let's get something concrete out of it" an infrastructure pun? If so, that's either simply good or bad enough to be good :-p
I wish
Believe it or not I didn't even realize it was a pun.
TANSTAAFL doesn't imply zero-sum, does it? Also, I could imagine circumstances in which there was a free lunch available for a time, but the impact of all those free lunches would cause feedback that would change the circumstances.
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
I cringed
when I read that column.
If I didn't know any better, I'd have thought Dick "Deficits Don't Matter" Cheney wrote it. The general theory holds (if you are borrowing money at 3% to grow the economy at 5%, you should borrow as much as possible). However, the assumption is that all it takes to grow the economy is more borrowing ad infinitum. Umm... negative, Ghostrider. Pray tell what happens when you're all tapped out of your credit line and the economy is still in a slump?
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
He actually
answers this in the article I cited in my diary on the same topic. He says that you jolt the economy enough with a massive (4% of GDP) bailout which should (no guarantees, but historically it has worked) get the economy back on track.
As far as ad infinitum borrowing, I don't think that is the case here (as I attempted to explain below--small fixes at a time could lead to continued borrowing but not a quicker fix as Krugman proposes). We can take care of the deficits once our economy gets out of the slump. It's a slippery slope fallacy to say that this will happen forever.
This situation happens all the time in business. You borrow to get through the bad times in hopes of paying it back in the good times. It is the best strategy we have at the moment. If it fails, well then, I guess we are in trouble . .
We are all mediators, translators. - Derrida
http://signicide.blogspot.com/
But we do borrow ad infinitum
Yeah, but we borrow during the good times too.
Everyone has lived beyond their means and it's time to pay the piper. The only way to fix this problem is to have our standard of living drop to sustainable levels. I fear that many people won't like this solution.
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
I suppose
but Clinton was paying off the deficit, so I don't think it is unheard of to actually pay your debts during the good times.
I do think we need a paradigm shift in our standard of living to sustainable levels, but there are harsh, shock to the system ways to do this and frog-in-boiling-water, accommodating ways to go about it.
We are all mediators, translators. - Derrida
http://signicide.blogspot.com/
The "accomodating" approach
The "accomodating" approach actually ends up worse for the frog, for whatever that note is worth (perhaps no more than a slight chuckle -- I'm not making a point via your metaphor, although I suppose one could).
More seriously, we have to look at deficits in the context of both current debt-to-GDP and short/medium/long-term projections for debt-to-GDP, meaning considering projections for likely/realistic revenue and spending. Even before this crisis and recession and associated expansion of deficits, the long-term outlook was poor in terms of fiscal imbalance (see chart in my diary, and information at links such as the CBO Long-Term Budget Outlook). In this context, the additional deficit spending worsens our long-term fiscal imbalance unless this deficit spending produces enough incremental long-term GDP growth to actually improve (i.e., lower) our long-term debt-to-GDP vs. what debt-to-GDP would be without such deficit spending. And if our long-term fiscal imbalance is exacerbated, it could very well mean ultimately a lower (average) standard of living vs. otherwise (depending on how much worse debt-to-GDP gets and on how much GDP grows).
As I say in the diary, Krugman does not make an argument that seems sensible to me for an expectation that the effect of the "stimulus" would be of the nature and magnitude needed per the preceding paragraph to have a positive long-term effect (or not have a negative long-term effect), and he instead puts forth an argument that seems to make little sense to me (focusing only on the short-term -- particularly next year -- and ignoring the fact that the incremental debt will be with us long after the interest rate conditions underlying his argument are no longer present).
Keeping our metaphors straight
The frog metaphor refers to stinerman's comment that we need to drop our standard of living to sustainable levels; so, yes, it is an appropriate analogy for the death of our current standard of living (frog=current standard of living). Chaos would emerge if people had to give up their current way of life in a span of a few years, while a longer transition would be calmer and still create the desired effect of killing our old way of life. That was my point. I was not referring to our economy in general or anything else here. Your slight chuckle is based on a GoRight-type sleight of hand.
As for the rest of your comment, I will try to get to it later today in the repy to your longer comment below, which covers much of the same ground.
We are all mediators, translators. - Derrida
http://signicide.blogspot.com/
Your slight chuckle is based
Ouch, you really know how to hurt a guy ;-)
In case my "chuckle" reference came across the wrong way, I didn't mean it in a derogatory way. I wasn't even sure I got what the point of the metaphor was. Seemed that you were suggesting that the slow-boil approach was preferable, and I was pointing out that the outcome of the immediate boil approach was better for the frog (he jumps out and lives), but I didn't (and still don't know) if I understand your point via the metaphor, nor if my point regarding the metaphor applies to what you were saying/implying or was irrelevant, which is why I said I wasn't making a point, but just trying to provide a chuckle.
I'm sorry
for comparing you to GoRight. That was undeserved.
(If you are out there GoRight, no offense to you either, though the sleight of hand is one of your favorite rhetorical strategies.)
I am still trying to get to your other comment. It's been a busy day.
We are all mediators, translators. - Derrida
http://signicide.blogspot.com/
Actually, I think "sleight of
Actually, I think "sleight of hand" gives him too much credit. I think he just gets all confused and somehow ends up piecing stuff together that has some superficial resemblance to a reasonably sound argument, but really isn't.
Sorry, I know you were trying to get away from that comment, but I couldn't resist.
Geeze, even when I'm not around ...
sleight of hand? Me? Meh. (This was a response to Specter.)
Actually my arguments are always based on sound logic. On the rare occasion that I am wrong, I admit as much. The fact that you find them to be confusing says more about you than it does about me.
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4In Krugman's Defense
I obviously had not read your diary before I posted mine on the front page. In defense of my post and Krugman's proposed solutions, most of which you cover here in some degree or another, it seems there are two different arguments you focus on, short-term and long-term policies. You begin by justifying the first, but then you conflate the two in your criticisms that follow later in your diary:
A few things here. Clearly, Krugman's article is only about short term solutions. You do not know what the future will bring, so for you to claim that a short term fix will inevitably have severe consequences (and implied worse consequences than doing nothing) is a bit Nostradamus of you. As Krugman says:
This quote shows the framing of the article. 'What can we do about the current economic crisis' is his focus. You seem to take an argument that Krugman states as a short term fix and make suggest it is a permanent fiscal policy. Yes, it has repercussions for future generations, but to extrapolate long-term policy from a short term fix is a ridiculous charge. We know the probable outcome with the proposed Krugman solution, which has its positives and negatives, but we do not know the outcome with a do-nothing approach.
You continue with your criticism by stating:
I think his argument, to the contrary might be implicit, but anyone paying attention to the current economic crisis knows what it is. If we do not have some kind of short-term solution, the prospects of getting our economy back on track are nil. Welcome the Great Depression II, and you can throw all of your 50 year charts and predictions out the window. It seems to me Krugman is saying, yes, deficits are bad. He even acknowledges as much:
But under our current circumstances, government intervention ala Roosevelt is one of the tried and true ways out of this mess. Once the economy is back on track, we may be able to then pay off the deficits and worry about other financing concerns five, ten, or even fifteen years into the future (when it seems the rate of increase in your charts become problematic). Krugman makes this clear when he says:
You are very correct about a few things, but in balancing Krugman's solutions and a do-nothing approach (we can't lower the interest rates much more and buying bad assets screws the tax payers outright, so what else is there to do?--I noticed no proposed solutions to take care of the current crisis in your post), I think his route is the best available to us. I agree that inflation is our biggest concern, but if these solutions are implemented quickly and it does have the intended impact, then we scale back and inflation is minimal. Public works (infrastructure rebuilding, etc.) is a way to get spending flowing and have tangible, physical improvements for our country. If we just throw money at the problem without creating jobs, then inflation will be much worse as the money will not circulate as efficiently. Are cuts needed? Yes. This will have to be part of the solution. But cuts alone will not save us. Should we have kept a closer eye on deficits and spending? Of course, but now is not the time to say 'would've, could've, should've' but to act. If we stay the current route, deflation is just as risky as inflation is with Krugman's proposed solutions, and then we are burdened with a sludge economy in which the time to act with the fewest repercussions is past. In other words, putting a cast on now will prevent infection and gangrene later.
(Edit): One more agreement and disagreement. You criticize Krugman for saying debt is "money we owe to ourselves." My statistics show
that "The US debt in the hands of foreign governments was 25% of the total in 2007. . . [and] foreigners held 44% of federal debt held by the public. About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China." (different enough to clarify).
While this is a frightening number, the old nuclear deterrent theory of M.A.D. holds here. Nobody is going to come for their money in the bad times as it would have repercussions around the world making their investment worthless. They have an incentive to see us do well, not only for their investment but also for global financial stability. So in a backwards way Krugman is still correct about this element essentially being a non-threatener. We should be concerned though, and this is where you are correct, that we are budening future generations with this debt (but much of my above reply says this debt may not be static and the consequeces could be worse if we do nothing).
We are all mediators, translators. - Derrida
http://signicide.blogspot.com/
No disrespect intended, but
No disrespect intended, but I must say that you seem to have misunderstood the central arguments I make in my diary, those that Krugman makes in his column, and the relationships between them.
On the contrary, Krugman is the one making a claim about the future, and without offering an argument that seems sensible to me (and offering instead one that seems bogus and misleading). Krugman’s central point is explicitly related to the long term (reminder: title of his column is “Deficits and the Future”), and his claim to know the long-term impact of the stimulus he advocates – he contends that a large deficit-expanding stimulus presents no trade-off between short-term and long-term, that the long-term impact will be positive as well, and that those who are worried that such is or may not be the case “have it all wrong”. Per my diary, Krugman writes:
As I say in my diary, “It’s possible that there is no trade-off, although I’m intuitively skeptical.” But my beef with Krugman’s column is that he makes the contention that the long-term outlook would be better with this stimulus than without it, but offers no argument that seems sensible to me and instead offers only an argument that seems bogus and misleading, because it is predicated on interest rate conditions that he expects to exist next year (short-term) and ignores the higher debt levels we will still have beyond the short-term when interest rate conditions change and this incrmental debt is likely to cause upward pressure on interest rates. And as I write in my diary (emphasis added here), “ my (admittedly non-expert) sense is that, five, ten and twenty years from now or longer, we will still probably have an incrementally worse (i.e., higher) debt-to-GDP as a result of this short-term deficit expansion, and if Krugman has an argument to the contrary, he hasn’t made it in this column.”
Regarding the lack of an argument from Krugman, you write:
First, remember, our policy choice is not dichotomous, but a matter of degree, and Krugman has been advocating a much larger stimulus (and thus much larger deficits for at least the next year) than are many others involved in the policy debate. Thus the argument is comparative and relative – the impact of, say, $1.2 trillion in stimulus vs. $600 billion. And if we are to simply adopt the crude premise that we are better off even in the long-term with a large stimulus than without it, why not borrow and spend $3 trillion or even more?
Second, one can potentially justify a policy that causes long-term harm on the basis that it mitigates short-term harm, and this smoothing out effect is probably part of the reason many support a large stimulus. Also, in practice there obviously may be effects of stimulus packages on wealth distribution or shifts in priorities that some consider desirable. But it is entirely different contention that there is no aggregate long-term harm to our economy from a very large stimulus at this time, and such a contention should be accompanied by an explicit argument with some specifics, and certainly not presented with a supposed supporting argument that is based on a false implied premise, as is Krugman’s argument, with its apparent implied premise (one that Krugman wouldn’t state explicitly because it would be ridiculous) that the interest rate conditions that exist next year will also exist over the long term.
Lastly, as I point out in the diary, he does not even make his contention that the stimulus he advocates would have a positive long-term economic impact conditional on investment-oriented spending. He merely says that the positive impact would be even greater if spending does have such an orientation.
It seems that you think I am contending or implying or assuming that Krugman is advocating such extreme deficit-spending as permanent fiscal policy. I am making no such contention, implication or assumption. Indeed, I rather doubt he would ever advocate such a policy. Running such large deficits as a percent of GDP year after year on a permanent basis would be unsustainable and disastrous unless it provided levels of incremental GDP growth that I doubt Krugman would consider realistic. And I just checked the column (after writing this paragraph to this point), and he states explicitly “Should the government have a permanent policy of running large budget deficits? Of course not.”
First, if you believe there are negatives, you may disagree with Krugman, if, that is, you are referring to net negatives at some point in time (and net positives at other points in time). Again, Krugman’s central point is that there is no (net) negative economic impact on the long-term – that we are better off economically even in the long term with the size of stimulus he advocates than without it. Of course, if you just mean that there are negatives that are outweighed at all times by the positives, then you are not disagreeing with Krugman.
Second, we do not “know the probable outcome with the proposed Krugman solution” except in very crude terms, certainly not nearly enough to support his contention that the long-term net impact on our economy is positive. Nor do we know the probable relative impact (short, medium, and long term) of a stimulus of the size Krugman has been advocating vs. a stimulus on a smaller scale.
As I stated clearly in my diary (1) I am not opposed to a large, deficit-expanding stimulus, and in fact, I favor it. The point of my diary was simply to point out that Krugman seems to be misleading people by over-selling such stimulus (more precisely the particularly large stimulus that he advocates, a larger one than many others are advocating and considering) as net beneficial even in the long term, and at the very least he has made this contention without an argument that seems to make sense to me, offering instead one that seems bogus, and also throwing out a related statement – that the debt is “basically money we owe to ourselves” – that is so obviously incorrect that it is downright bizarre coming from a Nobel Prize-winning economist and that raises even more suspicion of his sincerity.
Just a note regarding infrastructure spending as part of the stimulus: Although infrastructure spending generally can provide better long-term payback than spending more geared to current consumption, much infrastructure spending would not be good short-term stimulus because of the time lag in planning, approval and implementation. It seems that efficient short-term stimulus spending for infrastructure would only pertain to spending on infrastructure projects that are already approved and planned and ready to go, or already under way (but would have to be cut back or delayed by states without federal support via “stimulus” spending). So for much potential infrastructure spending, there is a trade-off between short-term stimulus and long-term “bang for the buck” (degree to which the net cost over the long-term is reduced or to which the investment is even net positive). I don’t know how much of the efficient short-term stimulus type potential infrastructure spending exists currently, nor do I know to what extent Congress or Obama plans to focus infrastructure spending on that type.
Not sure whom you’re addressing. I don’t advocate any cut in overall spending at this time, nor am I engaged in “would've, could've, should've”, nor am I advocating that we not act (to the contrary, again, I favor stimulus).
No, no need for such clarification. As I explained in my diary, the debt held by the public is what matters (not the gross debt, which includes money “owed” by one part of our government to another part of our government), so your 25% figure is irrelevant. Also, foreign ownership of the publicly-held debt is a bit higher now than your 44% figure. It’s closer to 50%, or perhaps at or slightly above 50% at this point. (Also, some figures vary by several percentage points depending on whether or not they are looking at the entire publicly-held debt including holdings of the Federal Reserve, but that doesn't change the picture enough to be worth getting into and thus adding complexity to discussion and possible confusion).
First, you are correct that foreign central banks would reduce the value of their investment in our debt if they were to dump a lot of it, but that is far from meaning that it couldn’t happen, let alone that the threat that it could happen could harm us in terms of upward pressure on interest rates or perhaps impact on the dollar. Conflicts could emerge at some point – let’s say, military conflict between China and Taiwan or the threat thereof – that could lead the U.S. to believe that, if we were to support Taiwan in some way, there is a significant chance that the Chinese government would decide to eat some loss of investment value to harm us and send us a message. In such a scenario, our foreign policy hands could be tied. And that’s just one example among many that are not implausible. As for M.A.D., well, first of all, we didn’t exactly sleep well in those days trusting in M.A.D., and secondly, M.A.D.is based on the premise that the consequence is utter destruction, as opposed to a consequence in which one experiences a cost that may be more than offset by some benefit, as is the case with a foreign central bank dumping – or threatening to dump – U.S. debt.
Second, even if there is no “dumping” ofU.S.
Third, the portion foreign ownership not held by foreign central banks is substantial, and these smaller investors have less disincentive to dumpU.S.
And no, Krugman is not “still correct about this element essentially being a non-threatener”. He didn’t make that point at all. He just said “public debt isn’t as bad a thing as many people believe — it’s basically money we owe to ourselves”. That’s just wrong and misleading, and he must know it, and that’s leaving aside the inter-generational aspect. Let’s not bend over backwards to try to craft some contorted defense of what the guy said.
Re: infrastructure and short-term impact
It appears that Obama is aware of the importance
of putting the money into projects that can begin immediately:
From that same source, there is an independent estimate of how much money could go into "shovel-ready" projects on road construction alone:
There is also discussion of a "green" -centric effort, which it sounds like would be mostly independent of the above, but here I am not sure of the timeline.
I believe there is also a desire to improve energy efficiency within large older buildings, for example schools, but I don't know how much of that is covered above or either the cost range or the timeline for this specific idea.
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Way to call a spade a spade!
On meet the press - BO confirmed that, though the deficit was already "massive", it would not curtail his planned "substantial" stimulus package. (Boy that last stimulus package sure did wonders!) Barry then eluded to the fact we had to get blood into "the patient", and could not be concerned with the deficit at the moment. It does not appear either that any of this will - in any way - dissuade "FDR the 2nd" from reconsidering his own "massive" spending - on health care, energy, and education...Yikes?
And furthermore - in another departure from anything resembling his campaign gobbly gook - our POTUS to be declared that this economic "crisis" we are experiencing is child's play in comparison to the days of the great depression? Yet he fails to understand that back then, before the federal government was allowed to get out of control, federal spending was a mere 7% of GDP, now it is an incredible 20%+ of GDP! 3X's as much! As wrong as the new deal was, and as long as it prolonged the suffering, at least FDR had a little economic elbow room to work with, Barry simply does not.
Close your eyes and get ready for a ride back in time my friends, 1970's here we come. Maybe Barry should ask Jimmy to come back as his throwback economic adviser?
This is America, we have been the definitive example of domestic nation building, and wealth creation. We should be looking for ways to eliminate big government and the obstacles that hinder the free market and individual liberty. And instead we are hiring a pseudo socialist and talking about government bailouts and new social spending programs!
The whole thing is pathetic and sad.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
I missed you
Hope you're doing well, RW.
With respect to Keynesian economics, no one has proven or disproven the theories behind it. Just has no one has proven or disproven classical theory or Austrian theory.
Economics is such an undeveloped field that even our greatest economic mind don't know their proverbial rear from a hole in the ground. I mean there are some obvious no-nos (don't make the tax rate 100%) that everyone agrees on, but around the edges there is a lot of work that needs to be done. I personally believe economics is too much of a social science for there to be any real hard and fast rules.
However, I do tend to agree with you. Debt needs to be under control first and foremost. Perhaps we need another Great Depression. Our current course is unsustainable. Our living standards absolutely need to come down and the only way that will happen is if credit isn't so easy to get. The credit markets are frozen you say? GOOD! And let's keep them that way for awhile.
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
Ya, I'm okay...
I've been peeking in here and there, mostly working hard to hide or sell everything I own so Barry won't take half of it! LOL!
The election took it's toll on me, I really am still pretty deppressed about the whole thing. I just haven't had the ability to muster what it takes to poke my head out and draw fire... ;-)
Good to see you too, I'll be around.
Has John been on much?
See ya.
- RW.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
Bah
I was upset for about 8 hours or so the day after Bush won again in 2004. Politics is mostly an interesting diversion for me. Our political leaders are too similar to evoke anything more than a small emotional response from me. When Obama won I was in a good mood for the rest of the evening and into most of the next day. I'm back to being the regular, bi-polar, pessimistic me and have been for awhile.
I've been off for awhile now since I got a job and moved to Columbus. I can't post as much as I'd like since I'm a working man these days. :-) I have no idea who has been in and out since I've been out so much.
Hopefully we can all get back into the swing of things come 2009.
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
Meanwhile back at sanity central...
...there is a apt analysis on the state of the art of governance
.
Example (a) illustrates the plight of the poor citizens of Gotham, and the burdens every tax paying mule will schlep under liberal David Patterson.
Example (b) we glimpse the response to sobering times for oil producing states like Alaska, the iconic whipping post Sarah Palin, and her response to tight economic times.
The interesting part is the plan of the two Governors could not be more different.
I'll let you decide under which plan you would wish to reside... ;-)
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
The people have spoken!
Population of New York: 19,297,729
Population of Alaska: 683,478
:)
We are the environment. There is no distinction. What we do to the earth we do to ourselves. —David Suzuki
As another current thread name suggests...
They deserve to suffer.
...Your response would have been better put something like this;
"The naive, the wishful thinkers, & the gullible, the George Soros', Jeremiah Wright's, & the good folks at Acorn have all had their say".
So much for the the traditional American principles and values that got us here, why worry about those little details like capitalisim and liberty since the people who lived by them are rapidly becoming a minority in their own country.
Ya, just keep bringing in the worst, the criminals, the scum from the rest of the world, go ahead and speak 20 different languages, have 20 different DMV manuals, teach pluralism in schools, and see where that gets you. Forget learning the lessons of history and just feel good about yourself for voting for Obama.
America is now officially on it's way to becoming a third world ghetto!
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
A call for states' rights
Sucks being in the minority doesn't it? That's why I'm a federalist. If you don't like the state you live in, there are 49 others that might be more to your liking. This isn't possible with a one-size-fits-all central government dictating to the states.
Again, that's a state thing. One thing I never hear from the people who wish to make English the official language of the US is where the power to declare official languages is found in the Constitution. I've looked and I can't find it. States, however, can declare official languages. I have no problem with them doing so.
I live in an area of Columbus that has a larger than average latino community. My hometown had a very large latino community. Many of them spoke very poor English. Does the fact that my neighbor can't speak English very well injure me in any way? Not particularly. Better yet, does the fact that my neighbor is bilingual and speaks Spanish in his home injure me in any way? Not in the slightest.
I recall in Ohio (where we have no official language) that there was a hearing on a bill or something along those lines about requiring people with CDLs to be able to read and write English. Many people reflexively say that they must. I would ask the question (since I don't know the answer) "Could someone who doesn't read/write English be a safe driver?". If yes, then they need not have a CDL. If no, then they would need to.
Too often the drive to require people to learn English is based on racism. I am not implying this is your motivation, but it is indeed the motiviation of many others that know bald racism has fallen out of favor.
Really, I think you have a problem with California, and I don't blame you. I'd have a problem with California. :-)
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
Frankly
As of Nov. 4, 2008, I'd have a problem with California, too. But I thank the gods I believe in* that I live in Massachusetts. (Earning the second half of my screen name here, I think!)
*read into that phrasing whatever you will
We are the environment. There is no distinction. What we do to the earth we do to ourselves. —David Suzuki
I was really hoping people
I was really hoping people wouldn't go with Red Wing's threadjack of this thread over to some "culture war" / anti-immigration / whatever point he wanted to make. Please don't go with it. There are open threads for that purpose.
Red Wing -- please use open threads for essentially irrelevant points that require such a stretch to make sound even tangentially related to a diary or discussion thereof.
You're right
This was a bit of a threadjack. I apologize for being the first to bite. But if it is any consolation, having a greater number of comments is more likely to get the occasional lurker to actualy read your diary, so that has to be a good thing, right? :)
We are the environment. There is no distinction. What we do to the earth we do to ourselves. —David Suzuki
Perhaps. I guess life is full
Perhaps. I guess life is full of trade-offs...although Paul Krugman apparently would disagree, at least when he finds it convenient ;-)
Point taken
I don't often look at the top when I post.
And isn't everything an OT during these slow days? :-)
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
BR's omnipresent criterion is sufficating.....
...to call that a thread jack is preposterous!
If anything BR has thread jacked his own thread by generating all these paranoid responses from the people who are actually here, participating on the site... but who now... in the wake of swords crossed own self appointed local deity BR's admonishment, find themselves jumping all over each other to be the most SCPC.
Ridiculous.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
The talking head behind the curtain speaks...
BR, there is no thread jack here.
1) I initially commented on the diary, Stinerman replied, I answered, SL then responded, and it went from there. That's called "a discussion evolving" BR, not a thread jack.
And 2) You certainly relish playing the role of some lamo empirical wizard and magistrate of all that is "tangentially related", rational, relevant, right or wrong, etc., don't you?
That along with all the other B...S... edict's and decree's you singularly render from that self absorbed mind of yours is nauseating.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
Someone writes a diary about
Someone writes a diary about whether or not a notable economist and commentator is misleading people about trade-offs between long-term and short-term from increased deficit-spending as stimulus, and you introduce (and provoke a discussion of) the topic of English-only.
Listen, either you think there is no such thing as a threadjack, you think threadjacks are perfectly fine (or at least yours), or you have absolutely no sense of what is a threadjack.
I ask you again to please comment where appropriate. Open thread, thread of a relevant diary, or new diary you write on the topic. If people come to read a diary on one topic and see a page filled to a large extent with almost completely irrelevant stuff, it substantially detracts from the experience of visitors to the site and their impression of SC and likelihood to join SC and participate, and for the regulars here it is simply better to get into matters unrelated to a diary/thread elsewhere.
I expect you'll reply, but I don't want to get into a long discussion of threadjacking on this thread.
EVERYONE -- please don't continue with this threadjack (or others). It encourages him.
Dear Dr. Sanctimonious...
You want to practice castigation, censure those that find your predominate behavior laughable, favor absolute obedience to your authority?
Too bad dude!
You're pious, smug, self satisfied magniloquence has worn thin.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
I'm not going to get in the middle of this,
since I unfortunately don't have time to read what I'm sure is an engaging discussion, but I will just say that the open threads could use all the posts they can get these days.
So please, do post in the open threads, it's appreciated! (Of course if you have a reply to a diary it should go in the diary.)
P.S. I looked up magniloquence -- always nice to learn a new word...
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
;-) Hi Brendan...
I agree.
In principle I am in agreement with the general point BR brought up, that we should most definately make an earnest effort to be on topic in diaries.
But the truth of the matter here is two fold;
1) Diaries do develop threads within themselves as a whole,
and 2) it is unreasonable to expect the entire body of membership to toil under BR's imperious, and often haughty demeanor.
I certainly have no intention of being manipulated by BR, as beguiling as he may be.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
To any FIRST-TIME
To any FIRST-TIME VISITORS,
Please don't judge SwordsCrossed by the comments here by Red Wing. Most of us here post reasonably relevant comments on a given thread, and most of us do not post comments indicative of paranoia. But every blog has a few.
Submit The Peoples Example Into Evidence...
*(And these examples are available whenever BR posts ad-infinitum)
Anyone who "dare" bring awareness to BR's tyrannical comportment is automatically dismissed, he uniformly suggests the comments are not "reasonable", he goes as far in this instance as to infer "paranoia", and finally implies the comments come from some fringe element in the blogoshere, "...every blog has a few".
This is as fine an archetype as you will find elucidating BR's pretentious, deprecating predilection. Certainly they get far more bloviated, and self aggrandizing, but even this diminutive sampling contains all of BR's ubiquitory hallmarks, and illustrates this notion that he is the self appointed grand poo pah of SC.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
Again, FIRST-TIME
Again, FIRST-TIME VISITORS,
Please stay a while, check out discussions on a few threads, and judge the participants on this site and the quality of discussion accordingly. Please don't judge the site by the crazed ramblings of Red Wing here. There are a couple of participants here who are a bit "off", as is quite common in the blogosphere. SwordsCrossed is a very open site with less moderator interference than most political blogs, which is, on balance, a good thing, but there are drawbacks, as you can see here.
Folks, can we please
drop this particular conversation?
Let me just put it this way: there are no FIRST-TIME VISITORS right now. Everyone who posts here is valued -- the site needs them and a lot of us here have developed a fondness for one another after a history of exchanges. We need to remember to disagree with one another without losing that friendly spark that makes conversation worthwhile.
I believe Red Wing agreed above with B Rational's general point about keeping diary conversations on track, and I'm sure we can all agree with Red Wing that sometimes conversations take interesting and rewarding twists and we should be open to those possibilities. So as far as I can tell the actual point of contention has been addressed, and there is no need for the thread to continue.
Thanks...
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Agreed Brendan..Thx.
n/t
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
ok. Just FYI, I wasn't
ok. Just FYI, I wasn't calling Red Wing a "First-Time Visitor". I was addressing any actual first-time visitors who come to this thread. I may occasionally refer people to my diary as part of discussion of the topic elsewhere, and I just don't want people to have a bad impression of SC due to major threadjacks (lots of irrelevant discussion) or crazed rants, hence my note to them.
CDL stuff
There is one reasonable basis for requiring an adequate ability to read English for (US) CDL applicants, and that is because of road signage. If one assumes that road signage serves a civil purpose and is expected to be read by drivers (indeed, that it is compulsory that it is read), then it follows that the ability to read and correctly interpret such signs is also a requirement for drivers.
Now, locally, municipaliities often use dual (maybe triple) language signage; for example, Houston's heavily Asian districts do so, and it's kinda cool, seeing "Southwest Freeway" written in Chinese characters. But for commercial truckers, their routes will vary, and there is no guarantee that signage in their native language will be available.
It's also rather like pilots; English is the language of the skies, and all commercial pilots are expected to be able to communicate in it effectively.
It's not racism or nationalism. It's practicality.
(My apologies for the threadjack)
EDIT: I suppose one could also expand this to include the ability to communicate with tollway agents, truck weigh station personnel, traffic and law enforcement, warehouse staff, and the ability to understand related signage, or any other normally occuring communication in that line of work. Whether we should be or not, the "average American" is not multilingual, yet.
"The human race divides politically into those who want people to be controlled and those who have no such desire." --R. Heinlein
I don't diagree El Stinito.. ;-)
It is not in their respective domiciles that the speaking of languages other than English is a problem. It is at the DMV, Courts, Hospitals, 911, and everywhere else that is offensive.
DMV is a joke in California, where one can barely find signage and literature in English anymore, but have no problem getting a drivers handbook in mandarin! And the employee's English is often marginal at best.
Traffic courts in America take twice as long today as they used to, not because of the litigious nature of our society, but because of the labor intensive linguistics involved!
Etc etc etc...
I mean it is comical people find the will to argue about most of this kind of stuff.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
Red_Wing's nightmare, animated
Each dot represents 100 people.
Immigration to the US, 1820-2007 v2
from Ian Stevenson 
on Vimeo 
.
H/T Andrew Sullivan
We are the environment. There is no distinction. What we do to the earth we do to ourselves. —David Suzuki
Get real...
There was a time in this country for mass immigration.
That time has clearly passed.
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman
Manifest Destiny?
In case you haven't noticed, Muslim countries are growing at a so-called alarming rate. Lest we be speaking Arabic soon, shouldn't you want more immigrants?
In our society, people are rewarded for pretending to be certain about things they're clearly not certain about. -- Sam Harris,
Quite the opposite...
n/t
Underlying all arguments against the free market is a lack of belief in freedom itself. ~M. Friedman