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Posts tagged with ‘paul krugman’

The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.

Paul Krugman, Who Wants a Depression? 

Conservatives don’t like the observation that American health care performs worse than other countries’ systems because it relies too much on the private sector and the profit motive. So whenever someone points out the obvious, there is a chorus of denial, of attempts to claim that America does, too, offer better care. It turns out, however, that such claims invariably end up relying on zombie arguments — that is, arguments that have been proved wrong, should be dead, but keep shambling along because they serve a political purpose.
The real obstacle, as we try to confront global warming, is economic ideology reinforced by hostility to science.

Secular Stagnation, Coalmines, Bubbles, and Larry Summers - Paul Krugman - →

Krugman parses Larry Summers recent IMF talk, and finds at the core the hard paradoxes of the postnormal: Secular Stagnation, where the liquidity trap inverts the order of the economic universe.

If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.

Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”

He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.

Amazing stuff – and if we really are looking at secular stagnation, he’s right.

Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.

One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go theKrugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.

Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!

But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.

Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.

I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.

Modern conservatism has become a sort of cult, very much given to conspiracy theorizing when confronted with inconvenient facts. Liberal policies were supposed to cause hyperinflation, so low measured inflation must reflect statistical fraud; the threat of climate change implies the need for public action, so global warming must be a gigantic scientific hoax. Oh, and Mitt Romney would have won if only he had been a real conservative.

It’s all kind of funny, in a way. Unfortunately, however, this runaway cult controls the House, which gives it immense destructive power — the power, for example, to wreak havoc on the economy by refusing to raise the debt ceiling. And it’s disturbing to realize that this power rests in the hands of men who, thanks to the wonk gap, quite literally have no idea what they’re doing.

Paul Krugman, The Wonk Gap

Years of Tragic Waste - Paul Krugman →

Krugman isn’t trying to get the Democrats to push hard for additional stimulus, although the logical extension of his ‘back of the envelope calculation’ would lead to that position. Krugman seems totally resigned to a continued stalemate in Washington: where the GOP tells outright lies and the Democrats respond with half truths.

Paul Krugman:

Set aside the politics for a moment, and ask what the past five years would have looked like if the U.S. government had actually been able and willing to do what textbook macroeconomics says it should have done — namely, make a big enough push for job creation to offset the effects of the financial crunch and the housing bust, postponing fiscal austerity and tax increases until the private sector was ready to take up the slack.I’ve done a back-of-the-envelope calculation of what such a program would have entailed: It would have been about three times as big as the stimulus we actually got, and would have been much more focused on spending rather than tax cuts.

'By any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure.'

Would such a policy have worked? All the evidence of the past five years says yes. The Obama stimulus, inadequate as it was, stopped the economy’s plunge in 2009Europe’s experiment in anti-stimulus — the harsh spending cuts imposed on debtor nations — didn’t produce the promised surge in private-sector confidence. Instead, it produced severe economic contraction, just as textbook economics predicted. Government spending on job creation would, indeed, have created jobs.

But wouldn’t the kind of spending program I’m suggesting have meant more debt? Yes — according to my rough calculation, at this point federal debt held by the public would have been about $1 trillion more than it actually is. But alarmist warnings about the dangers of modestly higher debt have proved false. Meanwhile, the economy would also have been stronger, so that the ratio of debt to G.D.P. — the usual measure of a country’s fiscal position — would have been only a few points higher. Does anyone seriously think that this difference would have provoked a fiscal crisis?

And, on the other side of the ledger, we would be a richer nation, with a brighter future — not a nation where millions of discouraged Americans have probably dropped permanently out of the labor force, where millions of young Americans have probably seen their lifetime career prospects permanently damaged, where cuts in public investment have inflicted long-term damage on our infrastructure and our educational system.

Look, I know that as a political matter an adequate job-creation program was never a real possibility. And it’s not just the politicians who fell short: Many economists, instead of pointing the way toward a solution of the jobs crisis, became part of the problem, fueling exaggerated fears of inflation and debt.

Still, I think it’s important to realize how badly policy failed and continues to fail. Right now, Washington seems divided between Republicans who denounce any kind of government action — who insist that all the policies and programs that mitigated the crisis actually made it worse — and Obama loyalists who insist that they did a great job because the world didn’t totally melt down.

Obviously, the Obama people are less wrong than the Republicans. But, by any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure.

And appointing the anti-regulatory Summers as chair of the Federal Reserve would be a perfect capstone for this litany of stupid missteps.

We have an ill-informed or misinformed electorate, politicians who gleefully add to the misinformation and watchdogs who are afraid to bark.

Paul Krugman, Moment of Truthiness

All economic data are best viewed as a peculiarly boring genre of science fiction.

Paul Krugman, Hitting China’s Wall

The Myth Of Libertarian Populism, The Dream Of Fluidarity

The GOP is spinning a hopeful tale about a return to dominance in the US, but the demographics are against them in profound ways. They have become — for all intents and purposes — a party divided amongst itself, one that has chased away all the moderates, and has no one in a position to appeal to the center.

Paul Krugman weighs in against their newest fantasy — libertarian populism — which is an effort to sugarcoat the same old pill they have been peddling for years, and somehow use that to pull the so-called “missing white voters” — downscale, rural whites from the North — to come back to the polls and vote Republican. One of the biggest problems is that those missing whites are missing their food stamps, which the GOP is taking away. 

Paul Krugman, Delusions of Populism

More than 60 percent of those benefiting from unemployment insurance are white. Slightly less than half of food stamp beneficiaries are white, but in swing states the proportion is much higher. For example, in Ohio, 65 percent of households receiving food stamps are white. Nationally, 42 percent of Medicaid recipients are non-Hispanic whites, but, in Ohio, the number is 61 percent.

So when Republicans engineer sharp cuts in unemployment benefits, block the expansion of Medicaid and seek deep cuts in food stamp funding — all of which they have, in fact, done — they may be disproportionately hurting Those People; but they are also inflicting a lot of harm on the struggling Northern white families they are supposedly going to mobilize.

Which brings us back to why libertarian populism is, as I said, bunk. You could, I suppose, argue that destroying the safety net is a libertarian act — maybe freedom’s just another word for nothing left to lose. But populist it isn’t.

The true issue is a deep cultural divide between the extreme right GOP and the rest of the country, which ranges from libertarian to liberal. 

The Earth and its resources are treated as spoils by the powerful, who will use all the powers they have to continue the ruinous policies of the past. But the Earth must be reconsidered as a shared commons, and our principal purpose must be to move from the shambles of our current economic and geopolitic systems to a new order, based on sustainability and universal human rights.

However, we are unlikely to see a populist movement, today, in the US, especially among poor whites. One of the impacts of the modern paradox is that most people self-identify with the rich. The American mystique is that we are all middle class, only a few steps away from being a millionaire. This thinking persists in spite of 30 years of increasing inequality and the largest stratification of wealth in the advanced economies of the world. Upward mobility is increasingly a myth.

As a result of craning their necks to look up at the lifestyles of the rich and famous, which fill the magazine covers in the supermarket check-out lines, poor people avoid looking at the people standing beside them, in their neighborhoods. Instead they buy some lottery tickets and dream about what they’d do with a few million. We have no solidarity because we don’t see ourselves as ‘we’. Each American sees themself as an individual, outside of any demographics, ‘temporarily unwealthy’, a future millionaire.

So we aren’t marching, chanting, or demanding work, action, justice.

My hope is that something else, something new could happen. In the industrial age the solidarity of the working class opposed the oligarchy of capitalists. So, in a post-industrial era, can the fluidarity of the precariat oppose those who have made our lives precarious?

We aren’t in a time when class, race, and sex are forgotten. Far from it. But we may find ourselves in circumstances where the foundation of our life on Earth pushes other considerations to one side.

The Earth and its resources are treated as spoils by the powerful, who will use all the powers they have to continue the ruinous policies of the past. But the Earth must be reconsidered as a shared commons, and our principal purpose must be to move from the shambles of our current economic and geopolitic systems to a new order, based on sustainability and universal human rights.

The GOP — even with libertarian populist mumbo-jumbo — are not going to take us there. I am not sure I am hearing that from any Democrats, either. We are hearing only small-bore arguments about divisive issues, and that satisfies the stalling of progress, and that stall is what the powers-that-be are after.

It’s kind of funny, actually: right-wingers love to praise the power of free markets and declare that the private sector can deal with any problem, but then turn around and insist that the private sector will just throw up its hands in despair and collapse in the face of new environmental rules.

Paul Krugman, Invest, Divest and Prosper

Krugman boils down the GOP argument against President Obama’s EPA plans: they have no deep-seated philosophic beliefs other than the powerful should be unfettered by considerations of what is good for the people as a whole. To that end, they wield their ‘conservative’ ideology as a blunt instrument, with no intention of conserving anything aside from the spoils they have stolen from us.