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Stimulus v. Cuts: Krugman and More

Economist Paul Krugman fires his salvos on the economic debate in Washington now – more stimulus spending or more austerity.

Nobel winner and NYTimes columnist Paul Krugman accepting the Global Economy Prize 2010 of the Kiel Institute in Germany, June 20, 2010. (AP)

The big overriding debate in Washington right now is spending versus austerity. The economy is pausing at a scary point. Does it roll forward? Groan forward? Or roll back? Collapse?

The austerity crowd says rein in spending now to restore “confidence.”   The “open-the-spigots” crowd says spend right now or risk disastrous depression.

The Keynesian spender-in-chief is Nobel Prize-winning economist Paul Krugman. Today, he’s with us.

This Hour, On Point: we hear the latest on the raging debate in Washington, then bring in Paul Krugman, on the fate of the U.S. economy.

Guests:

Mark Zandi, chief economist at Moody’s Analytics. He was also Senator McCain’s economic adviser during his 2008 presidential campaign.

Sudeep Reddy, economics reporter for the Wall Street Journal.

Bill Schneider, longtime CNN senior political analyst and now a senior fellow and resident scholar at “The Third Way,” a progressive think tank. He teaches public policy at George Mason University.

Paul Krugman, Nobel Prize-winning economist and New York Times columnist. He’s author of “The Conscience of a Liberal” and “The Return of Depression Economics.”

More:

On a recent On Point segment, Harvard economic historian Niall Ferguson renewed his on-going debate/feud with Paul Krugman over whether the U.S. needs to cut spending or push more government stimulus into the economy. You can read what Ferguson said on our show about Krugman’s views.

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  • Stephen Van Evera

    Hi Tom–

    I’m hoping you will ask your panel to summarize the historical evidence for and against Keynes’s theory.

    > What was the economic impact of FDR’s decision to halt stimulus spending and move to balance the federal budget in 1937-1938?

    > What was the economic impact of the vast increase in U.S. defense spending during 1941-1944? What can we infer from this episode about economic policy today?

    > What was the impact of the sharp rise of military spending in Germany during the 1930s? What can we infer from this episode?

    > What was the impact of China’s large stimulus spending during the last two years?

    > Overall, does stimulus spending correlate positively or negatively with recoveries from deep recessions?

    The debate on whether to stimulate today stems largely from a disagreement on whether Keynes was right or wrong. To decide this debate we should look to historical evidence.

    – Stephen Van Evera (MIT)

  • George from Lexington

    Isn’t the push to austerity really an opportunity taken by the “deficit hawks” to gut any social safety net programs?

  • JP

    Can you and your panel discuss the recession of 1920 and compare & contrast it with the Great Depression & the 1982 recession. I would like to hear what your panel has to say for why two of the three recessions ended normally in a short fashion and the 3rd was turned into the Great Depression.

  • pw

    I hope this isn’t going to be a Krugman vs. latest contender discussion. Ferguson’s time in the “On Point” sun must have been an hour’s worth of grim embarrassment for him and for many listeners. An intelligent man behaving like a child. I’d hate to think that our economic future could be influenced by those who want to win or “decide” a debate rather than do what we all should be doing: figuring out how to change our behaviors — from voting to spending — in ways which will allow greater stability and opportunity for all.

  • JP

    How has the US government counted the jobs created by the stimulus money and how much has each of the new jobs cost the taxpayers? How much of the stimulus money has been spent? Why hasn’t it all been spent?

  • Tom in DC

    I’m all for austerity if it means cutting corporate welfare, not just gutting social safety nets. Stop subsidizing oil, corn, and multi-billion dollar industries that don’t pay any taxes.

  • JohnO

    We are going deeper in debt and the “spend to grow” ethos is unsustainable. Please press Krugman on this.

  • Amy Ennis

    YES! I live in Paris and I’m tired of people in the States saying we need to cut spending like Europe is. Stronger regulations and a stronger welfare state have blunted the impact of the recession in some EU states, leaving them the option of cutting spending. This is certainly not the case in the US. Also, Europe is spooked by Greece. But the US is not Greece. On the contrary treasury yields are low because investors are flooding that market out of fear. Higher interest rates will come perhaps in the future, but for now, inflation is a distant possibility. On the contrary if people don’t have money to spend in an economy that is 2/3 consumption, we’re looking at deflation if the government doesn’t do something. Or, at the very least, a prolonged period of very slow recovery. Conclusion: Deficit reduction is not an option in the US right now.

  • JP

    How did the Senate pass a budget that does not exist without voting on it? Isn’t passing budgets that have detail and thought and debate the 1st priority of the US senate?

  • William

    The current federal government spending is over 1 trillion dollars with 45 percent of the previous stimulus funds not being spent. Should the federal government just redirect 20-30 percent of its existing budget to stimulus projects?

  • Ellen Dibble

    I heard something on NPR this morning about why the Chinese stimulus is not generating much growth. It turns out infrastructure may be good investment, but it is not capitalistically profitable: From a piece by Caitlin Kinney a month ago: “The stimulus package, of which 100 billion yuan is earmarked for this quarter, will be spent on low-rent housing, roads, railways and airports and infrastructure in rural areas. The funds, equivalent to almost a fifth of China’s gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said yesterday on its web site.”

  • JP

    Tom,

    Can you ask your guests the following? Are US treasury rates low because we are monetizing our debt by buying our own bonds to push interest rates down? Why have we not audited the FED since the 1960′s? Could the FED be cooking the books with the lack of oversight for 50 years?

  • Ellen Dibble

    I don’t know why, since demand for multi-unit housing is said to be high, the government doesn’t start encouraging that. How long can this market be throttled? I know. “Affordable housing” sucks all the oxygen out of this market. And if you want a reasonable apartment in which to save money and start out, you have to re-locate where mills (which employed renters before the days of superhighways, presuburb) have closed and outsourced to, say, Asia. Instead, they try forcing young people, very loosely “related,” into single-family homes.

  • jeffe

    The problem with most people is they seem to have a misunderstanding on the long term strategies to cut the deficit and the short term needs to get the economy stimulated.

    It was an act of cruelty by the Republicans and conservative Democrats to use the deficit as an excuse not to extend unemployment benefits. It would have added something like .1.4% to the deficit. Cut military spending!

    To answer the question about historical proof, well look at what happened in 37-38, the country slipped back into a deep recession.

  • Dr. Tom Taaffe

    Clinton and his predecessors deregulated the economic environment, creating the conditions that destroyed living wage work across the industrial spectrum. Bush did what not national leader has done since the Sumerians, by cutting taxes and starting multiple wars. Obama and the Demcorats perpetuated the problem by maintaining the status quo on was, doing little on taxes and spending nearly a trillion dollars on corporate welfare that, with the exception of the state bailout, produced few jobs and overwhelmingly benefitted the people who wrecked our economy.

    Why did the Democrats refuse to put joblessness, unemployment or the death of living wage work on their agenda?

    Why do fiscal conservatives never mention the war when they talk about deficits?

  • Ellen Dibble

    Anything job-wise that can be put on an assembly line, it seems to me, will go overseas. Why not outsource it where life is cheap? Duh.
    What we need to develop and encourage are the community-based enterprises, which by definition can’t be outsourced. Unfortunately, these don’t cause enough of an economic blip to get government attention. But to start, the government could start encouraging sustainable communities, linked by public transportation, where people can live like this.
    To talk about Jobs, thinking Corporation, I think is a mistake.

  • Dr. tom taaffe

    correction:

    Bush did what no national leader since the sumerians…”

  • Not a Chance

    Yes, let’s base our recovery and national economic policies on the opinion of the dumbest 14% of white America: the tea-baggers.

    The one obvious benefit here:

    Republicans are going to so screw and finish the job they started ruining our country, that a permanent nail will be put in their political coffin.

    Another generation from now, and America will be rid of Republicans forever.

  • Yar

    Today’s show dovetails with the show yesterday on education. Forget the numbers, the debt will be payed or defaulted by the children we educate today. Our stimulus should be doing a better job in education. I would use recent high school graduates in public service, (like the CCC) to leverage better education for all current students. It does two things, first it slows the demand on the entry into the job market. It gives work experience to young people, it also helps build better public education. We should use our existing schools to feed and train this new CCC. They can live at home and they should get a stipend and monitory credit toward higher education.

  • Tom Lindsey

    Rep. Barney Frank’s Sustainable Defense Task Force released a report for cutting Pentagon spending by an estimated $1 trillion over the next ten years without impacting our defense capabilities. When will Congress garner enough courage, especially the deficit-Hawks, and put military expenditures on the cutting board and reappropriate these expenditures?

  • Paul Criswell

    Tom, I would like to ask your guests if there is a difference between government spending on ‘infrastructure,’ such as roads, broadband communications, mass transit etc and ‘pure entitlements’ such as unemployment compensation, agricultural subsidies, welfare, etc.? It seems to me that it is just as ‘stimulative’ to deficit spend on infrastructure, but it strengthens our economy more in the long run.

    As for the comment above about the Chinese, they seem to have significantly overspent on infrasturcture, something that we are in absolutely no danger of doing.

    Thanks,

  • http://freeourfreemarkets.org steve banicki

    Why is no one pressing the issue that wereally don’t have “free” markets. Our major industries are controlled by oligopolies and these oligopolies control our politicans?

    Free our markets by using anti-trust laws and let the free market help solve our unemployment problems.

    The government needs to play its role as umpire to the free markets.

  • William

    Tom, Please ask if the massive tax increases this Jan. will kill off any further recovery.

  • Ellen Dibble

    There is also a lot of money to be cut from the budget by rationalizing Corrections and prisons. The War on Drugs is a big give-away to the drug cartels in Mexico and to the Corrections industry in the United States. It costs less to educate a kid than to lock him up.
    So — I guess the Congress doesn’t have the political courage to risk all those jobs in the corrections side of things. Where would those guards go to work?

  • Michael Osborn

    I’ve been reading “The Buyout of America” by Josh Kosman, and I’m not sure Koshman realizes it, but he explains why this economic uptick has no jobs associated with it: there are sizable numbers (enough to make an economic impact) of small and medium-size businesses who are too far in debt (from loans taken out to pay fees and dividends to their private equity owners) to hire anyone, whether or not there’s a business case for hiring.

    A federal stimulus will not be very helpful against this kind of thing, although aid to states and local governments will at least preserve jobs. What would really make a difference in the future would be
    1) pay dividends only from profits (make dividend payments to anyone illegal if such payment was from loaned money) and
    2) rewrite bankruptcy standards so that a judge can decide whether current loans made to pay fees to private equity firms or to pay dividends to private equity firms are “first in line” or “last in line” for repayment.

    There are several other possible things to do, but hopefully at least the two above will make current PE practice extremely unattractive.

  • Ian L.

    I served in Iraq as an Infantryman in the Army in 2005. I don’t understand why none of you are speaking seriously about the financial costs of the wars we are waging in Iraq and Afghanistan, and the extremely numerous military bases, and “missions” all over the world. Are you just avoiding this deliberately?

  • http://ddunn45@beld.net dan dunn

    This is a question for Paul Krugman. Why is the obvious not being stated relevant to the creation of jobs in the united states? Jobs will not come back until the wage of the american worker reaches some sort of parity on a global basis. This will be a long and somewhat painful process. The stimulus money is merely a braking mechanism for the inevitable decline in worker wages so that corporations can consider the U.S. a profitable place from which to do manufacturing once again. Mr. Krugman, your thoughts please.

  • Tyrone

    While spending money on repairing infrastructure is fine as good roads and infrastructure are needed for a vibrant economy, as a jobs vehicle it is wasted money. By definition, these are low-skill low-wage temporary jobs.

  • Rick

    In addition to things we need to do to reverse economic decline, we also need to talk about things we need to STOP doing, starting with allowing financial speculation and usury to become such a HUGE proportion of our economy. It’s buying and selling money for a profit of money, a circularly re-enforcing system that purports to create something from nothing that cannot be sustained.

  • Dr. Tom Taaffe

    Forgive the multiple posts. The narrowmindedness of this debate reminds me of the health care debates of the early 1990′s. God forbid anyone mention single-payer health care. Everyone either ignored or dismissed the idea.

    So it is with joblessness. God forbid anyone ever mention a WPA project.

    Privatized infrastructure projects, tax credits for corporations and other trickle-down economic solutions feed only the stock market, not main st.

    For example: in Hartford CT. They announced a 2.3 billion dollar sewer project over 3 years. I watched the local bureaucrats explain contracting, subcontracting and sub-subcontracting and this big machine that tunnels underground (eliminating labor) to a room full of unemployed men.

    The upshot of all that subcontracting was only 200 hundred local jobs – over a 3 year period – were going to be produced by this infrastructure investment. Or put another way (for all you fiscal conservatives), only about 2.4 million would be reaped by local workers for a 2.3 billion dollar investment.

    Hartford may need new sewers, but they need jobs ten times more.

  • Joe Rice

    What if the Obama administration were to call the republicans’ bluff and propose a $500 billion (or more) tax break?

  • JP

    Tom,

    Please ask Krugman if the massive tax increases this Jan. on income and dividends will kill the stock market and our economy.

    Also should we expect a large increase in 401K to Roth Conversions in the 4th quarter as a result of the increased taxes.

  • Michael

    I think the fear that people have about the accumulating debt is how large it really is. Relating it in terms of GDP is an abstraction that I doubt most economists, let alone general public, fail to comprehend. Today’s US Debt is twice as large as the value of all of the gold ever mined in human history ( http://tinyurl.com/USPublicDebt ). And that is just the US Debt. The fear, in my opinion, is that the path we are on will lead to hyperinflation akin to Zimbabwe’s.

  • JohnO

    Krugman politicizes most of his comments. He should stick to his field of economics and the various factors affected by the current USA and world economy. I would be interested in his strictly economic views, filtered of politics.

  • Tom Emmanuel

    Tom,

    Granting that Keynes is right, will the credit markets allow his theory to be put in practice? If the markets get spooked, as in Greece, it would be impossible to practically implement the spending that very well might boast the economy “in theory.”

  • Brinna Sands

    I wonder if people could understand that the economy is a bit like skiing (I’m not sure what the equivalent would be in the south, maybe water skiing?). If you don’t have enough speed, you don’t have any control. So to get the economy under control, we need to get it up to speed; then we can begin to control it.

  • Ellen Dibble

    Bingo. Dr. Tom Taaffe, it seems that in the New Deal, the government didn’t have to go to the lowest bidder, but could just establish a WPA and pay people in their employ what the government could. Nothing to profit at all. Not during the Depression. Jobs instead.

  • JP

    I agree with Krugman we will have deflation… for a short period of time followed by inflation and a banana Republic. The Obama plan has taken us down the road past the point of no return.

  • sl

    Can you please be specific and ask Mr. Krugman specifics on how more spending will help? I haven’t heard any specifics/numbers that can pursuade me. I haven’t seen any evidence that this spending or stimulus has done anything. We need more of a manufacturing base in this country again and not short term jobs that this supposed stimulus money has produced.

  • JP

    Why don’t we create the WPA where anyone that wants extended unemployment benefits needs to work for the local, state, or federal government. We have lots of clean up and construction that anyone could do. This would not only give the unemployed people money but benefit society.

  • jim thompson

    Go Paul Krugman go! I don’t know why the Republicans are the far right find it so hard to invest in America and it’s workers.

    Investing in the United States today will pay off tomorrow!

  • Ellen Dibble

    I think Krugman’s plan would goose the economy into jumping right off more or less the same cliff, like lemmings. If we recover slowly, we might stay perpendicular.

  • JohnO

    Does Krugman propose andy cuts to ofset, even partially, the spending that is proposed? Please ask Krugman to rank the items that should be addressed.

  • Joao Geada

    Given that the majority of government spending goes on just 3 items:
    - military
    - entitlement spending (social security, medicare, etc)
    - servicing the debt
    it is not surprising that most voters feel that the system is completely out of whack and needs to be trimmed back. And this is not inconsistent with stimulus spending to create jobs.
    What is so wrong about cutting back entitlements and military spending and redirecting those dollars to jobs and economic growth?
    Enough paying for the generation that caused the problems, time to start spending on our future and the future of this country.

  • William

    Mr. Krugman will get his wish this January when the Bush Tax cuts expire. Also, FDR raised taxes in 1936-37 with social security taxes, higher taxes on corporate profits and pushed for more unions which resulted in higher wages but fewer workers.

  • Bruce

    The “huge” stimulus bill was approximately a third tax cuts and the rest “stimulus”.

    Out of that money come some infrastructure projects, but people have little idea how much these things cost.

    For example, one big project in Rhode Island is ~$165M and there is another one that is coming out soon at approximately the same cost. These are just to replace two bridges in the smallest state in the nation.

    Cut out two wars overseas, reduce the military (we spend more than the rest of the world combined), and divert a steady stream of “peace dividend” (even half would be a lot of money) to infrastructure and people can start planning their lives again.

    I think of Greenspan and his budget surplus rationale for cutting taxes really messed us up.

  • CHRIS M

    Instead of cutting social program and unemployment benefits for those who cannot find jobs because there are NOT ENOUGH JOBS to go around with the living wages that reflect reality, why not cut off the Corporate Welfare like farm subsidies (which many members of congress or their families take advantage of)and big oil. These amount to huge amounts of the budget and, like military spending, are ignored.

    We, the peoeple, are NOT represented in our government. Special interest trumps all and we are chumps to think Congress will ever do anything to benefit the average US citizen. I don’t see them decreasing their pay, perks, or benefits in solidarity with their constituents, they just play us for fools. It is a smoke & mirrors games to benefit themselves and their family & friends while making it seem like they care. They DON’T. It benefits them to have a broke & desperate populus in regards to jobs and opportunities. We turn against each other rather than against them.

  • JP

    Please ask Mr. Krugman if more spending is what is needed, why don’t we spend 10x the previous stimulus? 100x the previous stimulus?

  • JP

    Tom,

    Didn’t we spend money hand over fist during the great depression and it only made things worse. The creator of the policy in 1938 admitted that the policy failed and asked for his policy to be reversed.

    The government has to take money from people to give it to others. Moving money from your right hand to your left hand does nothing!

  • KW

    I completely buy Paul Krugman’s arguments, but I don’t understand how to possibly get the folks in Washington to do the right thing. The Democrats are paralyzed and the Republicans seem to think that it’s in their best interest to keep the economy in a tailspin.

  • Tom Stickler

    SO FRUSTRATING to have random callers, ignorant of macro economics, as a valid(?) counterpoint to Krugman?

    Uncle Sam is sick and the deficit hawks say bleed him so more.

  • David Henry

    How much of the debt 10 billion debt was wasted on the war in Iraq? I am pretty sure the 10 billion wasn’t all on Obama’s watch.

  • Ellen Dibble

    I’m hearing and believing that government jobs might actually be the least expensive and most effective and best organized way of getting at a problem, whether re-wiring the nation or providing water.
    However, government endeavors do NOT spike the stock market, and there are a lot of retirees, and a lot of investors who throw a lot of lobbyist weight in Congress.
    So if stimulus is government jobs, it doesn’t help the stock market. Medicare doesn’t help the stock market; but certain medical insurers help it a lot.

  • Mike

    David Henry: You are off by a factor of 1000. It’s $10 Trillion. Your mistake is part of the problem – politicians think of $10 Trillion the same way they think of $10 Billion. All they see is the mantissa.

  • Ellen Dibble

    I’m thinking 40,000 clean-up workers in the Gulf. If the government hired them directly, did not subcontract, it would cost X. If BP hires them, then it costs X + profit. The people don’t necessarily get more per day, but.

  • tom from boston

    Bush had a stimulus plan that nobody wants to talk about. It was called the iraq war. over a trillion dollars spent above and beyond the normal federal budget.

  • Mike

    Ellen Dibble: Government does not add to the economy, since all of its money is from taxes (i.e. money taken from economic generators) or borrowing. If everyone worked for the government, there would be no economic activity to support the government.

  • William

    President Obama’s famous quote about being fair.

    MR. GIBSON: And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

    SENATOR OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

  • Mary O’Connor

    The economy is “out of recession” largely because it has shed huge portions of the work force. What can be done about an economy structured so that it’s just fine, so long as all those people who used to be included in it are shoved off to the side–many, it would seem, never to work again?

  • Dr. Tom Taaffe

    The devil is in the details. What kind of stimulus are we talking about?

    More corporate welfare? Or a WPA jobs program? More publicly funded/privately produced infrastructure projects or more public works projects?

    If you assign workers to federal, state or local agencies and run the hiring process through General Services, Democrats could have the beginnings of a project up by November. Tough to pull off at this point – and 19 months belated – but better than never at all.

    If the price tag scares the fiscal conservatives, tell them to get us out of these wars.

    79% of all federal jobs posted are defense, intelligence and homeland security. So what are they going to cut?

  • JP

    If government jobs were the secret of success, the Soviet Union wouldn’t have collapsed, because it had nothing but government jobs.

  • Johnathan Cash

    Thank you Paul Krugman for all your good work and courage to tell the truth. Another way to stimulate the economy will be to bring the military home from Iraq and Afghanistan, saving 10billion dollars a month. To cut the budget, cut the military first!

  • Victor Wallace

    The unfortunate side of the relationship of politics & economics is that there is alway a lag. The fundamentals of the economic engine – education, infrastructure & excessive inefficient spending on wars — was understaken by the Bush regime. The previous administration wrecked the foundation and started the recession – so its unfortunate that Obama will take all the blame. All the improvements he makes — the next guy will take the credit

  • Saket

    What are the motivations of the nay-sayers? Do they want to avoid higher taxes at any cost?

  • JP

    Communist China, glutted with government jobs, would have generated more income per capita than Hong Kong where, at least before the Communist takeover, there were hardly any government jobs. But Hong Kong’s per capita income was about 20 times higher than that on the mainland.

  • Johnathan_Cash

    Paul? Why can’t the US make a policy to require companies that sell goods in the US, to produce at least half of those goods in the US? Whats so wrong with that?

  • Frederic Lowen

    Whether the government stimulates or not, it will not turn around the financial crisis, or the existential crisis, until it is recognized that the government is a government of the corporations, by the corporations and for the corporations.

    The only group that has any money now are the large corporations, sitting on more than ever before. That’s no coincidence, stimulus or not, the governments and corporations are in a partnership that exploits the population.

    There are no free markets: every market is so slanted that the population’s money just falls into the pockets of the corporations, secondly, to the governments, which use it against the population to maintain the Status Quo. Who caused the problems?… who is sitting pretty?…the corporations!

    Without recognizing that, nothing can change.

    The so-called Republican politicians are nothing more than Corporation proxies, and the Tea Party nothing but a tool by which corporations can keep government regulation minimized and confused.

    All we can do is await further break-downs until common sense begin to exert itself.

  • sl

    It is so obvious that Mr. Krugman’s views are politically based. I also haven’t read or heard a positive viewpoint from Krugman.

  • Mel

    What’s the moral justification for government interference in the marketplace and can we design a government economic policy that is power-neutral, that doesn’t encourage cronyism in selection of who gets money or breaks?

  • Ellen Dibble

    The United States, unlike Soviet Russia, does not want to own the means of production. I would go out on a limb and say that most government workers are overworked and would be glad to have LESS responsibility. Case in point: Teachers. Are they trying to have more students per class?
    Well, maybe it’s not a good parallel. But even in the Gulf Oil Spill, I didn’t notice ANY PART of the government saying they were going to take on the expertise of deep sea drilling, for instance.

  • Tom Stickler

    Who’s this sock-puppet JP?

  • http://Timesizing.com Phil Hyde

    Hi Tom -

    What we’ve got is a shortage of jobs on a pre-computer workweek of 40 hours. Why isn’t Mr.Krugman talking about modernizing the workweek for the Age of Robotics?

    Even before World War II solved the Depression in the worst way, the 44-42-40 hour nationwide workweek of 1938-39-40 was taking unemployment down 1% for every hour cut.

    Even Pres.Hoover in 1932 said that shorter hours is the quickest way to create jobs (Ben Hunnicutt, Work Without End, 1988).

  • William Maher

    Well, it’s nice to be reminded over and over again that a Marxist-socialist shill like Paul Krugman is a Nobel prize winner. Didn’t the same lefty group give Afghan-bound O’Bama a Peace prize before he took office? Pssst–Paul, I don’t know if you noticed, but O’Bama’s stimulus hoax did not go unnoticed in the real world–even by his groveling socialist. Paul, are you aware that no one in the Democratic party is allowed to use the word “stimulus” anymore(That’s how well your plan went)? Yeah Paul, your approach is working well in Greece–my socialist friends, including my brother, are big fans or yours. As always with socialists, there’s no problem confiscating and spending billions of other people’s money, because socialists don’t earn any money in the first place; what’s there to lose? Paul, what’s your opinion of the ponzi scheme called Social Security? Don’t tell me–ponzi schemes are wonderful when authorized by the government(but it’s for the children so we understand)
    Has Paul Krugman ever run a Dairy Queen? You might have noticed that Paul Krugman, as all socialists, will never be found in the same room as an adversarial peer, openly debating the merits of socialism versus capitalism. No problem for the Nobel Prize Committee.

  • jp

    History shows the U.S. economy beginning to turn around in early 1933, probably before FDR took office. Despite Hoover’s blunders — trying to prop up wages and prices, signing the Smoot-Hawley tariff, signing a big tax hike, and signing the Norris-LaGuardia Act that accelerated union organizing and doubled the number of strikes during Hoover’s last year — enough adjustments had occurred that the economy was ready for a turnaround before FDR began his Hundred Days.

  • William

    William Maher – You nailed it.

  • Ann Jackson

    I am one of the unemployed Americans and have been for just over two years. I have tried again and again and again to find employment. I am well-educated, have a great employment history, etc. I keep coming up with a goose egg in response to my searches. The federal government hired me as a census enumerator. Part-time temporary work but work nontheless. I was delighted.

    I hear in the argument against extending benefits the whisper of envy or jealousy. Those people fortunate enough to have held onto their jobs thinking those of us less fortunate are getting away with something.
    Less about the country’s economic future than about “I have to work, so should they”.

    Until you sit where I am sitting I would ask that you curb that jealous streak. This is hardly a position to be envied.

  • JP

    Ellen Dibble,

    I don’t think government workers are overworked since the average government employee salary is about 2x the average private sector wage. Didn’t government employees used to make less than private sector but have better benefits? Somehow the private sector is the slave to the government these days.

  • ThresherK

    Please ask Krugman if the massive tax increases this Jan. on income and dividends will kill the stock market and our economy.

    *yawn*

    Which massive tax increases? The resumption of tax rates that the law provides for? The stopping of blowing a hole in the budget thanks to the Bush tax cuts which didn’t pay for themselves?

    Aren’t you forgetting, “Deficits don’t matter”. Oops–that’s only when Bush was in the White House.

  • Ellen Dibble

    You anti-socialists, look at the experience of certain countries being plundered by huge corporations. I believe they are beginning to find that “democracy” is another name for oligarchy. And the oligarchs are not even native. And the way to “lean forward” (as Republicans say) is to nationalize, to try to reclaim resources for the native people. Capitalism is starting to cave to democratic forces. The United States of course is on the side of the corporations.
    Am I wrong?
    I just think that the capitalist/socialist or democratic/communist split is a great divide that was set up by the nuclear stalemate of the Cold War, and if you look at the Third World of that era, you’d find that principles were compromised in order to maintain a certain stand-off.
    It was an artificial split, and in the current climate (no pun intended), it is not a useful counterpoint. It’s not like Spain versus Germany in Johannesburg today (soccer). It’s like all the diversity you can imagine trying to accommodate to new conditions.

  • jeffe

    It speak volumes on how some people are so clueless when they use the moniker of “socialists” and “socialism” when the encounter anything or anyone who challenge their ideology. How about using your brain, do a little research and come up with some good talking points instead of insulting everyone’s intelligence.

    By the way almost half of the people who start businesses such as a Dairy Queen fail within the first four years of business. Only 2/3 of all small business start-ups survive the first two years and less than half make it to four years.

    Running a Dairy Queen does not make one an expert on how economies work.

  • J

    The Republican party is now my parents democrat party and the democrat party is now fully infiltrated by the socialists. http://newzeal.blogspot.com/

  • Mary Flynn

    I do wish someone had said that the spending for WWII occured here. Our ore was mined and the steel manufactured, all by formaerly unemmployed citizens; arms, from guns to ships, were made here, not in another nation. This put heavy industry back to work. American farmers grew the cotton and American workers made the cloth for uniforms, and then the garment industry made the uniforms.
    We do not even make military hats in this country any longer. If those who make everything we need for war ever decide to stop making materials and selling them to us, we will be in serious trouble.

  • Ellen Dibble

    newzeal — site where you go to see how a party bankrupt for reason and ideas is trying to blindside the rest of us. (Who knows why.)
    Am I right?

  • Dr. Tom Taaffe

    Well said, Frederic.

  • William

    ThresherK – Tax cuts work if the feds reduce spending. Here are a few tax increases coming in Jan.

    Personal income tax rates will rise

    Higher taxes on marriage and family. The “marriage penalty” will return from the first dollar of income. The child tax credit will be cut in
    half from $1000 to $500 per child. The standard deduction will no longer be doubled for
    married couples relative to the single level. The dependent care and adoption tax credits will
    be cut.

    The return of the Death Tax

    Capital gains tax will rise from 15 percent
    this year to 20 percent in 2011.

    The dividends tax will rise from 15 percent this year to 39.6 percent in 2011

    The “Medicine Cabinet Tax”.

    Deficits always matter and President Bush went overboard with spending. Just like President Obama is doing now.

  • Scott Phillips

    Tom – In the interest of hearing all sides I encourage you to have as a guest on your program economist Dr. Thomas Sowell. Or even better, a debate between Sowell and Krugman.

  • jeffe

    Seems like the Williams are in agreement. Being that they have great minds on how to run an economy such as ours, I am waiting for their collective wisdom on how to fix this mess.

    Amazing, simply amazing how some segments on the right seem to think that just throwing out the word “socialist”
    is an answer. You guys just demonize people without any constructive ideas or input. Of course this is the weapon of extremist, to degrade some other population such as the illegal immigrant or any Latino for political gain. Then start calling people socialist and yelling that they “want their country back”. I have heard this all before, it was used by every fascist government in the 20′s and 30′s in Europe. You don’t fool me.

  • Paul C

    William Maher, You know, I didn’t see any logic or sense to your argument, but when you used words like “socialist” and “grovelling” you won me over. You are like the kid on the playground who could call other kids names better than anyone else. What a brilliant way to make decisions! I think you should be President. Only trouble is, you are going to have to come up with more and more creative names to call people.

  • ThresherK

    William,

    You’re still calling it a Death Tax? Stop with the talking points.

    The right couldn’t come up with a poster child for this when it was rammed down our throats. Are they going to find one now?

    “Medicine cabinet tax” searches show up on Americans for Tax reform, Openmarket.org, Competitive Enterprise Institute, NationalReview, LiberalWhoppers. Anything on CNN.com, NYTimes.com, or CNBC.com I’m missing? (I searched and found nothing.) Sounds like another right-wing talking point; just one that didn’t take.

    I have no problem with the cap gains tax going back to 20% or dividend taxes back to 39%. Warren Buffet has said that he pays lower taxes when he cashes in a chunk of his assets than the waitress who serves him lunch pays on the tip he leaves her.

    And personally, I don’t care too much that you consider deficits to have mattered during the last decade. You are a voice in the wilderness, a statistical outlier. The right wing, the right-wing media, and the mainstream media (who can’t be bothered to go past “on the one hand, on the other”) played along with the phrase “deficits don’t matter” when a Republican was in the White House, during an economic expansion of ~5 years (which almost made up for the recession preceding it, for middle-class and working-class America).

    And now, during a recession, when tax receipts naturally go down during a recession, individuals aren’t taking up new spending (with money they don’t have), and businesses aren’t expanding (to meet demand that isn’t more tomorrow than yesterday), governments are to do what they’ve done: Spend more.

    And extend unemployment benefits, as they have for every recession since WWII.

  • William

    jeffe – Actually, It was Dr. Howard Dean that started the phrase “We want our country back”. After his “Dean Scream” incident.

  • fh

    Interesting and scary show today. Krugman seems to ignore the real problem of government mal-investment. Also, I’m concerned over the anti-business stance the administration has taken. Why invest if capital gains and dividend taxes increase, makes little sense to me.

    Yeah, Krugman with a Nobel prize, my oh my.

  • Frank Times

    There is a redistribution of income taking place of fewer and fewer resources and assets. There is no wealth creation taking place. You cannot lower unemployment levels and rates without the creation of wealth.

    Krugman is an advocate of quantitative easing. Maybe Paul and the other Keynesians can tell us exactly how much more we should spend. $1 billion? $10 billion? $100 billion? $1,000 billion?

    I am still waiting for the “jump start” of the economy that Obama and the libs told me would happen with the stimulus.

  • ThresherK

    Why invest if capital gains and dividend taxes increase, makes little sense to me.

    Unless you are so sophisticated that you think a six-figure sum should be buried in a pickle jar in the back yard. People invest because banks are paying about 0% interest on savings. And your being scared about tax rates isn’t the deterrent you think it is.

    Else people wouldn’t have invested when capital gains and dividend rates were much higher, under “Communists” like Eisenhower, Kennedy, and (I think) Reagan.

  • William

    ThresherK – I have no problem with the capital gains taxes going to less than five percent, same with zero taxes on dividends, and zero death tax. But that’s me, if you love huge taxes that is ok, that is you.

    I think they should have extended unemployment payments but your boy Harry Reid said “nope”, that stimulus money is mine”. So hey, that is you and your side kicking unemployed Americans to the curb.

  • ThresherK

    I’m sorry, how many Republicans lined up and said “Let’s extend unemployment insurance”?

    And still calling it Death Tax? Oogedy-boogedy.

    Better trolling, please?

  • William

    ThresherK – What do you need the Republicans for? Your side has the majority you can pass anything you want and usually Snow and Collins vote on your side too.

    Nope..it’s that darn Harry Reid would not even consider the option that the Republicans offered,..such an evil old man..bitter…kicking all those poor people to the curb…sad day..Where is Ted Kennedy and Paul Welstone when you need them?

  • jacob

    Housing eats up a lot of the poor’s income , it needs to be regulated . How about something simple as rent control.

  • Fred

    To spend or not to spend…..

    That is the question and a grave decision for the US. Spending really means an investment in the US and the people of the US.

    What is troubling is the when will this spending turn? @ let’s say 7% unemployment? How is this going to happen. Past history of the Great Depression has shown that the ultimate government spending, WWII, lifted the US out of depression.

    What’s troubling is what War is going to do that? Will we actually have to start one? to break the “Great Recession”?

    The good part? Perhaps it will be a short one when we deplete all of the Strategic Oil Reserves or one of our “enemies” decides not to export a product we “need” for import making up a component for something we need to sustain the War.

    So what we need is a “War” where we can “renew” our manufacturing prowess, promote sustainable growth and benefit the people of the US. A war on energy depletion a war for energy generation?

    So yes, we should spend? and invest in OUR infrastructure, hopefully this will bring back a lot of skills we need to grow as a nation and a “War”? in a breakthrough? industry so we can sustain our citizens keep us employed and be able to grow to make sure the US maintains a world leadership position.

    WOW, my head hurts. I wish there was some easy “app” for that….

  • TomK

    It is such a joke to hear how Americans have suddenly become deeply, deeply concerned about deficits. On the grasshopper-ant scale, we are definitely grasshoppers! All we care about is the size of the payments. Now, apparently, we’ve done a 180 and are projecting out years in the future, instead of the loss of jobs and wages right now. This is pure rightist propaganda designed, as George from Lexington said, to attack the safety net that the elitists have hated since 1935.

    The really disappointing thing to me is that anyone would listen to the same people who brought us the bush crash of 2009. Strike 3, you’re out.

    Krugman, and most liberal and conservative economists, agree that we are in deep danger without more stimulus. We could do such wonderful things with gvt support of high-speed rail, solar research, etc. It would create jobs and make us look a little less like a 3′rd world country compared to asia.

    Eventually we need to fix the deficit, but jobs and “pump priming” is the priority now. Eliminating the deficit is easy. 1. With the top 1% getting the most income, and close to the lowest tax rates, since 1929, it’s obvious that taxes have to go up at the top. 2. It’s no coincidence that we spend 2x as much as other developed countries on health care, with lousy results, and that we have the only corporate system. We need national health care! 3. We spend more on the military than the rest of the world combined. Stop the wars and make our allies pay for their own defense. Those 3 steps would get us on the right track quickly, no class warfare required.

  • Dr. Tom Taaffe

    Trust the right to speak an ugly truth, rather than the shiny lies the Democrats have been feeding us.

    Dan Dunn nailed it on the head when he said hardship will continue until American worker wages equalize with wages worldwide. (see his post above)

    That seems to be the sum of bipartisan economic policy, how to manage the downsizing of American people’s fortunes until we are no better off than the indonesians or chinese workers.

    It also explains the narrowminded discussion on jobs and the refusal to discuss the death of living wage work.

    This is the most malevolent and dangerous ambition of all and a vital danger to every American. Say it again loud a clear, so we can all be clearly aware of your agenda. It threatens us far greater than any Taliban could imagine.

    Is that your vision for the 21st century, how to turn us all into slaves for benefit of a global corporate nightmare?

    What world to give to our children! You should be ashamed.

  • eric

    Of course Mr. Krugman is right.
    I also heard him say recently that our timid half measures to stimulate the economy have already locked us into a long slow recovery at best. I am inclined to believe this too.
    Perhaps he is just too reasonable. He cites precedents and examples to support his argument. He explains his position and defends it against all comers in the most reasonable fashion.
    I am convinced that a lot of people just don’t do “reasonable.” There are people who begin with the conclusion! They start with conclusions based on their beliefs and the arguments proceed from there. Conservatives are convinced that taxes=bad, regulation=bad, government=bad, etc. and no argument can justify any exception to these universal truths. Everyone knows that the earth is the center of the universe.
    Real problem solvers are a small club. They realize that the solution to a problem, if there is one, comes from objective study of the problem itself, understanding=solution.
    People are upset. They want to blame someone or something for our present misfortunes. Perhaps if Krugman were to launch into a sustained rant about the policy mistakes that led to this mess and how our dis-functional government has failed to do what needs to be done to prevent it or get us out of it, perhaps more folks would listen to him.
    There is a lot of anti rationalism going around, epitomized by the tea party people. “It’s all Obama’s fault.”

  • Marcia Schneider

    What can be done to incent corporations to spend and hire Now?

  • jeffe

    What can be done to incent corporations to spend and hire Now?
    Posted by Marcia Schneider

    Nothing. If they are publicly traded corporations they have to answer to their shareholders but not to the public or the government.

  • Heather

    We need some stimmulus and some austerity. At the minimum we need to extend unemployment insurance which we know to be a good investment. Unemployed uninsured people facing finacial ruin are a terrible drag on the economy in the same way that an uninsured person with a health issue who goes to the emegency room for delayed care is a drag on the hospital. Forclosure, loss of stable home life and school, hunger, use of food banks instead of grocery store, reduced neighborhood property value, all end up costing the community more than that unemployment check.

  • Charlotte

    There is a fundamental difference between this recession/depression and the Great Depression:

    In the Great Depression, the workforce had skills to match the jobs to be created if only they could generate those jobs to put people back to work. Today we have a workforce many of whose jobs have already been exported forever. We need to retool the workforce as well as the banking and finance systems.

    Therefore, I’m willing to tolerate debt ONLY if it retools the workforce for jobs that will actually be there or can in fact be generated. I also want banking, finance, and stock exchange reform with real teeth in it — not just that pathetic fig leaf recently signed into law.

    And there is another difference: We quibble about extending benefits to those who have worked diligently all their lives and never asked for a penny before this collapse that is not of their making. Yet we continue to shell out food stamps and Section 8 and medicaid to those who have never made the effort to complete their educations or to find and keep a job.

    Therefore, I’m willing to help people on a sliding scale to the extent that they need health care and supplements to subsidize their income and to provide their children with decent day care and afterschool programs (The French are light years ahead of us on this.) But I do expect everybody to contribute to this society and not just take from it. Maybe you can only volunteer for now, but get up off your duff and do it. The only exception I would make would be for those taking care of a disabled loved one full time, and them I would help to the max.

  • Heather

    OK, I know it’s not popular, but can we really afford our overseas wars? If I have to experience “austerity” in poorer local and state services here at home, how about cutting spending for these wars were nobody wants us. I’d rather cut there than shorten the school day. Lets see some cost bennefit analysis on the war.

  • jeffe

    You know what is so funny, how Republican politicians who have been part of the Federal government for most of their lives say things such as “government” is the problem.
    Well given that they are part of the government are they not part of the problem.

    A perfect example is John McCain who has been quoted to saying that the government has been a fault at securing the borders in his state. Yet he has been in Washington for 30 plus years. He also use to support amnesty for illegals but now advocates sending them back to their country of origin.

    I don’t know but to me this is the definition of a hypocrite.

  • TomK

    I also agree that part of what we are experiencing is the equalization of wages worldwide. It’s been obvious to me for a long time that the phony corporatist “free trade” would lead to sliding American wages. The right love to talk about the benefits of free trade, but they carefully ignore what happens when one trading partner starts off with much higher wages. If an American is making $17 and a chinese is making $3, for a total of $20, and due to the miraculous benefits of free trade the combined wages rise 50% to $30 AND equalize, the American still gets a pay cut of $3!

    There is only one reason why Americans should live better than anyone else, and that is our technology and capacity to manufacture products that the rest of the world wants. However “our” corporations are NOT “ours”, they’re trans-national entities loyal to themselves only. They’re happy to ship our jobs offshore so that our technology no longer benefits average Americans, hence the slipping wages. So I must add to the 3 points for balancing the budget with no cuts to the safety nets a fourth, stop phony free trade and offshoring that benefits no Americans but the corporate elite.

  • cory

    Not a Chance,

    Just read your post at 1021hrs. Please takr $5 from petty cash and buy yourself a pint of your favorite brew. Cheers to you!

  • TomK

    jeffe, GoP pols MAKE gvt the problem when they are in power. They don’t even have to tear down regulations for their corporate friends, they just appoint ideologues with a mandate to do nothing to head key agencies, and then when the agencies don’t function they say “See! We told you gvt is worthless!” It’s a beautiful self-fulfilling prophecy. So we get the likes of “Brownie” at FEMA during Katrina, Alan “markets regulate themselves” Greenspan at the Fed, Archibald “see no evil” Cox at SEC, etc etc. Dam right gvt is the problem, with clowns like that in important positions. OTOH, gvt works just fine when it’s run by people who aren’t trying to destroy it, or to turn the USA over to the corporations.

  • Lon C Ponschock

    Lots of verbiage on here today. I just wanted to introduce a new thought. There is much made of the Nobel Prize won by Mr. Krugman.

    Might it not be better to look for new answers, perhaps from one of those who have been recognized by the “Right Livelihood Award” also made in Sweden as an answer to the regular winners of prizes based on traditional merit (from the authorities in power)?

    I truth I have had enough of the meritocracy in all of it’s forms. Example: Obama’s Nobel Peace Prize.

    And yes, lack of discussion of the wars as economic debt does not get mentioned enough. It’s always labor that gets the blame, or bad investments. Who holds the war machine investments?

  • gracie

    I completely agree with Heather! The idea of a Ferguson vs. Krugman debate seems to translate into a “superpower empire” vs. “its people” debate. I know what I support, and it certainly is not the Superpower govt that starts useless, bloody, and expensive wars abroad without asking me, the citizen, what if I want to pay for it.

  • John

    Just move to Massachusetts OUR ECONOMY IS GETTING BIGGER and BETTER

    I have seen alot of cars with plates from California,Virginia,New York,tons from Rhode Island,Michigan etc etc.

    You have more of a chance getting a job in Mcdonald’s in Massachusetts than any other States

    I LOVE MASSACHUSETTS where everyone are working not working to get a free ride.

  • Steve V

    It appears to me that over the decades we have built an Empire, as other countries have done in the past, and are now witnessing its decline. I’d like to hear a program on other Empires, such as the Roman and British, and see if there are lessons we can learn regarding their decline. Since we’re discussing (financial) history what do these Empires have to teach us?

  • http://www.lowenfoundation.org/ Frederic Lowen

    Right On TomK!

    You’ve got their MO!

    A big driver in losing American jobs is artificially cheap energy and transportation. If Big Energy wasn’t subsidized by our tax money, loan guarantees, (lack of) regulation, military support and war expense; and if the environmental and social costs of oil/gas/coal/nuclear/ethanol were in the cost of gasoline and electricity etc. they wouldn’t be so quick to ship raw materials to China, finshed goods back, and scrap back again; or lettuce from 6000 miles.

    It’s a myth that the US hasn’t had an energy policy. We have had the most effective energy policy ever: it happens to be the same as Exxon-Mobil’s (or BP’s) Business Plan. Exxon-Mobil is the largest most profitable corporation in the world. They have had a net income of over $10 Billion every 3 months for a long time, and that’s after the corporate manager have spent as much as they can think of (and get away with) on themselves and maintaining the Status Quo.

    Strip away the subsidies, and we would have a sustainable energy economy faster than anyone is prognosticating, even without solar/wind subsidies!

    The only way out is higher energy prices. The political destruction of alternatives, and the American addiction to cheap energy is not sustainable.

    And it is not just Exxon-Mobil, they are the rule, not the exception. All large business across all industry groups operate the same way: gut real government, and fleece the sheep.

    With 5% of global population utilizing 25% of global resources in America, we are somewhat spoiled. It is not a political issue, it is a natural fact. As we are at or approaching global limits, it will have to move towards equalization; a tough headwind for ordinary Americans. The only way we can minimize its’ effects is either by military intervention, or by re-learning how to solve and avoid real problems, which we have clearly forgotten. Americans are best at making money (which will become literal on this path), but we have forgotten that it should be by solving and meeting real needs; not by creating imaginary needs and markets based on fear and insecurities, with a free hand to exploit the people, because the government is a government of, by, and for the corporations.

  • Mike Drymiller

    Tom,
    Please keep Krugman’s comments to the point and have him remove his political poison.

  • Lon C Ponschock

    Answering SteveV,

    The most astute observer on the comparison of empires is Kevin Phillips. Phillips is not an ideolog and he does comparative analysis of the empires following that of antiquity which was the Roman Empire. Phillips is due to hit with a new book soon. The most recent one called “Bad Money” showed how August, not September tells the tale of an economy. Though history does not repeat it rhymes and echoes the patterns that have preceded. Over many years Phillips has shown the touch points of similarity with empires that are now gone.

  • twenty-niner

    “Past history of the Great Depression has shown that the ultimate government spending, WWII, lifted the US out of depression.”

    True, but we had the added benefit of being the only major industrial power left in tact after WWII, leaving our factories with a huge competitive advantage (by having walls and roofs).

    I would agree that government spending that creates demand while at the same time decimating foreign competition would be hugely stimulative.

  • twenty-niner

    “Eliminating the deficit is easy. 1. With the top 1% getting the most income, and close to the lowest tax rates, since 1929, it’s obvious that taxes have to go up at the top.”

    I think the problem is that many Americans aren’t really comprehending the magnitude of the deficit as well as private debts, which all must be serviced. Let’s do some quick calculations:

    Fed. spending: $3.55 Million Million
    Fed. revenue: $2.12 Million Million
    Fed. deficit (spending – revenue): $1.43 Million Million

    Number of tax-paying households: 109 Million
    Fed. spending/household = (3.55 x 10^6)/109 = $32.5 K

    If we were to tax households making $250K or more to cover the $1.43 T shortfall:

    Number of $250K+ households: 1.7 Million
    Required tax/$250K+ household = (1.43 x 10^6)/1.7 = $841 K

    So, if we tax the $250K+ households at close to $1 million per year, we can cover the deficit. Of course, this is only the deficit. Taxes would have to go up from there to actually pay down the $12.8 T national debt and cover the looming $108 T in unfunded liabilities. Further, don’t forget the $14.1 T in mortgage debt, $2.4 T in consumer debt, and $.83 T in credit card debt, which also must be serviced. And on top of this, tack on a $.7 T trade deficit (2008 figure), which also must be paid with borrowed/printed money.

  • Jeff Burton

    From 2003, when the Bush tax cuts that Krugman so reviles were fully implemented too the beginning of the recession in 2008, federal income tax receipts grew 56%(according to US treasury data). Pray tell, Mr Krugman, how much revenue does the government need to conduct it’s business. I wish my income had ballooned by 56% during that period. As usual, this is a spending problem, not a revenue problem.

  • Matthew Simpson

    Tom:
    I think your show is one of the best programs on NPR, so I wanted to point out a misconception that I heard in your interview with Krugman and that I hear all around the media.
    In what way is spending money on Iraq “spending money overseas”? Most of the money spent on US wars goes to defense contractors, oil suppliers, and the paychecks of military personnel. Even the bases that the US builds overseas are mostly constructed by US contractors. Halliburton’s extensive involvement in military construction and services is one salient recent example.
    This disconnect between the basic reality of US war spending and the way it gets described on the radio is curious. Perhaps the problem is that people are afraid to connect military spending to profits. To make the connection is to understand one of the most important reasons for continuous and costly warfare in our time. If so much was not to be gained, perhaps gigantic war efforts would cease to be the response to problems that could be solved in other ways.
    In any case, the media needs to speak as if it understood the elementary issue of where the money goes.

    Best,
    Matthew

  • David from NY

    If WWII brought the U.S. out of The Great Depression, why not recreate those conditions of government policy by creating a war like scenario by committing the economy to a specific goal, such as combatting global warming.

  • david

    Paul Krugman’s approach to the financial problem will produce a “untowards effect”. We are seeing the effects grow before our very eyes.
    What pulled America out of the problems of the past was a robust industrial system that made things here in America. We do not have that very important industry today.
    Out economy is 60-70% consumption driven.
    Our main companies who hire the bulk of Americans are small businesses.
    Raise taxes, the increases that are coming next year, will cause people and companies into hoard mode.
    Stimulating with borrowed money is like putting a bandaide on a cut now and dying of cancer two weeks later.
    “The tragic inevitability of government intervention is that when you create a permanent agency to deal with a problem it has an inherent tendency to make the problem itself permanent.” Janet Daley
    Government can create a conducive environment for business or it can create more problems.
    I am afraid we are in for some really bad times ahead.
    Our wants have exceeded our needs.
    All we need now is for gas to go up over $4

  • BrettG

    War spending, especially GWB’s 2 wars, were proven not to have long-term gains. That came out in the 70s and later.

    Without a stimulus as Krugman likes, why should businesses hire? Without demand created by more people working for better wage, they have no reason to hire anybody!

    The GOP/Soviet-style “Supply” doctrine has moved all the $$$ to banks & corporations, leaving no money to be spent by the largest pool of consumers. Further, those consumers have their houses foreclosed, retirement funds decimated & credit cut by banks & corporations that economists tell us is at record levels.

    ‘we’ve ignored the Demand side of the economic equation since the late 1970s when the median family income started to drop due to de-regulation & lack of regulation.

    Add in crony capitalism, GWB’s crony contracts.

    We need to get out of the 2 wars we’re in & concentrate on infrastructure repair & upgrade. We rank 30th in broadband internet speeds – far behind Estonia & 37th aggregate health in the world.

    When we have local jobs & workers who spend locally & the $$ multiply due to the domestic multiplication factor.

    It doesn’t matter how much “Supply” stores and services have if there’s no one with money to buy the goods.

  • LenoreP

    Have unemployment benefits replaced the welfare program that were cut back in the Clinton Presidency?

    What is your position on cutting back on the benefits of Federal and State workers most of who receive much better benefits than their private sector equivalents?

  • Gary

    The economy is actually nothing in and of itself… It is simply a medium of people power, and so it does NOT matter whether to spend or not to spend our way “out of this”… we have a people problem including greed that needs to be addressed!

  • Malcolm D.

    hey, I’m a John McCain economist, meaning I don’t know shi$ about economics. however, that does not stop me from knowing everything.

    Seems to me that we have the same amount of wealth in this country as we did before “the meltdown”. But where did it go?????

    I wonder if the answer to this question might be simply that it went to “the ultra rich”, and the “almost ultra rich”.

    So could someone tell me what’s wrong with redistributing some of this wealth form the rich to the middle class/poor; after all, it was already redistributed from the “lower class” to the rich.

    Is there, perhaps, enough “discretionary spending money” amongst the rich to entirely, or at least largely, eliminate the big bad deficit? Maybe even help some of the folks who are losing their houses?

  • TomK

    twenty-niner, let’s not oversimplify. I mentioned 3 points, and then a fourth.

    1. The total income is about $7 trillion and about 20% of that goes to the top 1%, say $1.4 trillion. A modest additional collection of 10% from this ultra-comfortable group yields, say $150 billion/yr

    2. We spend about $2 trillion/yr on health care. Kicking out the bloated corporate system and reaching the efficiency of even the most expensive systems in the rest of the developed world easily gets us $500 billion/yr

    3. Budgeted mil spending is about $700 billion/yr and the “emergency” off-budget spending for iraq and afghanistan is about $150 billion/yr.

    So, end the wars and shave more off the “regular” mil spending, which would leave us as the #1 mil spenders in the world, and you’re approaching $1 trillion/yr to play with. Maybe that won’t “eliminate the deficit”, but ti sure is a giant step.

    and 4., if we restored good jobs to ordinary Americans by discouraging offshoring, and the economy recovers, tax revenues from the middle class will rise.

    Gee, I didn’t even have to mention “reform” of SS.

    Does anyone not know yet that when the right says ‘reform” it translates to “screw the middle class”?

  • david

    CBS news is doing a grading of Obama’s first year.
    http://www.cbsnews.com/8301-503544_162-6116297-503544.html?tag=

  • TomK

    Thanks, Fredric Lowen. I agree that we subsidize energy use so that consumers don’t pay the true cost, and in doing so promote a lot of bad things like high consumption and the associated deficit, neglect of alternatives, pollution, the ease of globalization, etc.

  • madenamerica

    The next stimulus needs to directly correct the cause of this (or any) recession/depression or it will fail. Make it as complicated as it suits you, the truth remains that what exists is nothing more than the unequal distribution of wealth. This unequal distribution of wealth has reached its functional limit and hence we have recession/depression. To place money with entities that already have money/power will only perpetuate this lack of flow and that is all this recession is, merely the perpetuation of money not flowing because it has pooled. This has happened throughout all eternity and will happen through all eternity; it is the nature of human society, of human nature. KISS, Keep It Simple Stupid. Money, resources, goods will always be accumulated by the powerful, the powerful will always seek to control structures to keep the flow going their way until “it all falls down”(yes everything has limits) and then gets redistributed. To maintain this countries strength and integrity the flow must be directed toward sustaining the masses, not the few. And I need to be able to buy a flag made in America, a flashlight made in American that is a fundamental to basic economics also; it really isn’t that hard to figure it out, it is very simple. And don’t worry if they don’t get it figured out in time to save their country, time will do it for them. It is just such a shame to see so many suffer and to lose the promise our nation. Come on leaders, come clean for your country, and come home to your country. Yes, there is a big bold world out there to go play in, but you need us too, you can’t leave us behind; after all we are why you went out there. Forget that and you will lose the game. Part of the game is not just getting that big pile of money for yourself, its passing GO still holding on to your country.

  • twenty-niner

    T/K

    I agree with most of your points, except for government-run health care. Not that I’m against government-run health care in theory, I just don’t trust OUR government to run it.

    Also, military spending is highly stimulative and factors directly into GDP:

    GDP = private consumption + gross investment + government spending + (exports − imports).

    Slashing the military would put a lot of military personnel, government civilians, and contractors out of work. Not that this shouldn’t be done, it just needs to be done sensibly.

    My take is that it is probably too late to avoid default. The guys who know the debt markets are singing a different tune than Krugman. From Bloomberg, Bill Gross warns of a debt super cycle:

    “U.S.’s $13 Trillion Debt Poised to Overtake GDP: Chart of Day”

    http://www.bloomberg.com/news/2010-06-04/u-s-s-13-trillion-debt-poised-to-overtake-weigh-down-gdp-chart-of-day.html

  • informed American

    I thought Obama’s 787 billion dollar stimulus package was supposed to keep unemployment below 8%. Some people will foolishly believe anything.

  • Candace

    What a disappointing program. As usual, Tom Ashbrook asked the same question to his guests, over and over again. In doing so, he never seriously challenged Mr. Krugman. Either Mr. Ashbrook doesn’t do his homework, or his producers fail him (or possibly both).

    For his part, Mr. Krugman hides behind his Nobel Prize–this formerly prestigious award now has all the cache of an MTV Movie Award–and obfuscates, cherry picks, and outright lies.

    As the owner of a medium-sized business, I disagree strongly with Mr. Krugman’s bald-faced lie that there is no evidence that business is not hiring because of the policies of the Obama administration. Much to the contrary. I cannot and will not re-hire employees until I am clear about just how much the new health care system is going to affect my underlying costs, nor do I know how much a new energy policy would impact my operations. When there is such uncertainty, business cannot flourish.

    Also, I fear that at times Mr. Krugman (abetted by Mr. Ashbrook) portrayed the choice as too dichotomous–either spend to create jobs, or do nothing. This is a grossly unfair and ridiculously oversimplifying characterization of the debate. Americans don’t want no spending. We want smart, efficient spending. A drunken Hilton sister can manage her finances better than our current leadership, whose solution to any and every problem is a few billion dollars of spending.

    Frankly, this government has wasted significant amounts of resources on “progressive” pet projects that will have little impact on short- or long-term economic growth. There has been woefully little coverage in our mainstream media about the ridiculously inept (or even criminal?) accounting for the stimulus spending. Too much of this government’s spending is nothing but patronage that will go to certain congressional districts to prop up Democratic support. And I heard little about whether this was the right time for our government to launch one of the largest entitlement programs in the history of this republic.

    Again, is the choice really between doing nothing and having Barack Obama toss around my tax dollars as if they’re Monopoly money?

    Finally, Keynesians like Mr. Krugman are quite fond of trotting out 1937 as irrevocable evidence that austerity would be misguided. Keynesian economics is a paradigm largely built off of one event–the Great Depression. Any social scientist worth his or her salt would first acknowledge that there is no way to say definitively that deficit spending saved the US economy in the 1930s (I notice that Mr. Krugman is fond of citing statistics without acknowledging that the methodologies used to derive such “findings” are highly contentious within academia), and that extrapolating from one event is seriously flawed science.

    My final point is this: There was a very real undertone throughout the program that, if Americans oppose the stimulus, they only do so because they are misguided. I wonder how a public that was so apparently enlightened just two short years ago to elect the savior incarnate could so horribly lose its way.

  • Marc

    Mr. Krugman makes a good argument that now we have to spend more in order to avoid a double dip into recession. However, his credibility is poor given how partisan he is. Several times he peppered his sentences with talking point phrases like tax cuts for the rich. Not enough, by itself, but it did make me suspicious. Then, when a caller asked about spending on the war, Krugman said essentially, Obama’s war was good spending, but Bush’s war was bad spending. He sounded a lot like a democratic version of Hannity with an economics degree.

    Then I thought about where that money would go. The wars will get a lot. Some to the new health care system – one patterned after Massachusetts which has the highest average premiums in the nation plus has increased by a factor of 4 the number of people gaming the system (signing up just when they need care, then dropping out).

    But a lot would go to public sector workers. The average federal worker makes 22% more than the average private sector worker (normalizing the data for differences in education and experience). If you add in benefits (health care, retirement accounts, etc), it’s 30 to 40% higher in the public sector. Oh and the net change of unemployment for fed workers has been close to zero (inotherwords, there have not been cut backs). Massachusetts has cops still watching holes being dug in the streets. California has state university professors that put in 15 to 20 hours a week for full pay. New York has thousands of teachers sitting all day in “the rubber room” because they can’t be fired, but they’re not qualified to teach. Pensions in many states have given the employees the ability to retire in their early 50’s with all benefits and most of their salary.

    Either Krugman is what we call here, a hack, or he’s too insulated.

  • jeffe

    Gee a professor of economics from Princeton University is now being called a hack. Did any of you people hear John McCain’s economic adviser Mark Zandi say just about the same thing as Krugman did? Krugman was also right in predicting the housing bubble and the wall street induced collapse.

    It’s interesting to here conservative or Republicans go on about partisanship when all I read here is pretty much based on it. So give me a break Candice. On your other points, you say you don’t want to hire because of the new health care laws coming down the pike. OK so lets unpack this for a moment. What your saying is you will stiffen your own businesses growth due to some perceived unknown factor. You seemed pretty happy to let Bush “toss around your tax dollars as if they’re Monopoly money”. If it were not for the blatant partisan spin of your post you might have had some credibility in your talking points.

    I find it funny how people on the right tend to cry victim all the time. Yet they are as partisan as they come. Interesting dichotomy I would say.

    I would also add that steeping to base insults to get ones point across or to debase Mr. Krugman actually hurts your arguments. Do you people who do this not see this? Or is it that you don’t care because you don’t believe anything anyway.

    Let me ask you this, if Krugman is right and a year from now we are in the exact position he stated, what then?

  • Ellen Dibble

    Somewhere last night I heard Senator Bennett (Utah, who lost a primary to someone less, he said, into negotiation, more into blaming everybody else, loudly, all over network TV). And I think Senator Dement from one of the southeast states.
    And it reminds me of the thread in here about: How about we blame the other side. We are the strongest and the best, so on and so forth.
    Don’t people realize this scapegoating kind of politics: Whom can we bad-mouth, whom can we blame, whose resources can we co-opt, rather than taxing ourselves — don’t you hear the Nazi cry of Lebensraum, we are the best, there is someone we can blame? How about the immigrants…
    It’s very unnerving to hear it here.

  • TomK

    twentyniner, I understand your concern about our gvt running health care. However, note that for some time we’ve had gvt agencies run by political appointees who believe that “gvt is the problem” and that civil servants are losers who can’t find work in the private sector….not exactly a formula for a successful organization. I strongly believe that those who believe that “gvt is the problem” have done their very best to MAKE gvt the problem, and that gvt can do very well when it is run by people who believe in public service. IMO our gvt functioned like that for a long time, but i admit that I’m not sure if we can ever go back.

    Even with the gvt bashers running the gvt, note that most seniors are quite happy with gvt-run medicare, even those elderly teapotters who want the gvt’s hands off of their medicare :)

  • Johno

    He didn’t offer any concrete evidence as to how more spending would in fact create meaningful jobs or boost domestic growth as a whole. He said it himself, if large companies started to invest in new projects, the result would be the same as if the government did, without adding to our national debt. Find ways to promote corporate spending (like the 2 billion for green projects in the original stimulus package) and stop giving cash to “too big to fail” companies that simply use it to erase their individual fiscal mistakes. The government doesn’t know how to best spend the tax dollars of individuals and small businesses (as proven by the first stimulus package), so instead of throwing more money into corporate America, provide incentives for them to spend their cash (WHICH THEY ACTUALLY HAVE UNLIKE THE GOVERNMENT).

  • john hosemann

    hello tom
    krugman suffers from the keynesian idea that economic activity can be goosed up or down from the top via policymakers using their brains…well as a matter of fact economic decisions by firms and households are what drives the overall economy in the aggregate…and as long as the ‘elites’ like krugman keep layering on uncertainty there will be decision making retrenchment by firms and households…some even high level obamma supporters like immelt at g e and the head of verizon have discovered the foregoing hard economic truth…krugman could print 5 trillion more bucks to no avail as long as the spigot of uncertainty is wide open from the white house and congress…bailing out teacher,firemen, police and state employeee pensions produces nothing real…firms and households being able to keep more of their productive wealth would turrn things around in a hurry..

    thank you john hosemann

  • Candace

    jeffe–

    I appreciate your taking the time to respond to my post, even though you spelled my name wrong.

    Instead of dealing with my critiques of Nobel Laureate Krugman directly, you just call me a partisan hack. And you also seem to call me a liar and an oppressor who now cries “victim!” Classy and effective.

    You say that I am deferring growth in my business, but hiring doesn’t necessarily mean growth. If I hire, but then cannot handle the cost of these new employees, then my business suffers, and it contracts. (And, no, my business doesn’t produce those little black lawn jockeys, as you seem to imply. We actually produce green cleaning products.) Uncertainty is tough when you’re trying to plan.

    If I complain about the macroeconomic policies of this administration, then I’m just a hypocrite claiming I’m being victimized. This is a typical tactic of “progressives” that basically says that Republicans (of which I am emphatically not) have no right to dissent against Democratic policies. Who the heck are you to judge me, and to make some veiled criticism that I am part of some oppressive class?! I started my business from absolutely nothing and work 15-hour days to keep it going. Your comments are ignorant and bullying.

    I never, for a single second, said I was ok with the way Bush managed my money. I was just as displeased with that. Who are you, David Axelrod?! Typical Obamabot talking points–instead of deal directly with any criticism of His Holiness, just mention how bad Bush was.

    The level of intellectual discussion on these boards is the same as the level of intellectual discussion on the program itself. I do not expect to return to either in the future.

  • jeffe

    First off your post was as partisan as they come. You make a statement about Krugman being partisan and then you make remarks like this: this government has wasted significant amounts of resources on “progressive” pet projects that will have little impact on short- or long-term economic growth. Sounds partisan to me.

    Candace, I also never said anything about what your company made. It seemed to me that you were using the health care bill as an excuse. If the business is growing and needed staff I would think that it would be prudent to hire them. Again it seemed to me that your intent here was clearly partisan in nature.

    I never called you a liar. I called your intentions hypocritical there is a difference.

    You made comments about Krugman being partisan and then you are doing the same thing! Give me a break.
    I never said you can’t post what you want, did I?
    I made a comment pointing to your hypocrisy which seems to have set you off into a diatribe.

    You then say your leaving to never return, to never too darken the doors of the On Point forums again.
    Talk about drama… you don’t get your way and have a temper tantrum.

    I suppose it was presumptuous of me to think that you supported Bush’s and the Republican congress’s handling of the economy however the general thesis of your post was clearly conservative in nature which leads one to conclusions.

    As far as you being part of some oppressive class well if the shoe fits… I never implied that, hmmm are we reading some wrong assumptions here. I guess I did, I thought you were a conservative or a Republican, but now you say you are not.

    As for me being a supporter of Obama, I would hardly call myself that. He’s pretty disappointing on all fronts.

    I was not talking about him, it was Krugman.

    Anyway you wont be reading this as you have announced that it is beneath your intellectual stature to bless the On Point forum with your majesty’s presence.

  • William

    The government should sell off some of its assets and use the proceeds to decrease the debt. The TVA (Tenn. Valley Authority) has completed it’s original purpose and would bring in much needed cash if it was spun off to the private sector.

  • Fred

    America’s incessant addiction to credit is propelling us straight down the road to bankruptcy. And Krugman’s advice? Mash down the accelerator. Brilliant.

  • Rob L

    Lying economists know which side their bread is buttered on. Balance trade against China and the rest of the world and there will be more jobs in the U.S. then we know what to do with. If you don’t balance trade then it will just be more of the same.

    More debt just makes the bankers happy as they collect the interest off the rest of us. The debtor is a slave and people like Krugman want to continue the enslavement of the American people.

ONPOINT
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Apr 23, 2014
In this Thursday, Dec. 20, 2012, file photo, Chet Kanojia, founder and CEO of Aereo, Inc., shows a tablet displaying his company's technology, in New York. Aereo is one of several startups created to deliver traditional media over the Internet without licensing agreements. (AP)

The Supreme Court looks at Aereo, the little startup that could cut your cable cord and up-end TV as we’ve known it. We look at the battle. Plus: a state ban on affirmative action in college admissions is upheld. We’ll examine the implications.

Apr 23, 2014
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Apr 22, 2014
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As a new Tyrannosaurus Rex arrives at the Smithsonian, we’ll look at its home – pre-historic Montana – and the age when dinosaurs ruled the Earth.

 
Apr 22, 2014
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We look at Iraq now, two years after Americans boots marched out. New elections next week, and the country on the verge of all-out civil war.

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