More from Krugman

[dayman]

"The thing is that we've actually seen in practice, you can say idealy lets have a plan to reduced the deficit 5 years out, 10 years out, while at teh same time doing stimulus for the economy, Washington doesn't work that way. If you spend a lot of your time saying the debt and the deficit are the big problem, the message that what we need to do now is promote jobs gets lost. And in fact we've spent the last 2.5 years focused entirely about the long term deficits and entitlements and doing nothing for employment, that balance has got to shift." (Krugman in the above video)

 

That quote basically sums it up

Edited January 29, 2013 by SameOldBills

[3rdnlng]

Well while after watching the entire interview less than an hour ago, just not what I saw. No doubt you can easily rail against him for being totally soft on the urgency of those problems and probability of not avoiding them, but it's a little disingenuous to say that he flat wouldn't do anything since he says in the interview if we were dealing with some all powerful King that could just do things with a snap of a finger he would.

 

In any event, as for me, I do believe we need to do something. I also believe Krugman is right when he says right now if you are comparing the two...growth now is more important.

 

How in hell's name do you expect to get growth from the policies this f'n administration has pursued? Cash For Clunkers? Lending money to the next Solyndra? Funding union pensions? We would get more growth by showing fiscal responsibility, thus setting a new tone to the business owners that are hording their cash.

[B-Man]

How in hell's name do you expect to get growth from the policies this f'n administration has pursued? Cash For Clunkers? Lending money to the next Solyndra? Funding union pensions? We would get more growth by showing fiscal responsibility, thus setting a new tone to the business owners that are hording their cash.

 

You didn't mention Obamacare and the other new regulations that are now starting this year that will continue to suppress economic growth.

 

.

[3rdnlng]

You didn't mention Obamacare and the other new regulations that are now starting this year that will continue to suppress economic growth.

 

.

 

I was saving that for SOB's next post trying to raise the limit on his credit card so he could make this month's payment.

[GG]

Since when does consensus actually mean anything?

 

Not that i agree with Krugman but I have a hard time seeing how America borrowing at historically low levels will ever cease as long as they remain the cleanest dirty shirt. Capital has to flow somewhere and with the near collapse of the Euro and the lack of history behind the CNY, it will be decades before someone emerges which will, in my opinion, keep the US safe from having to borrow at high interest rates.

 

The key term is relatively high interest rates. US will always have a discounted cost of borrowing (as long as that empire thingie keeps going), but absolute rates will not be this low forever. So Professor Krugman chooses to ignore that with a bigger entitlement class, private sector growth naturally slows down, and he will not get the economy moving fast enough to pay for his super stimulus. So he'll crush the near term deficit, while waiting for the entitlement tsunami to wipe everything else out in 25 years (after he's long dead).

[B-Large]

Krugman's argument for stimulus and alot of it makes sense, if:

 

1. The US had a much lower long-term debt

2. We are typically fiscally reponsible in the good times, and in the bad times borrowing a spending makes sense because we will pay it back when the econmy improves.

 

While I think either way healthcare will drive this country to the brink of insolvency as the boomer retire (or we will become a nation of the Healthcare have's and have nots) whether or not it is Medicare/ Medicaid or Private Insurance, I think its a poor stance to take that we shoudl only focus on the short-term, when there are things we can do to long-term outlook to ease the fiscal burdens...

[Magox]

Since when does consensus actually mean anything?

 

Not that i agree with Krugman but I have a hard time seeing how America borrowing at historically low levels will ever cease as long as they remain the cleanest dirty shirt. Capital has to flow somewhere and with the near collapse of the Euro and the lack of history behind the CNY, it will be decades before someone emerges which will, in my opinion, keep the US safe from having to borrow at high interest rates.

 

Let me address a few points:

 

To your statement

 

Capital has to flow somewhere

 

Not necessarily, remember after the Lehman collapse? Was credit and capital flowing? Of course that was more of a systemic banking failure, but all one has to do is see that systemic sovereign debt failures are just if not more damaging (see Europe). So Capital doesn't have to flow somewhere. Now of course, the "cleanist dirty shirt" is the phrase coined by one of my favorite financial dudes, Bill Gross and he has a point. Of course we have an inherent advantage over the rest of the world and that of course is our mantle of having the world's reserve currency. However each and every passing day, that status is eroding due to a bevy of reasons, whether it be from the rise of the east relative to the U.S, the diversification of their assets into other areas, arranging currency swaps with other trading partners at a much faster clip than we have seen in the past, and last but not least, our unsustainable long-term debt outlook, mainly due to our overburdened health care systems through underfunded liabilities such as Medicare and S.S that continue to look worse by the day.

 

Another point, something that is lost on SOB is that my original post was regarding Krugman's denial that the U.S doesn't have problems with our entitlements that from his perspective don't need to be addressed within the next decade. Of course any rational thinking person who understands the English language realizes that he was conflating two different topics. He was talking about Krugman's broader point of advocating for stimulus now until we have full employment and then worry about Growth later. That is another subject entirely, my post was about what Krugman said about the entitlements, and of course what I posted right below this proves that.

 

 

“My message is, we’ve got a coming collapse if we don’t take care of our entitlements,” Scarborough remarked.

“It’s a long way off, it’s not necessarily even true,” Krugman replied. “All you’re saying is that we should lock in now the health care changes that we think we would have had to make within 15 years.”

 

 

“Not just lock in changes,” Haass interrupted. “We’ve got to make real cuts over the next decade.”

“No we don’t,” Krugman shot back.

 

Scarborough made a point about how we need to address our entitlements, Krugman literally scoffed at that suggestion and even implied that what Scarborough stated wasn't even true. Haas said that we needed to address it over the next decade and Krugman said that we didn't.

 

It's pretty clear

 

The Medicare HI Trust Fund faces depletion earlier than the combined Social Security Trust Funds, though not as soon as the Disability Insurance Trust Fund when separately considered. The projected HI Trust Fund's long-term actuarial imbalance is smaller than that of the combined Social Security Trust Funds under the assumptions employed in this report.

The Trustees project that Medicare costs (including both HI and SMI expenditures) will grow substantially from approximately 3.7 percent of GDP in 2011 to 5.7 percent of GDP by 2035, and will increase gradually thereafter to about 6.7 percent of GDP by 2086.

The projected date of HI Trust Fund exhaustion is 2024, the same date projected in last year's report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs.

 

http://www.ssa.gov/o...rsum/index.html

 

So according to the Medicare Actuaries, we are expected to exahaust our funds by 2024. So who's right? Krugman or the Medicare actuaries? That's why when I said:

No one agrees with you, not the credit rating agencies, Bowles simpson, Conservative think tanks, mainstream economists, most liberal think tanks, but more importantly, math doesn't agree with you.

and you replied with

 

"Since when does consensus actually mean anything?" Well, if it were just consensus then maybe it wouldn't have quite as much weight,but I did say "BUT MORE IMPORTANTLY, math doesn't agree with you"

 

What do I mean by math? Well, I just showed you, we know that the funds will be exhausted by 2024, and Krugman said that we didn't have to address it by that time period.

 

How do you believe the bond markets will react if we do what Krugman suggests, which is not address Medicare before it's expected time table before it exhausts? Do you think there is a chance we could see rates go higher?

 

The argument that was being made on the Morning Joe Panel wasn't to enact draconian cutting measures that would slow down the economy, the argument being made was we should have pro growth policies AND address our long-term debt solution, primarily they were talking about reforming the entitlements. Krugman and his zombie followers don't believe we can do both.

 

Well, I disagree.

Edited January 29, 2013 by Magox

[fjl2nd]

Krugman's argument for stimulus and alot of it makes sense, if:

 

1. The US had a much lower long-term debt

2. We are typically fiscally reponsible in the good times, and in the bad times borrowing a spending makes sense because we will pay it back when the econmy improves.

 

While I think either way healthcare will drive this country to the brink of insolvency as the boomer retire (or we will become a nation of the Healthcare have's and have nots) whether or not it is Medicare/ Medicaid or Private Insurance, I think its a poor stance to take that we shoudl only focus on the short-term, when there are things we can do to long-term outlook to ease the fiscal burdens...

 

People aren't going to listen. Krugman is mostly right although I may not go as far as him to ignore entitlements completely but the #1 priority should be economic and job growth. Worrying about the year 2025 just hampers growth now. Long-term budget projections are a lot of the time useless because so many things can happen that changes the outlook like wars, a 9/11 type attack, a financial crisis like in 2007, etc. There can be positive booms as well that aren't predicted. (although, I don't see that happening this day in age)

 

What Krugman points out is pretty simple: People want to cut benefits now for the sake of not having to cut them in the future. The cuts or tax increases are coming regardless. Paul Krugman is essentially a Post-Keynesian economist at this point. He isn't even part of a mainstream economic view. He, like most Keynesians only care about the short-term so it his opinion on this matter shouldn't surprise anybody.

[meazza]

People aren't going to listen. Krugman is mostly right although I may not go as far as him to ignore entitlements completely but the #1 priority should be economic and job growth. Worrying about the year 2025 just hampers growth now. Long-term budget projections are a lot of the time useless because so many things can happen that changes the outlook like wars, a 9/11 type attack, a financial crisis like in 2007, etc. There can be positive booms as well that aren't predicted. (although, I don't see that happening this day in age)

 

What Krugman points out is pretty simple: People want to cut benefits now for the sake of not having to cut them in the future. The cuts or tax increases are coming regardless. Paul Krugman is essentially a Post-Keynesian economist at this point. He isn't even part of a mainstream economic view. He, like most Keynesians only care about the short-term so it his opinion on this matter shouldn't surprise anybody.

 

Because as GG said, he'll be dead and gone in the long run. Thank God my parents didn't think like him.

 

Bolded part:

 

What is the difference between cutting benefits now and cutting them later? Think Greece.

[TPS]

"The thing is that we've actually seen in practice, you can say idealy lets have a plan to reduced the deficit 5 years out, 10 years out, while at teh same time doing stimulus for the economy, Washington doesn't work that way. If you spend a lot of your time saying the debt and the deficit are the big problem, the message that what we need to do now is promote jobs gets lost. And in fact we've spent the last 2.5 years focused entirely about the long term deficits and entitlements and doing nothing for employment, that balance has got to shift." (Krugman in the above video)

 

That quote basically sums it up

Apparently Magox can only focus on one thing too. It's a pretty simple argument: we should focus on the unemployment short term thingy now; then worry about the Medicare long term thingy in a few years, since it's the FUTURE increase in costs and spending, not today's costs and spending, which create a deficit in the future.

 

Btw, the deficit as a % of GDP has been trending down since 2009, and will reach a sustainable level in another year (unless of course the tax increases and coming spending cuts push us back into recession).

[3rdnlng]

Apparently Magox can only focus on one thing too. It's a pretty simple argument: we should focus on the unemployment short term thingy now; then worry about the Medicare long term thingy in a few years, since it's the FUTURE increase in costs and spending, not today's costs and spending, which create a deficit in the future.

 

Btw, the deficit as a % of GDP has been trending down since 2009, and will reach a sustainable level in another year (unless of course the tax increases and coming spending cuts push us back into recession).

 

Horseshit. That's like saying I used to drink a quart of vodka a day but I've cut it down by an ounce so I'm trending down. You should be ashamed to try to get that across as any kind of a sensible point.

[fjl2nd]

Horseshit. That's like saying I used to drink a quart of vodka a day but I've cut it down by an ounce so I'm trending down. You should be ashamed to try to get that across as any kind of a sensible point.

 

The truth hurts bro.

 

http://www.usgovernmentspending.com/spending_chart_2008_2017USp_XXs1li111mcn_G0f

[3rdnlng]

The truth hurts bro.

 

http://www.usgovernm...Xs1li111mcn_G0f

 

My analogy fits your chart perfectly for the numbers we know. As far as the government predictions for down the road, if that's what you are calling "the truth" then you are out of your mind.

[B-Large]

Horseshit. That's like saying I used to drink a quart of vodka a day but I've cut it down by an ounce so I'm trending down. You should be ashamed to try to get that across as any kind of a sensible point.

 

But isn't that like in the election when Mitt Romney was talking about cutting PBS funding, liberals were bent and argued that is was such a tiny amount, but conservative argued that drops in the bucket are still drops in the bucket?

 

Isn't incremental progress downward better than expansion of the deficits?

[fjl2nd]

My analogy fits your chart perfectly for the numbers we know. As far as the government predictions for down the road, if that's what you are calling "the truth" then you are out of your mind.

 

So, now long term projections mean nothing? You guys need to make up your mind!! Or is it only okay when it fits your narrative?

[GG]

Apparently Magox can only focus on one thing too. It's a pretty simple argument: we should focus on the unemployment short term thingy now; then worry about the Medicare long term thingy in a few years, since it's the FUTURE increase in costs and spending, not today's costs and spending, which create a deficit in the future.

 

Btw, the deficit as a % of GDP has been trending down since 2009, and will reach a sustainable level in another year (unless of course the tax increases and coming spending cuts push us back into recession).

 

Silly me, but I could have sworn the Administration was laser focused on employment back in 2009?

 

BTW, how did the economy fare in 4Q12, before the tax hikes came in?

[fjl2nd]

Silly me, but I could have sworn the Administration was laser focused on employment back in 2009?

 

BTW, how did the economy fare in 4Q12, before the tax hikes came in?

 

Not great due to cuts in government spending (mainly on defense). Consumer spending and investment both up though...

[GG]

Not great due to cuts in government spending (mainly on defense). Consumer spending and investment both up though...

 

Consumer spending increased during Christmas season? You don't say. How did it increase relative to other 4Qs, considering it was a modest increase relative to 3Q12? Spin it any way you want, I'm still waiting for the 2009 Summer of Recovery to kick in.

[3rdnlng]

So, now long term projections mean nothing? You guys need to make up your mind!! Or is it only okay when it fits your narrative?

 

I'm saying for you to call projections "the truth" is assinine. Why don't you give some reasons for the deficits going down by that much?

[meazza]

Consumer spending increased during Christmas season? You don't say. How did it increase relative to other 4Qs, considering it was a modest increase relative to 3Q12? Spin it any way you want, I'm still waiting for the 2009 Summer of Recovery to kick in.

 

I guess we know who reads those Krugman blogs