More from Krugman

[TakeYouToTasker]

Puh leeeeseeeese

 

Just say my bad and call it a day.

Well, yes, I did misinterpret your meaning; but as I said, what you wrote was prone to it.

[TPS]

Well, yes, I did misinterpret your meaning; but as I said, what you wrote was prone to it.

C'mon Mag, don't let him get the best of you! Besides, I'm enjoying it too much....

 

Btw, don't know who this is, but, from my perspective, I think he does a good job of clarifying the Joe vs Krugman thing.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/31/joe-scarborough-paul-krugman-and-the-economist-pundit-divide-on-debt-and-deficits/

Edited February 1, 2013 by TPS

[Magox]

Here is something from someone slightly more credible than Neil Erwin

 

I remember reading this article back some time ago, which goes into depth regarding this topic.

 

 

 

As public debt in advanced countries reaches levels not seen since the end of World War II, there is considerable debate about the urgency of taming deficits with the aim of stabilizing and ultimately reducing debt as a percentage of gross domestic product.

Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP. Nevertheless, many prominent public intellectuals continue to argue that debt phobia is wildly overblown. Countries such as the U.S., Japan and the U.K. aren’t like Greece, nor does the market treat them as such.

 

 

Indeed, there is a growing perception that today’s low interest rates for the debt of advanced economies offer a compelling reason to begin another round of massive fiscal stimulus. If Asian nations are spinning off huge excess savings partly as a byproduct of measures that effectively force low- income savers to put their money in bank accounts with low government-imposed interest-rate ceilings -- why not take advantage of the cheap money?

Although we agree that governments must exercise caution in gradually reducing crisis-response spending, we think it would be folly to take comfort in today’s low borrowing costs, much less to interpret them as an “all clear” signal for a further explosion of debt.

Changing Interest Rates

Several studies of financial crises show that interest rates seldom indicate problems long in advance. In fact, we should probably be particularly concerned today because a growing share of advanced country debt is held by official creditors whose current willingness to forego short-term returns doesn’t guarantee there will be a captive audience for debt in perpetuity.

Those who would point to low servicing costs should remember that market interest rates can change like the weather. Debt levels, by contrast, can’t be brought down quickly. Even though politicians everywhere like to argue that their country will expand its way out of debt, our historical research suggests that growth alone is rarely enough to achieve that with the debt levels we are experiencing today.

While we expect to see more than one member of the Organization for Economic Cooperation and Development default or restructure their debt before the European crisis is resolved, that isn’t the greatest threat to most advanced economies. The biggest risk is that debt will accumulate until the overhang weighs on growth.

Historical Precedents

At what point does indebtedness become a problem? In our study “Growth in a Time of Debt,” we found relatively little association between public liabilities and growth for debt levels of less than 90 percent of GDP. But burdens above 90 percent are associated with 1 percent lower median growth. Our results are based on a data set of public debt covering 44 countries for up to 200 years. The annual data set incorporates more than 3,700 observations spanning a wide range of political and historical circumstances, legal structures and monetary regimes.

 

 

Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare (see attached chart 2 for U.S. public debt since 1790). Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?

Even absent high interest rates, as Japan highlights, debt overhangs are a hindrance to growth.

The relationship between growth, inflation and debt, no doubt, merits further study; it is a question that cannot be settled with mere rhetoric, no matter how superficially convincing.

In the meantime, historical experience and early examination of new data suggest the need to be cautious about surrendering to “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past.

 

In addition he answers the "Why" that Neil was asking of the deficit hawks.

 

Probably should read the rest, great stuff.

 

And when you have some time, look at this

 

They have done more work on Sovereign debt than anyone, going back over the past 200 years throughout the world, looking into what makes a country more susceptible and so on.

 

I really would suggest you look into it. They back up their hypothesis with empirical data. This one here goes back into the history of Sovereign Debt issues and correlations of more recent examples.

 

Again, I think it would be helpful to you for the read the work they have been gathering for the past few years. I believe it would give you a whole new perspective on the risks of rising debt, even for a country such as ours.

[Magox]

So Krugman and Scarborough had a debate yesterday on PBS. One fascinating gem from Krugman was that in a depressed economy, Krugman suggested that "spending is spending". In other words, even if it is wasteful spending, that it is better to have it then not to have it. That is utterly absurd. To not take into account the "return on your money" factor is obscenely irresponsible. That money is real money, it is money that will eventually have to be paid back WITH INTEREST!

 

That right there shows you that Keynesianism is a religion for Krugman and his cult followers. It's a blind faith that he places on spending, and make no bones about it, it is a blind faith. To not take into account the effectiveness and efficiency of the money that is being borrowed in order to restore the economy is extremely dangerous. When confronted by Scarborough if we should just throw money (spending) at the wall and see what sticks? Krugman basically said yes.

 

The stimulus bill of 2009 fell well short of all expectations, which would include from independent economists, the W.H's team of economists and CBO's projections. The reason being is for various reasons, but mainly for two reasons. One, is that Washington isn't capable of implementing a plan that passes the "return on your money" test. There are too many constituencies, lobbying groups and special interest groups that control where the money will flow that creates wasteful spending.

 

And two, which is what I've been saying for years now, where Krugman and others fail to realize is that this economy requires structural reforms. This economy has structural issues, the notion of just spending more money, any money in any way is a serious flaw that some of these economists have.

 

What doesn't get much play is that when people point to the stimulus bill as proof that Keynesianism wasn't the solution for this downturn, Krugman proudly scoffs " I advocated for double the original amount". Well guess what? When you take into account the original stimulus and the two following stimulus along with the other spending packages we had, it came close to totaling the amount he advocated for.

 

Krugman has been Wrong about a lot, and yesterday his philosophy of unbridled spending was on full display for everyone to say.

 

oh and he got his ass handed to him by Scarborough. Scarborough basically used krugmans own words against himself, and somehow in Krugmans view, those retorts were somehow considered "ad hominem" attacks.

Edited March 5, 2013 by Magox

[Keukasmallies]

Krugman may be subscribing to the Adam Smith corollary, "In the long run we'll all be dead."

[TakeYouToTasker]

Krugman may be subscribing to the Adam Smith corollary, "In the long run we'll all be dead."

[IDBillzFan]

Krugman really comes out of the gates energized and insightful with his most recent column yesterday, "Dwindling Deficit Disorder."

 

http://www.nytimes.c...t-disorder.html

 

Right now, a sustainable deficit would be around $460 billion. The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit — what the deficit would be if we were near full employment — is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.

 

So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

 

All is well, people. All is well.

[B-Large]

Hehe, I mean I don't know what to tell you I just watched the video. I heard what he was saying throughout the interview. He doesn't imply that we should simply ignore it, his point is that the priority should be jobs not locking into benefit cuts that take place in the future.

 

And in his opinion, once again just stating his opinion since I just watched it, is that the climate change analogy is terrible b/c "every year we don't do something we put 35 billion tons of carbon dioxide into the air, what exactly are doing this year that will make it harder for us to deal with healthcare costs in 2025?" He just saying that saying that we have to lock in healthcare changes now that we think we will have to make in 15 years is not comparable urgency....and in fact he would put job simulating measures ahead of locking in healthcare changes for 15 years from now in terms of urgency...

 

Krugman would hold more weight if in the good times government make structural changes to Safety Net programs and found way to reduce spending overall. The problem is in bad times the Government spends, in good times the Government Spends.. there is never scaling back, nearly never. I mean it took sequestration to pare of a fraction of discretionary spending. Just because Medicare/ Medicaid is fuunded for 10 more years doesn't mean we should not find solutuion to eneitable problems...

[B-Man]

Krugman really comes out of the gates energized and insightful with his most recent column yesterday, "Dwindling Deficit Disorder."

 

http://www.nytimes.c...t-disorder.html

 

 

 

All is well, people. All is well.

 

 

Liberal Economist Takes On Krugman: Federal Reserve Averted Depression NOT Obama

 

In his most recent salvo published at the Huffington Post Saturday, Sachs spoke heresy to Obama-lovers across the fruited plain including Krugman claiming that following the 2008 financial crisis, "It was the Fed, not the fiscal stimulus, which prevented a fall into depression."

"Professor Krugman and Crude Keynesianism" is a rather lengthy piece from Sachs that includes a lot of economic facts and figures that might bore most readers, but is well worth your time.

In it, he addressed where Keynesians such as Krugman and Obama went wrong in 2009, and why their theories today aren't working.

The long and the short of it is that the Administration backed by economists such as Krugman believe deficits and debt don't matter, and that any government spending regardless of how random and untargeted will have a positive economic impact.

Sachs disagrees:

The original stimulus legislation was overwhelmingly of the form of temporary tax cuts and temporary transfer payments, the kind of deficit spending especially likely to have little effect on aggregate demand. Only $88 billion of the $787 billion stimulus-package was in direct purchases of goods and services by the federal government. The rest was temporary transfers and tax cuts.

(This was not an accident. A critical and predictable weakness of the 2009 stimulus is that House Democrats and the White House negotiated it in just a few weeks. In the unnecessary haste, there was no serious consideration given to long-term needs in infrastructure, for example. With presidential leadership we could -- and should -- have forged a decade-long strategy. Now we have no such strategy in place or likely to come into place.).

 

 

http://newsbusters.org/blogs/noel-sheppard/2013/03/11/lib-economist-takes-krugman-federal-reserve-prevented-depression-not#ixzz2NFaxQ0Cq

[TPS]

Krugman would hold more weight if in the good times government make structural changes to Safety Net programs and found way to reduce spending overall. The problem is in bad times the Government spends, in good times the Government Spends.. there is never scaling back, nearly never. I mean it took sequestration to pare of a fraction of discretionary spending. Just because Medicare/ Medicaid is fuunded for 10 more years doesn't mean we should not find solutuion to eneitable problems...

The government always spends. What you mean is that in bad times the government borrows a lot, and in good times under Republicans following supply-side economics government borrows a lot. You're only supposed to borrow a lot during bad times to offset the private sectors fall in spending.

 

Krugman really comes out of the gates energized and insightful with his most recent column yesterday, "Dwindling Deficit Disorder."

 

http://www.nytimes.c...t-disorder.html

 

 

 

All is well, people. All is well.

As you quoted, he says for the next 10 years. that means we don't have to work out the solutions today, we can do it over the next few years. the other main point that he's making is that stability means getting to a point where the debt/GDP ratio is stable or falling. the number he quotes ($400+ billion) represents the deficit that could be maintained at full employment for a given interest rate.

Growth cures most deficit problems.

[B-Large]

The government always spends. What you mean is that in bad times the government borrows a lot, and in good times under Republicans following supply-side economics government borrows a lot. You're only supposed to borrow a lot during bad times to offset the private sectors fall in spending.

 

As you quoted, he says for the next 10 years. that means we don't have to work out the solutions today, we can do it over the next few years. the other main point that he's making is that stability means getting to a point where the debt/GDP ratio is stable or falling. the number he quotes ($400+ billion) represents the deficit that could be maintained at full employment for a given interest rate.

Growth cures most deficit problems.

 

I don't disagree. But the point is that we can make changes to programs that are on unsteady ground, we can axe program that don;t work or that are duplicative... it is possible, the "wait till later" strategy is forge in failure...

[Magox]

Just remember everyone, in a down economy, virtually just about all spending is good, doesn't matter how effective or where we spend it, the important thing to remember is that we spend.

Edited March 11, 2013 by Magox

[IDBillzFan]

As you quoted, he says for the next 10 years. that means we don't have to work out the solutions today, we can do it over the next few years. the other main point that he's making is that stability means getting to a point where the debt/GDP ratio is stable or falling. the number he quotes ($400+ billion) represents the deficit that could be maintained at full employment for a given interest rate.

Growth cures most deficit problems.

 

There is no logical reason to avoid making cuts today. None. There is a ton of stuff that could be cut right away if only someone would do as they promised and go line item-by-line item and eliminate waste.

 

But no. Apparently we have time for that later, based on predictions for assumptions of items that may or may not be a certain way at a certain time in the not-so-distant future for a given amount.

[TPS]

There is no logical reason to avoid making cuts today. None. There is a ton of stuff that could be cut right away if only someone would do as they promised and go line item-by-line item and eliminate waste.

 

But no. Apparently we have time for that later, based on predictions for assumptions of items that may or may not be a certain way at a certain time in the not-so-distant future for a given amount.

As I've stated (which is K's position), the deficit is falling as economic growth takes hold. Cutting too much spending today could slow that process down and cause the deficit to increase again--pushing us into another recession. You can certainly decide about cuts next year, or the next few years, but don't make the cuts this year when the economy is actually gaining momentum.

 

The logical argument is that one person's (or government) spending is another's income. Someone's income will be smaller, and therefore they will spend less. The impact does not stop at the first cut in spending. For example, the economy around Ft. Brag is suffering as military spending cuts are made.

 

Unless other sectors of the economy increase today to offset the government cuts today, then the cuts will cause a slowdown, causing taxes to decline and very little impact on the deficit, and possibly worsen the deficit if the decline is sharp enough.

 

This is why Europe is floundering. They make cuts to meet deficit requirements; those cuts cause the economy to decline causing lower taxes and increased deficits; so they cut again, causing the same impact.

 

Just remember everyone, in a down economy, virtually just about all spending is good, doesn't matter how effective or where we spend it, the important thing to remember is that we spend.

If your goal is to prevent unemployment from worsening in the short term, then that is a true statement. That's what unemployment insurance does--it's a transfer of money to the newly unemployed which helps maintain demand in the economy, helping to prevent an even worse outcome. That is the purpose of short term stimulus--make sure a recession doesn't become a depression.

[Magox]

If your goal is to prevent unemployment from worsening in the short term, then that is a true statement. That's what unemployment insurance does--it's a transfer of money to the newly unemployed which helps maintain demand in the economy, helping to prevent an even worse outcome. That is the purpose of short term stimulus--make sure a recession doesn't become a depression.

 

I know that you endorse all spending, doesn't matter the effectiveness, just as long as you spend it. As I said before, you are a one trick pony, who knows no other policy prescriptions for growth other than spending.

Edited March 11, 2013 by Magox

[TPS]

I know that you endorse all spending, doesn't matter the effectiveness, just as long as you spend it. As I said before, you are a one trick pony, who knows no other policy prescriptions for growth other than spending.

That's just an ignorant interpretation of what i said.

Spending is the short-run issue; long-run growth depends on capital and technology, education, infrastructure, and a few others.

[Magox]

Here is what I said:

 

Just remember everyone, in a down economy, virtually just about all spending is good, doesn't matter how effective or where we spend it, the important thing to remember is that we spend.

 

Here is what you said:

 

If your goal is to prevent unemployment from worsening in the short term, then that is a true statement.

 

And yes, the goal is to prevent unemployment from worsening.

 

So there is little room for interpretation, I didn't say or imply "spending" was bad, what I spoke to was the effectiveness of the spending. It is a demonstrable case in study that the more debt you pile on, the more it stunts future growth. Pretty soon we will hit a tipping point with the interest that we have to pay on our debt. That is why it is important to spend wisely and not have this destructive attitude towards our debt that Krugman and his faith based followers of the church of spending have. While I agree that in most down turns, Spending has a place in an economic recovery, it is not the only solution that we have to get us out of downturns. Not all downturns are created equally, in some cases there are no structural issues and a little jump start spending could be all that is needed. In other downturns such as this one, spending isn't all that is needed. I've gone over more than a few times what other things we could be doing, and they include structural reforms. My thoughts are based on hard data and I have no ideology that imprisons or limits what I see. I sometimes support added regulations, I sometimes may support additional taxation, just depends on the conditions on the ground.

 

You on the other hand are a prisoner of your ideology, you are incapable of seeing anything outside your bubble that doesn't fit your ideology. You admittedly believe in virtually just about any kind of spending in a down economy, and you also believe in higher taxation and regulations in just about any condition. It's the same old same old with you. Whatever is part of anything that can be construed as social liberal economic orthodoxy, you endorse it.

Edited March 11, 2013 by Magox

[TPS]

Here is what I said:

 

 

 

Here is what you said:

 

 

 

And yes, the goal is to prevent unemployment from worsening.

 

So there is little room for interpretation, I didn't say or imply "spending" was bad, what I spoke to was the effectiveness of the spending. It is a demonstrable case in study that the more debt you pile on, the more it stunts future growth. Pretty soon we will hit a tipping point with the interest that we have to pay on our debt. That is why it is important to spend wisely and not have this destructive attitude towards our debt that Krugman and his faith based followers of the church of spending have. While I agree that in most down turns, Spending has a place in an economic recovery, it is not the only solution that we have to get us out of downturns. Not all downturns are created equally, in some cases there are no structural issues and a little jump start spending could be all that is needed. In other downturns such as this one, spending isn't all that is needed. I've gone over more than a few times what other things we could be doing, and they include structural reforms. My thoughts are based on hard data and I have no ideology that imprisons or limits what I see. I sometimes support added regulations, I sometimes may support additional taxation, just depends on the conditions on the ground.

 

You on the other hand are a prisoner of your ideology, you are incapable of seeing anything outside your bubble that doesn't fit your ideology. You admittedly believe in virtually just about any kind of spending in a down economy, and you also believe in higher taxation and regulations in just about any condition. It's the same old same old with you. Whatever is part of anything that can be construed as social liberal economic orthodoxy, you endorse it.

I suppose you take the Fox approach which is if you say it enough, people believe it...

 

I have said for years (prior to the crisis) that I think government can be cut some 10-20%. however, I don't want to see this happen until the economic recovery has the strength to withstand the cuts--we have a few years.

 

I don't weigh in too often regulations, other than wrt finance. I've recently come to the conclusion that big firms in monopolistic industries help shape the kind of regulations implemented, and those regulations tend to hurt smaller companies, making it more difficult for them to compete with the big guys--regulations are used to create barriers to entry and protect industries from new competition.

 

I don't always suggest spending in a down economy. You can fill a demand gap by cutting taxes, increase spending, or both. For years I've said the best option to stimulate spending and increase employment is a cut in payroll taxes for workers and businesses.

 

I agree about structural issues. It's not inconsistent with my views, as you believe.

 

My philosophy (and probably Krugman's) is that deficits have stabilized the economy and prevented a worse outcome. Now that there is some positive growth, the dollar value of the deficit is falling, as is the deficit/GDP ratio. As the economy continues to improve, the deficits continue to drop. If Congress just let things play out, the deficit/GDP ratio would fall below the rate of NGDP growth by 2014 and thd Debt/GDP ratio (what you are worried about) would stabilize and start to decline.

 

Big, stupid cuts right now could jeopardize that momentum, thus causing deficits to worsen like they have in Europe time and again.

 

Twist these anyway you want.

[Magox]

I suppose you take the Fox approach which is if you say it enough, people believe it...

 

 

 

They're your words professor, and it's there for anyone to see.

Edited March 11, 2013 by Magox

[TPS]

 

 

They're your words professor, and it's there for anyone to see.

There are enough people here who know that I've stated the things in the post that you ignore.