Krugman, Peacocks, The Deficit, Health Care And Spending
If you’ve been following Nobel economist and NY Times columnist Paul Krugman over the last few months, you’ve seen him slowly fall out of love with the Obama administration. The primary reason is the administration has seemingly ignored his advice about the size of the deficit spending – stimulus – that should be happening. Krugman feels that the first stimulus was “too small”. I disagree, I feel it was a poorly targeted pork bill that didn’t address stimulus at all (with spending delayed on most of it for future years, it’s hard to fathom how it acts to stimulate the economy now). But the amount should have been more than adequate to do that which Keynesian’s like Krugman prefer. In fact, my guess is Krugman knows that, but can’t bring himself to admit it. Thus he continues to pretend the size of the “stimulus” is the problem.
That said, today he goes after the president’s claim in the SOTU that he’s addressing the deficit. Krugman essentially comes to the same conclusion most of us have – it’s not at all a serious attempt to do so:
Last week, the Center for American Progress, a think tank with close ties to the Obama administration, published an acerbic essay about the difference between true deficit hawks and showy “deficit peacocks.” You can identify deficit peacocks, readers were told, by the way they pretend that our budget problems can be solved with gimmicks like a temporary freeze in nondefense discretionary spending.
Guess who he identifies as a “deficit peacock?” Anyone who listened to the State of the Union address knows that answer. Krugman goes on to tell us why it is in our best interest to be spending more right now and not worrying about the deficit:
The nature of America’s troubles is easy to state. We’re in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that’s keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.
But that brings us back to the $787 billion dollar “stimulus” bill (which, btw, the CBO now says will cost us $862 billion). That bill was supposed to be focused on bringing unemployment down, wasn’t it? In fact, the explicit claim was if it was passed, unemployment wouldn’t rise above 8%.
Of course one has to wonder if the money had been spent to stimulate job growth instead of monitoring the radioactive feces of rabbits whether or not such spending could have kept that unemployment number down. Only $256 billion of the $787 has been spent with no appreciable effect on unemployment at all. Could it have had an effect if it had been spent on what it should have been? We’ll never know. What we do know, as does Krugman, is that politically a second stimulus is a very unpopular.
That’s not to say we won’t see one. What we will see, however, is any second stimulus introduced to the public as a massive “jobs bill”. The word stimulus won’t be attached to it in any way, shape or form. But that’s why the characterization of Obama as a “deficit peacock” is dead on.
Krugman then gets to the pretzel logic that leaves everyone shaking their head:
In the long run, however, even the U.S. government has to pay its way. And the long-run budget outlook was dire even before the recent surge in the deficit, mainly because of inexorably rising health care costs. Looking ahead, we’re going to have to find a way to run smaller, not larger, deficits.
How can this apparent conflict between short-run needs and long-run responsibilities be resolved? Intellectually, it’s not hard at all. We should combine actions that create jobs now with other actions that will reduce deficits later. And economic officials in the Obama administration understand that logic: for the past year they have been very clear that their vision involves combining fiscal stimulus to help the economy now with health care reform to help the budget later.
First, not everyone agrees that you must “spend” to help the recovery. In fact, credit where credit is due, Obama layed out some tax cuts for small businesses and cap gains tax cuts that may indeed provide the impetus for hiring. The fact that he could have done that a year ago shouldn’t be lost on anyone. But while that means some reduced tax revenue for government, it isn’t a massive spending program. And, in fact, to offset that loss of revenue, government ought to cut spending commensurate with the loss. That’s the way toward fiscal sanity and a balanced budget – or at least one which is closer to being balanced than it is now.
So Krugman’s attempt to claim there’s only one “intellectual” solution to the contradiction he’s posed is poppycock. Note also that he brings up health care reform. The “budget” he’s talking about is that of the US government. The reform he’s talking about in this particular case has to do with the government programs which are out of control. Not the private side which as zip to do with the US budget. Only the Medicare/Medicaid side. Which again begs the question of why taking over much of the private side helps solve the crisis on the government side?
He finally admits it later on in the article:
So if health reform fails, you can forget about any serious effort to rein in rising Medicare costs.
He’s most likely right. And here’s what’s interesting about that sentence. Many of us on the right have been saying for quite some time, “if Medicare and Medicaid are the problem, why not fix those problems first and then, if successful, we can talk about further reform”. Instead we’ve gotten this monstrosity which really doesn’t address those problem areas (despite Krugman’s belief it will) and grabs for even more.
I’d love to see Krugman defend the logic of that.
So we’re paralyzed in the face of mass unemployment and out-of-control health care costs. Don’t blame Mr. Obama. There’s only so much one man can do, even if he sits in the White House. Blame our political culture instead, a culture that rewards hypocrisy and irresponsibility rather than serious efforts to solve America’s problems. And blame the filibuster, under which 41 senators can make the country ungovernable, if they choose — and they have so chosen.
I mostly agree in general with the sentiments expressed here, just not some of the specifics. Our political culture leaves much to be desired. You have to understand that when the best you can hope for is gridlock, something is very wrong with the mechanism that governs the country. It incentivizes behavior that looks short-term and rewards those who bring money to their home districts and states. Until that sort of system is changed, gridlock is about the best we can hope for. Unfortunately those who would have to change the system are presently rewarded by it.
That said, Obama is as much a part of the problem as anyone. He stole into the White House by promising “change” and people like Krugman bought into it. And while some of the scales have slipped from Krugman’s eyes, he still hasn’t accepted the fact that Obama is a double-talker who says all the right things and then acts exactly like a Chicago machine pol in his daily dealings. Obama is as much a part of the problem as anyone else in the system.
Lastly – it seems all the cool kids in DC and NY have discovered a new word for “they won’t go along with what we want to do” – “ungovernable”. Have you noticed that? We weren’t ungovernable when the Democrats wielded the minority filibuster in the Senate. We weren’t ungovernable when the anti-war crowd filled the streets. We weren’t ungovernable when Democrats used every procedural trick in the book to block Social Security reform. Nope, that only happens when Republicans have 41 seats in the Senate, Tea Parties protest and the right fights health care reform.
Krugman, like much of the left, has a very short and selective memory.